[Senate Hearing 107-904]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-904
 
 DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT AND 
        INDEPENDENT AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2003
=======================================================================

                                HEARINGS

                                before a

                          SUBCOMMITTEE OF THE

            COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   on

                           H.R. 5605/S. 2797

 AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF VETERANS AFFAIRS 
AND HOUSING AND URBAN DEVELOPMENT, AND FOR SUNDRY INDEPENDENT AGENCIES, 
  BOARDS, COMMISSIONS, CORPORATIONS, AND OFFICES FOR THE FISCAL YEAR 
           ENDING SEPTEMBER 30, 2003, AND FOR OTHER PURPOSES

                               __________

             Corporation for National and Community Service
              Department of Housing and Urban Development
                       Department of the Treasury
                     Department of Veterans Affairs
                    Environmental Protection Agency
                  Federal Emergency Management Agency
             National Aeronautics and Space Administration
                      National Science Foundation
                 Neighborhood Reinvestment Corporation
                       Nondepartmental witnesses

                               __________

        Printed for the use of the Committee on Appropriations

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

                                 ______


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                      COMMITTEE ON APPROPRIATIONS

                ROBERT C. BYRD, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             TED STEVENS, Alaska
ERNEST F. HOLLINGS, South Carolina   THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont            ARLEN SPECTER, Pennsylvania
TOM HARKIN, Iowa                     PETE V. DOMENICI, New Mexico
BARBARA A. MIKULSKI, Maryland        CHRISTOPHER S. BOND, Missouri
HARRY REID, Nevada                   MITCH McCONNELL, Kentucky
HERB KOHL, Wisconsin                 CONRAD BURNS, Montana
PATTY MURRAY, Washington             RICHARD C. SHELBY, Alabama
BYRON L. DORGAN, North Dakota        JUDD GREGG, New Hampshire
DIANNE FEINSTEIN, California         ROBERT F. BENNETT, Utah
RICHARD J. DURBIN, Illinois          BEN NIGHTHORSE CAMPBELL, Colorado
TIM JOHNSON, South Dakota            LARRY CRAIG, Idaho
MARY L. LANDRIEU, Louisiana          KAY BAILEY HUTCHISON, Texas
JACK REED, Rhode Island              MIKE DeWINE, Ohio
                  Terrence E. Sauvain, Staff Director
                 Charles Kieffer, Deputy Staff Director
               Steven J. Cortese, Minority Staff Director
            Lisa Sutherland, Minority Deputy Staff Director
                                 ------                                

           Subcommittee on VA, HUD, and Independent Agencies

                BARBARA A. MIKULSKI, Maryland, Chairman
PATRICK J. LEAHY, Vermont            CHRISTOPHER S. BOND, Missouri
TOM HARKIN, Iowa                     CONRAD BURNS, Montana
ROBERT C. BYRD, West Virginia        RICHARD C. SHELBY, Alabama
HERB KOHL, Wisconsin                 LARRY CRAIG, Idaho
TIM JOHNSON, South Dakota            PETE V. DOMENICI, New Mexico
ERNEST F. HOLLINGS, South Carolina   MIKE DeWINE, Ohio
                                     TED STEVENS, Alaska (ex officio)

                           Professional Staff

                             Paul Carliner
                           Gabriel A. Batkin
                              Alexa Sewell
                         Jon Kamarck (Minority)
                          Cheh Kim (Minority)

                         Administrative Support
                          Jennifer Storipan













                            C O N T E N T S

                              ----------                              

                       Wednesday, March 25, 2002

                                                                   Page
Department of Veterans Affairs...................................     1

                       Wednesday, March 13, 2002

Department of Housing and Urban Development......................   109

                       Wednesday, March 20, 2002

Environmental Protection Agency..................................   177

                       Wednesday, April 17, 2002

Corporation for National and Community Service...................   303

                       Wednesday, April 24, 2002

Neighborhood Reinvestment Corporation............................   337
Department of the Treasury: Community Development Financial 
  Institutions Fund..............................................   354

                         Wednesday, May 1, 2002

National Aeronautics and Space Administration....................   409

                         Wednesday, May 8, 2002

Federal Emergency Management Agency..............................   481

                        Wednesday, May 15, 2002

National Science Foundation......................................   533
Nondepartment witnesses..........................................   575



















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

                              ----------                              


                        WEDNESDAY, MARCH 6, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:35 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Barbara A. Mikulski, (chairman) 
presiding.
    Present: Senators Mikulski, Kohl, Johnson, Bond, Shelby, 
Craig, Domenici, and Stevens.

                     DEPARTMENT OF VETERANS AFFAIRS

STATEMENT OF HON. ANTHONY J. PRINCIPI, SECRETARY OF 
            VETERANS AFFAIRS
ACCOMPANIED BY:
        FRANCES M. MURPHY, M.D., ACTING UNDER SECRETARY FOR HEALTH
        ROBIN HIGGINS, UNDER SECRETARY FOR MEMORIAL AFFAIRS
        GUY H. MCMICHAEL, III, ACTING UNDER SECRETARY FOR BENEFITS
        D. MARK CATLETT, PRINCIPAL DEPUTY ASSISTANT SECRETARY FOR 
            MANAGEMENT
        JAMES W. BOHMBACH, CHIEF FINANCIAL OFFICER, VETERANS BENEFITS 
            ADMINISTRATION
        DANIEL TUCKER, DIRECTOR, BUDGET AND PLANNING SERVICE, NATIONAL 
            CEMETERY ADMINISTRATION
        VINCENT BARILE, DEPUTY UNDER SECRETARY FOR MANAGEMENT, NCA
        NORA E. EGAN, CHIEF OF STAFF
        TIM S. McCLAIN, GENERAL COUNSEL
        MAUREEN P. CRAGIN, ASSISTANT SECRETARY FOR PUBLIC AND 
            INTERGOVERNMENTAL AFFAIRS
        JOHN A. GAUSS, ASSISTANT SECRETARY FOR INFORMATION AND 
            TECHNOLOGY
        DENNIS DUFFY, PRINCIPAL DEPUTY ASSISTANT SECRETARY FOR POLICY 
            AND PLANNING
        ELIGAH D. CLARK, CHAIRMAN, BOARD OF VETERANS' APPEALS
        JOHN OGDEN, CHIEF CONSULTANT, PHARMACY BENEFITS MANAGEMENT 
            STRATEGIC HEALTH GROUP
        ART KLEIN, DIRECTOR OF BUDGET OFFICE, VETERANS HEALTH 
            ADMINISTRATION
        JIMMY NORRIS, CHIEF FINANCIAL OFFICER, VETERANS HEALTH 
            ADMINISTRATION
        JOHN R. FEUSSNER, M.D., CHIEF RESEARCH AND DEVELOPMENT OFFICER, 
            VETERANS HEALTH ADMINISTRATION
        LAURA MILLER, ASSOCIATE UNDER SECRETARY FOR HEALTH, VETERANS 
            HEALTH ADMINISTRATION
        GORDON MANSFIELD, ASSISTANT SECRETARY FOR CONGRESSIONAL AND 
            LEGISLATIVE AFFAIRS
        RITA A. REED, DEPUTY ASSISTANT SECRETARY FOR BUDGET
        RICHARD J. GRIFFIN, INSPECTOR GENERAL


            opening statement of senator barbara a. mikulski


    Senator Mikulski. Good morning, everybody, to the 
Subcommittee Veterans, Housing, and other Independent Agencies. 
We will come to order.
    Today we have the opportunity to listen to Mr. Secretary 
Anthony Principi, to present to us the appropriations request 
from the administration on behalf--on behalf of the 
administration for the Department of Veterans Affairs.
    This is a wonderful day in the sense that we welcome you, 
Mr. Principi----
    Mr. Principi. Thank you.
    Senator Mikulski [continuing]. An old and dear friend. And 
it is also Senator Bond's birthday.
    And I am not going to tell any more. But, Senator Bond, you 
know we, on the committee, love you. You know, we Democrats are 
just crazy about you.
    You are our little muffin here today.
    Senator Bond. Thank you very much.
    Senator Mikulski. That is just about the calorie count you 
and I are supposed to have for all----
    Senator Bond. I can only eat a quarter of it.
    Senator Mikulski. I know you are--kind of a caffeine-kind 
of guy.
    Senator Bond. Yes, yes.
    Senator Mikulski. No one ever thinks you are decaf; that is 
for sure.
    Senator Bond. No.
    Senator Mikulski. But let me also present this to you this 
morning and just say, Senator Bond, you are the cream in my 
coffee.
    Senator Bond. Thank you. I am deeply honored. Thank you.
    Senator Mikulski. Now are you not glad we have gotten in a 
good mood to talk to you?


                           prepared statement


    Really, Senator Bond, you know that I think the world of 
you. And I really enjoy so much our collegial relationship. And 
I would like to take this time to wish you a happy birthday and 
lots of good health and may you get all of your birthday 
wishes, including the very, very best allocation for our 
subcommittee.
    [The statement follows:]
           Prepared Statement of Senator Barbara A. Mikulski
    I am very pleased to welcome VA Secretary Principi to the 
Subcommittee. It is appropriate that we are beginning our 2003 process 
with Secretary Principi, because keeping our promises to our nation's 
veterans is this Subcommittee's highest priority. We look forward to 
another productive year working with Secretary Principi and his team.
    My goals for this hearing are two-fold. First, we must ensure that 
the 2003 budget keeps the promises we made to our veterans. And second, 
we must make sure the VA is a good steward of taxpayer dollars--so that 
our veterans and the American people get the most for their hard earned 
money.
    The budget requests $57 billion for veterans' benefits and 
services: $29 billion for entitlements, and $28 billion for 
discretionary programs that are under this Subcommittee's jurisdiction. 
This is a $3 billion increase in discretionary funding over 2002.
    Promises made must be promises kept.
    This year's request for medical care is $25.5 billion--a $2.6 
billion increase over 2002. It includes $1.5 billion that the VA 
expects to collect from third-party health insurance and co-payments 
from veterans, as well as $800 million in retirement liability accruals 
as proposed by the Administration.
    So by our math, the real increase in VA medical care over 2002 is 
$1.4 billion--excluding collections and accruals.
    In the last three years, the Subcommittee has provided large 
increases for medical care--$1.7 billion in 2000, $1.3 billion in 2001, 
and $1 billion in 2002, to encourage more veterans to enroll in the VA 
system, and to provide them with the medical care they deserve. At -a 
time when high private health insurance and prescription drug costs are 
really straining our elderly on fixed incomes, we can only expect that 
the Subcommittee will be urged to continue these increases.
    That is why I am very concerned about two major issues affecting 
veterans' medical care.
    First, I am perplexed and perturbed that the VA tells us it has a 
$400 million shortfall in 2002. The VA-HUD Subcommittee provided $350 
million above the President's request for VA medical care to ensure 
that promises made to our--our nation's veterans can count on the 
Subcommittee to keep promises. But the Subcommittee needs to be able to 
count on the VA to provide accurate budget estimates, and I am now very 
concerned about the VA's ability to count.
    Second, I am very troubled about a proposal in this budget to 
require certain veterans to pay a $1,500 deductible for medical care. 
VA tells us that most of our ``Priority 7'' veterans--those who are not 
disabled as a result of their service, and who make more than $24,000 
per year--have private insurance that will pick up the tab. But that 
doesn't mean much to the veteran who was lucky enough to avoid being 
injured in battle, and who now makes a hard earned living in a small 
business that doesn't provide him with health insurance.
    I am very concerned that a $1,500 deductible will leave some 
veterans without any health care at all. Especially in today's 
climate--where the private sector is abdicating its responsibility so 
frequently--we must protect those who use the VA system as a safety 
net. There are many flaws in this deductible proposal, but the worst is 
that VA can't tell us for certain how many veterans it will effect, 
because it has a dismal performance of collecting insurance information 
from our veterans. We have many concerns about the $1,500 deductible 
proposal, and I hope Secretary Principi can answer our tough questions.
    Instead of proposing deductibles to shift the healthcare burden 
onto our veterans, the VA should be finding ways to improve what our 
veterans and taxpayers are owed from private insurance companies. We 
need to do more in this area, and I want to know what the VA is doing 
to ensure that our veterans and taxpayers get what they are owed.
    We understand that collections from veterans will also increase 
because the prescription drug co-payment has been increased from $2 to 
$7. Many of my veterans in Maryland have been surprised by this 
increase, and I would like to know how the VA decided on $7, and if 
there are plans to make further changes the copayment.
    Also in the area of prescription drugs, I believe that the VA can 
provide us with some very valuable lessons learned as we continue to 
look for a Medicare prescription drug benefit. The VA spends almost $3 
billion each year on drugs, and its benefit program could serve as a 
model for the future. I'd like the Secretary to tell us about the 
benefits that VA provides and how it develops its formularies so that 
we can build upon this expertise.
    On the other hand, unfortunately VA still has a way to go on 
waiting times. Veterans still have to wait too long to see a doctor.
    And on the benefits side, while the VA has made progress in 
reducing its claims processing time, 165 days is still unacceptable. I 
know Secretary Principi wants to reduce processing time to 100 days by 
2003, and I am interested in learning how he plans to do this.
    Finally, I also want to be sure that the VA is taking care of its 
own caregivers. A recent Gallup poll found that nursing is the most 
respected profession in the United States. Yet this country is facing a 
nursing shortage that we're working hard to address. I'd like to know 
what VA is doing to recruit, retain, and improve working conditions for 
its nurses.
    Again, I welcome Secretary Principi to his second appearance before 
the Subcommittee and I look forward to hearing his testimony.

    Senator Mikulski. With that, Mr. Principi, why do you not 
go ahead and proceed with your testimony?

                    STATEMENT OF ANTHONY J. PRINCIPI

    Secretary Principi. Thank you, Madam Chairwoman.
    Senator Bond, Senator Johnson, it is a great pleasure to be 
with you.
    And I, too, wish you a very, very happy birthday, Senator 
Bond. It is always good to come up here on birthdays.
    I am very pleased to have this opportunity to present our 
budget request to you and am grateful to the President for his 
support. We are requesting $58 billion for veterans' benefits 
and services, $30.1 billion for entitlement programs, and $27.9 
billion for discretionary programs; an increase of $6.1 billion 
over our 2002 enacted level.
    Let's look specifically at our medical program. First, I 
think it is important to back out accounting transfers, so that 
the budget proposal does not appear to include any smoke and 
mirrors or increases due to a proposed deductible. The real 
apples-to-apples increase is 7 percent for medical care, a 
$1,570,000,000 increase. I will talk a little bit more about 
that increase and the challenges we face in health care.
    Next, we are requesting an increase of $17 million for 
burial services, a $94 million increase for our Veterans 
Benefits Administration to continue the great work that our 
people are doing in reducing the claims backlog, and a $64 
million increase for capital programs. We have a robust medical 
research program. We are requesting an increase that would 
bring our appropriation to $409 million. Combining our $401 
million subsidy from medical care funding with the funds we 
receive through grants from universities and other Federal 
agencies with our appropriation, we will have a $1.46 billion 
program in medical research that we are very, very proud of.

                       VA'S MEDICAL CARE PROGRAM

    With the funds allocated for medical programs, members of 
the committee, we will be able to treat nearly 4.9 million 
veterans in the coming fiscal year. That is a 3.3 percent 
increase over fiscal year 2002. But it does not tell the whole 
story. Clearly, we have seen such a phenomenal growth in 
workload over the past several years. The growth has been 
somewhat staggering since eligibility reform went into effect 
in 1996 and we made the important transition to primary care 
and community-based outpatient clinics. Our growth rate has 
been 38 percent in priorities one through six. But the real 
story is the growth in priority seven, which has grown 500 
percent since 1996.
    In 1996, priority 7s represented 3 percent of our workload. 
Today they represent 33 percent of our workload. And that 
number will grow to over 42 percent by the end of the decade. 
The cumulative cost for priority 7s alone, just this one 
category, is $20 billion between 2003 and 2007. In 2007 it will 
consume over $5 billion a year of our budget.
    So, we have grown in priority 7s from 200,000 veterans in 
our system to over 1 million in 2002. And I believe patients 
are coming to us for many, many reasons. I think there are some 
national policy issues involved here. Veterans seek our care 
because we have a very, very fine benefit package from primary 
to nursing home care, including the very, very important 
pharmacy benefit that we provide.
    Of course, more outpatient clinics have been opened. We 
have 622 now, across the country. Just as depicted in the 
movie, ``If you build it, they will come,'' well, we have built 
them, we have opened them, and they have certainly come. And I 
think our quality is clearly so much better today. Our customer 
satisfaction is good. We are not perfect, but we are doing good 
work.
    Those factors, coupled with HMO's, and Medicare HMO's 
closing down, or no longer offering a pharmacy benefit, and the 
fluctuating economy in some parts of the country, have resulted 
in that increase in workload. That increase is something that 
we need to deal with. I have been very, very honest in saying 
that, notwithstanding this record requested increase in medical 
care funding, without some actions by the Congress or by me as 
Secretary, to either limit enrollment, or to require a greater 
sharing in the cost of their care by priority 7s, or enactment 
of Medicare subvention, or without increased collections for 
medical care cost recovery, we will not have enough money to 
treat all of the veterans who come to us in open enrollment. A 
lot of the changes that took place in 1996 were premised on 
Medicare subvention, which never happened.
    I need to state for the record, because it is an important 
policy issue that all of us have to grapple with to ensure that 
the quality remains high, that the access times to get into 
clinics are not reasonable. We see longer and longer wait times 
in some parts of the country, which is unacceptable and not 
good quality of care. We are not meeting the expectations 
people have of us, and we need to grapple with that issue.

                       $1,500 DEDUCTIBLE PROPOSAL

    The service-connected and some of the poor feel that they 
are being squeezed out in some areas of the country, so there 
are some warning signs on the horizon. After looking at all of 
the options available to me, I opted for a deductible where 
priority 7s would share in the cost of their care, rather than 
closing off enrollment.
    The deductible does not operate like a regular deductible. 
No one is asked for money out-of-pocket at the beginning before 
the care is provided. We will bill insurance companies for 
every dollar of that deductible, and we will charge veterans 
without insurance a percentage of reasonable charges.
    The bottom line is we need to work with the members of this 
committee and the House committee to devise a solution to this 
problem, whether the deductible is modified or we look at other 
steps that we can take to ensure that we manage our growth and 
maintain high quality care.

                     GRANTS FOR VETERAN EMPLOYMENT

    We are also requesting a transfer in funding of $197 
million from the Department of Labor for the Veterans 
Employment in Training Service Program. Though this program has 
not worked as well as it should at the Department of Labor, 
that is not an indictment of the people in the program. I think 
it is more an indictment of the system.
    Veterans in the age group of 20 to 24--those recently 
discharged from the military having served their Nation 
honorably, have a 9.6 unemployment rate compared to the general 
population of 4.2 percent. In 20 States, fewer than 11 percent 
of the veterans who go to the employment service for help were 
place in suitable jobs. We have over 500,000 veterans who are 
unemployed today, a third of whom have been unemployed for more 
than 15 weeks.
    I believe that VA, which has been entrusted with caring for 
veterans as its sole mission, could manage this employment 
program very well by making it outcome-based, performance-
based, and putting it into the continuum of programs we have 
for veterans through vocational rehabilitation education, and 
other programs. I support this transfer because I think it is 
good for veterans. I would commission a task force, comprised 
of the stakeholders, to help me identify how we can establish 
this new program in VA and how it should work.

                    VETERANS BENEFITS ADMINISTRATION

    On the benefits side of the house, I am pleased to report 
to you that we are making progress on reducing the claims 
backlog. In January of this year, we set a record in the number 
of claims we decided: 62,536. That record was broken in 
February; we decided 62,900 claims. That compares to 29,036 in 
January of a year ago, and 28,900 in February a year ago. So, 
we have doubled our productivity and our accuracy rate remains 
at an all-time high.

                     PROCUREMENT REFORM TASK FORCE

    We are looking at how we manage the VA. I have established 
a procurement reform task force to provide me with 
recommendations on how we can be better procurers of goods and 
services. Outside of Defense, we are probably the largest 
procurement department in government, with purchases of $5 
billion annually in goods and services. I think there is an 
awful lot of room for improvement. I now have the report on my 
desk, and I intend to implement the recommendations to 
standardize and use national contracting volume discounts to 
improve the bottom line so that we have more money for 
veterans.

                        ENTERPRISE ARCHITECTURE

    We did the same with our Information Technology Program, 
and established an enterprise architecture strategy 
implementation and governance plan with an information 
technology board to help us end stove-pipe design, development, 
and procurement of IT. Under the leadership of Dr. John Gauss, 
our new CIO, we will make some real progress in that area.

                    NATIONAL CEMETERY ADMINISTRATION

    With regard to our national cemetery system, we are in the 
process of opening 6 new national cemeteries across the 
country. They are in different phases of development. Due to 
the aging of the World War II population, interments are at an 
all-time high in our national cemeteries. We have to ensure 
that we have space to honor those who served their Nation in 
uniform.

                           PREPARED STATEMENT

    We have great challenges, Madam Chair, Senator Bond, 
members of the committee. But I am convinced that we are on the 
right road. And working together, I think we can overcome the 
challenges that we face.
    Thank you very much.
    [The statement follows:

        Prepared Statement of the Honorable Anthony J. Principi

    Madam Chair, and members of the Committee, good morning. I am 
pleased to be here today to discuss the President's 2003 budget 
proposal for the Department of Veterans Affairs (VA) and tell you about 
the significant progress we are making on behalf of the Nation's 
veterans.
    Our budget reflects the largest increase ever proposed for 
veterans' discretionary programs. It ensures more veterans will receive 
high-quality health care, that we will provide more timely and accurate 
benefit claim determinations, and that we will maintain a dignified and 
respectful setting for deceased veterans. Our proposal reflects the 
debt of gratitude we owe to those who have served our country with 
honor. It also signals our enduring commitment to the men and women in 
uniform who today defend our freedom many miles away.
    We are requesting $58 billion for veterans' benefits and services--
$30.1 billion for entitlement programs and $27.9 billion for 
discretionary programs. This is an increase of $6.1 billion over the 
2002 enacted level. Our budget increases VA's discretionary funding by 
$3.1 billion over the 2002 level, including medical care collections. 
Increases for specific programs are as follows: $2.7 billion for 
medical programs; $17 million for burial services; $94 million for the 
administration of veterans' benefits; and $64 million for capital 
programs and other departmental administration.
    Our budget request includes $197 million for a new grant activity 
that replaces programs currently administered by the Department of 
Labor and $892 million for certain Federal retiree and health benefits 
as proposed by the Administration's Managerial Flexibility Act of 2001. 
Excluding these new activities, our budget for discretionary programs 
reflects an increase of $1.9 billion, or 7.8 percent over last year's 
funding level.
                              medical care
    For Medical Care, we are requesting budgetary resources of $25 
billion, including $1.5 billion in collections. This amount includes 
$793 million for accrual for certain Federal retiree and health 
benefits and $260 million in increased collections related to the 
proposed legislation deductible initiative. Under current law without 
the impact of these two variables, the Medical Care increase is $1.5 
billion--comprised of $1.4 billion in increased appropriations and $158 
million in increased collections. This increase when combined with the 
$1.1 billion impact of the deductible proposal, equals $2.7 billion, 
the amount of the medical care increase that would be needed to support 
the projected 6 percent increase in 2003, which is 290,000 more veteran 
health care system users without the enactment of the deductible 
proposal.
    Madam Chair, we are focusing on improvements needed to our billing 
and collection from third party insurers. While we have doubled our 
collections in the past couple of years, we know we need to do more. In 
a collaborative effort with an external contractor, we have identified 
24 actions that will yield significant enhancements to our ability to 
collect revenue. While many of these actions require time and 
investment, we have already begun improvements to the revenue 
collection process. I have directed that we begin the process of 
consolidating billing and collection services, and that we explore the 
cost and benefits of outsourcing these services. In addition, we are 
aggressively pursuing insurance identification by obtaining new HIPAA 
compliant software to facilitate exchange of medical information with 
non-VA entities. We are also mounting increased veteran and employee 
awareness and training campaigns. Further, we have developed a web-
based performance metrics program that is used by central office and 
medical center staff to monitor and evaluate the critical steps in the 
revenue cycle. Following the original implementation of reasonable 
charges in September 1999, we have implemented two updates. Work is 
nearly complete on the next reasonable charges update, which we expect 
to publish in the Federal Register as an Interim Final Rule and 
implement during Spring 2002. We expect to collect over $1 billion this 
year with continuing increases in 2003 and beyond. We are committed to 
maximizing our revenue opportunities from this source.
    VA has experienced unprecedented growth in the medical system 
workload over the past few years. The total number of patients treated 
increased by over 11 percent from 2000 to 2001--more than twice the 
prior year's rate of growth. For the first quarter of 2002, we 
experienced a similar growth rate when compared to the same period last 
year. The growth rate for Priority 7 medical care users has averaged 
more than 30 percent annually for the last 6 years, and they now 
comprise 33 percent of enrollees in the VA health care system. Based on 
current law, this percentage is expected to increase to 42 percent by 
2010.
    I am proud that an increasing number of veterans are choosing to 
receive their health care in the VA system. Despite this success, we 
have much to accomplish. Patient access to our medical facilities must 
be improved and this budget reaffirms our commitment to do so. Our goal 
is for veterans to receive non-urgent appointments for primary and 
specialty care in 30 days or less, while being seen within 20 minutes 
of their scheduled appointment. We have included an additional $159 
million in our request to work toward this goal.
    Madam Chair, I know you agree that VA's health care system should 
maintain timely, high quality care for service-connected and low income 
veterans and remain open to all veterans. To effectively manage 
participation in the system, we are proposing a $1,500 medical 
deductible for Priority 7 veterans. With no change in policy, the cost 
of care for Priority 7 veterans would grow from $1 billion in 2000 to 
over $5 billion in 2007. To assure that rising workload does not dilute 
the quality of care, Priority 7 veterans are being asked to pay for a 
greater portion of their health care than in the past. We are 
recommending that these veterans be assessed a deductible for their 
health care at a percentage of the reasonable charges up to a $1,500 
annual ceiling. This is not a standard deductible that must be paid 
upfront and veterans' insurance may cover all charges. If all 
projections, funding levels, and the new deductible are realized, VA 
anticipates continued open enrollment to all veterans in 2003 without 
detriment to our traditional core patients--those with service-
connected disabilities and lower incomes.
    VA is working to meet the challenges in long-term care for 
veterans. However, we believe that a literal interpretation of Public 
Law 106-117, the ``Veteran's Millennium Health Care and Benefits Act of 
1999'' will result in less than optimal solutions for increasing our 
long-term care capacity. The number of individual veterans who received 
care in VA increased from more than 3 million veterans in 1998 to more 
than 4 million veterans in 2001, due primarily to VA's efforts to 
expand access for primary care. During that same time period, efforts 
have been made to meet the increased demand for long-term care. 
Although the average daily census in VA nursing homes declined, 
veterans mandated under Public Law 106-117 to receive such care are 
being served in VA and contract community nursing homes. VA is also 
supporting a significantly increased census of veterans in State 
veterans nursing homes. At the same time, VA has been expanding care 
for veterans in home and community-based extended care, consistent with 
the mandates of Public Law 106-117. Indications we have received from 
veterans show that they are pleased with options providing long-term 
care closer to home, as well as alternatives to more traditional 
skilled-nursing environments. We look forward to working with Congress 
to pursue the best options to provide veterans with long-term care.
    Our rapidly aging veteran population requires more health care 
services. Our request includes $817 million to address this rising 
demand. These funds will support our emphasis on access and service 
delivery, pharmaceutical support, prosthetics, CHAMPVA for Life, and 
information technology. Management savings of over $316 million will 
partially offset resource needs. For example, I am establishing a 
program across the VA system that will implement ``best practice'' 
standards for dispensing and prescribing pharmaceuticals.
    The 2003 budget supports our cooperative efforts with the 
Department of Defense (DOD) to improve Federal health care delivery 
services. Over the past year, we have undertaken unprecedented efforts 
to improve cooperation and sharing in a variety of areas through a 
reinvigorated VA and DOD Executive Council. VA and DOD entered into a 
Memorandum of Understanding (MOU) in December 1999, with the objective 
of reducing contract duplication. The first addendum to that MOU 
resulted in the conversion of DOD's Pharmacuetical Distribution and 
Pricing Agreements (DAPAs) to reliance on VA's Federal Supply Schedule 
(FSS) contracts for pharmaceuticals, which was completed in December 
2000. The second addendum is an agreement to convert DOD's DAPAs for 
medical/surgical products to reliance on VA's FSS. This effort was 
completed in December 2001. To address some of the remaining 
challenges, the Departments have identified four high-priority items 
for improved coordination: veteran enrollment, computerized patient 
records, cooperation on air transportation of patients, and facility 
sharing instead of construction.
                    medical and prosthetic research
    VA's clinical research program is funded at the highest level in 
history with a partnership of government, universities and the private 
sector. Over $1.46 billion will be invested in 2003: $409 million in 
direct appropriation; $401 million in support from the VA Medical Care 
appropriation primarily in the form of salary support for the clinical 
researchers; $460 million from Federal organizations such as DOD and 
NIH; and $196 million from universities and other private institutions. 
This investment will allow VA to expand knowledge in areas critical to 
veterans' and other citizens' health care needs including 
schizophrenia, diabetes, further implementation of cholesterol and 
other guidelines, aging, renal failure treatment, and clinical drug 
treatment evaluations. This investment is relevant to the medical needs 
of the entire Nation and will enhance future quality of life.
        capital asset realignment for enhanced services (cares)
    We continue our effort to transform the veterans' health care 
system under the Capital Asset Realignment for Enhanced Services 
(CARES) initiative. We are evaluating the health care services we 
provide, identifying the best ways to meet veterans' future medical 
needs, and realigning our facilities and services to meet those needs 
more effectively.
    Madam Chair, this initiative is not a perfunctory exercise. The 
CARES process has already had a significant impact on our planning 
process. Last week, I announced my decision on realigning VA health 
care facilities in VISN 12. For example, we will shift inpatient 
services to a remodeled Chicago West Side Division, and maintain a 
Lakeside Division multi-specialty outpatient clinic in the downtown 
area. The Hines VA Medical Center will be renovated, including the 
Blind Rehabilitation and Spinal Cord Injury Centers. Sharing 
opportunities between the North Chicago VA Medical Center and the 
adjacent Naval Hospital Great Lakes will be enhanced.
    CARES is critical to the future of VA health care. It will allow us 
to redirect funds from the maintenance and operation of facilities we 
no longer need to direct patient care. I am prepared to make the 
difficult choices necessary to ensure accessible care to more veterans 
in the most convenient and appropriate settings. We will complete CARES 
studies of our remaining health care networks within two years. Any 
savings that result from CARES will be put back into the community to 
provide higher quality care and more services to veterans. Changes will 
affect only the way VA delivers care--health care services will not be 
reduced.
                 major and minor construction programs
    For all capital programs (construction and grants) this is the 
largest request since 1996. Specifically for major construction, new 
budget authority of $194 million is requested. We are requesting funds 
for four seismic projects in exceptionally high-risk areas: two in Palo 
Alto, one in San Francisco, and one in West Los Angeles, CA. These 
projects involve primary care buildings and a consolidated research 
facility--all of which will be part of any service delivery option 
resulting from the CARES process. Seismic improvements will ensure 
veterans and their families, and VA staff, will continue to be cared 
for, and work in a safe environment. The 2003 Major request also 
addresses critical National Cemetery needs. Resources are included for 
new cemeteries in Pittsburgh, PA and Southern Florida and a columbaria 
and cemetery improvements project at the Willamette National Cemetery, 
OR. Design funds are provided in the amount of $3.4 million for the 
design of new cemeteries in Detroit, MI and Sacramento, CA. We are also 
requesting funds to remove hazardous waste and asbestos from 
Department-owned buildings, perform an emergency response security 
study, reimburse the judgment fund, and support other construction-
related activities.
    To date, we have received $80 million in Major Construction funding 
to support the design and construction of projects that result from 
CARES studies. Our Major request for 2003 includes $5 million to 
continue efforts to realign our facilities.
    New budget authority in the amount of $211 million is requested for 
the Minor Construction program. Particular emphasis will be placed on 
outpatient improvements, patient environment, and infrastructure 
improvements. A total of $35 million is earmarked for CARES-related 
design and construction needs. These funds have been proposed to allow 
VA to immediately implement CARES options that can be accomplished 
through the minor construction program (i.e., capital projects costing 
more than $500 thousand and a total project cost less than $4 million). 
In addition, $20 million is dedicated to a newly created category to 
fund minor seismic projects, which will allow VA to further address its 
seismic corrections needs.
                           veterans' benefits
    For the administration of veterans' benefits, we are requesting 
$1.2 billion and an additional 125 employees over the 2002 level. The 
President has promised to improve the timeliness and quality of claims 
processing. Last year, I established a claims processing task force to 
recommend changes that would improve the time it takes to process 
claims. The results of that task force, as well as implementation 
plans, have been presented to me and we have already begun to execute 
many of the recommendations.
    I have set a goal of reaching 100 days to process compensation and 
pension claims by the summer of 2003. While the annual average number 
of days for these claims is projected to be 165 for 2003, we expect to 
achieve the 100-day goal by the last quarter of the year. Four months 
ago, we began a major effort to resolve 81,000 of the oldest 
Compensation and Pension claims. A key element of this effort involves 
a ``Tiger Team'' at the Cleveland Regional Office that will tackle many 
of these claims over an 18-month period. The team became fully 
operational in November 2001. Additionally, consolidation of pension 
benefit maintenance at three sites will allow VBA to free up employees 
to focus on rating compensation claims.
    At the same time we are reducing the time it takes to process 
claims, we continue to improve the quality of claims processing. During 
2003, the national accuracy rate for compensation and pension claims is 
projected to grow to 88 percent--a significant improvement from the 59 
percent rate evidenced in 2000. This budget contains $3.5 million to 
support 64 additional employees dedicated to the Systematic Individual 
Performance Assessment (SIPA) initiative. This is an important 
contribution to enhance internal control mechanisms and bring 
accountability to the accuracy of claims processing.
    This budget provides additional staff and resources to continue the 
development of information technology tools to support improved claims 
processing. Over the last several years, VBA has developed and 
implemented major initiatives, established cooperative ventures with 
other agencies, and used technology and training to address accuracy 
and timeliness. This budget continues to focus on initiatives in these 
high payoff areas. For example, this budget requests $6 million in 
support of the Virtual VA initiative. This effort, when complete, will 
replace the current intensive paper-based claims folder with electronic 
images and data that can be accessed and transferred through a web-
based application.
    Our budget also addresses the mandate to ensure that Montgomery GI 
Bill (MGIB) education benefits provide meaningful transition assistance 
and aid in the recruitment and retention of our Armed Forces. Recent 
legislation has improved these benefits and our priority is to deliver 
them as efficiently as possible. I am pleased to report that the 
Imaging Management System (TIMS) is now functioning in all four 
Regional Processing Offices. The electronic folders that result from 
this effort have expanded access points, improved data access, and 
enhanced customer satisfaction. This budget requests $6.2 million to 
develop and install the Education Expert System (TEES). Among other 
benefits, this expert system will enable us to automate a greater 
portion of the education claims process and expand enrollment 
certification. In 2003, we will continue to improve the accuracy and 
timeliness of education claims and improve blocked call rates.
    Madam Chair, I would like to take this opportunity to mention one 
of VA's great success stories--the administration of more than 4 
million insurance policies in force. The American Customer Satisfaction 
Index (ASCI) and the University of Michigan conducted a study of the 
insurance death claims process and the satisfaction of beneficiaries 
who received awards. This study gave the VA's insurance program a score 
of 90 on a scale of 100. This is one of the highest scores ever 
recorded for either government or private industry. This budget 
provides funding to continue the Insurance Center's history of 
excellence. Our request includes a paperless processing initiative, 
which improves timeliness and quality of service while reducing the 
cost to policyholders.
                 new veterans employment grants program
    Veterans represent a unique and invaluable human resource for 
American society and the economy. Service personnel leave the military 
knowing they have made a vital contribution to their country. Veterans 
want to continue making meaningful contributions as they return to 
civilian life. However, in 21 States, fewer than 10 percent of veterans 
between the ages of 22 and 44 were placed in employment after seeking 
job search assistance from State service providers; during 2001, there 
was an average of 519,000 unemployed veterans, and in the same time 
period, 32 percent of unemployed veterans experienced 15 or more 
consecutive weeks of unemployment.
    America's labor exchange market has evolved in the time since the 
foundation for current programs was laid. This budget proposes 
legislation that will allow VA to create a new competitive grant 
program to help veterans obtain employment. VA is working with the 
Department of Labor (DOL), veterans' service organizations and others 
to propose a veterans' employment program tailored to the needs of 21st 
century veterans seeking assistance in finding suitable employment. The 
details of the legislative proposal to implement this initiative are 
not yet final. If authorized by Congress, the new program will broaden 
our ability to assist veterans with employment and training services. 
Our first priority will be serving unemployed service-connected 
disabled veterans and those recently separated from military service. 
We will also help other veterans searching for employment. Our budget 
request for discretionary programs includes $197 million for the grant 
initiative.
    We have the flexibility to design a program that will incorporate 
elements currently contained in the DOL grant program--transition 
assistance; disabled veterans' outreach; local veterans' employment 
representatives; and homeless veterans reintegration. Veterans look to 
the VA for education benefits, home loan assistance and, in some 
instances, rehabilitation and employment, medical care and compensation 
benefits in the transition years after leaving active duty. Later in 
life, many veterans may return to the VA for health care and ultimately 
burial benefits. Adding an enhanced employment opportunity program to 
the spectrum of care and services provided by VA would provide veterans 
with a single access point to a full continuum of benefits and services 
throughout their lifetime.
    I know there are many questions left unanswered regarding this new 
program. We are in the process of finalizing our legislative proposal 
within the Administration and will submit it to you in the near future. 
At that time, we will be prepared to address your questions in greater 
detail.
                    national cemetery administration
    The budget proposal includes $138 million to operate the National 
Cemetery Administration. The request preserves our commitment to 
maintain VA's cemeteries as National shrines, dedicated to preserving 
our Nation's history, nurturing patriotism, and honoring the service 
and sacrifice of our veterans. It provides a total of $10 million to 
continue renovation of gravesites, as well as clean, raise, and realign 
headstones and markers.
    As noted earlier in my testimony, our budget request for Major 
Construction includes funds for the development of two new national 
cemeteries in the vicinity of Pittsburgh, PA and Miami, FL. Operating 
funds also are requested to prepare for interment operations in 2004 at 
these two locations and to begin interment operations at new cemeteries 
at Fort Sill, OK, and near Atlanta, GA.
                        management improvements
    Madam Chair, last year I stated my commitment to reform VA's use of 
information technology. I am pleased to report that we have made 
substantial progress in this area and will continue our reform efforts. 
As VA moves forward with implementation of the One-VA Enterprise 
Architecture developed in 2001, we will manage information technology 
resources to account for all expenditures and ensure our scarce 
resources are spent in compliance with this Enterprise Architecture. A 
strong program is under development for Cyber Security. We are re-
engineering our IT workforce to ensure we have the proper skill sets to 
support our program needs. I have recently approved a comprehensive 
change in how we manage our IT projects to ensure they deliver high 
quality products, meet performance requirements, and are delivered on 
time and within budget.
    VA is bringing enterprise-wide discipline and integration of our 
telecommunications capability to increase security, performance, and 
value. Command and control capabilities are being established to 
support the Department in times of emergency. Electronic government 
will be expanded and internet capabilities will be enhanced to improve 
the delivery of services and the sharing of knowledge for the benefit 
of the veteran. All of these efforts will focus on meeting the 
objectives of the President's Management Agenda.
    We are pursuing other important initiatives that will promote 
better management practices throughout the Department. For example, I 
recently convened the VA Procurement Reform Task Force to examine our 
acquisition process and develop recommendations for improvement. The 
Task Force has presented 60 recommendations to accomplish several major 
goals that will enhance our ability to: 1) leverage purchasing power; 
2) obtain comprehensive VA procurement information; 3) improve VA 
procurement organizational effectiveness; and 4) ensure a sufficient 
and talented VA acquisition workforce. Mandatory use of the Federal 
Supply Schedule, reorganization and elevation of the VHA logistics 
function to more quickly standardize medical and surgical supplies, and 
establishment of a National Item File are some of the more prominent 
recommendations being made in order to maximize savings in our medical 
care procurements. We are well on our way to achieving savings and 
increased effectiveness in VA's acquisition arena.
    Finally, our 2003 request includes funds for a new Office of 
Operations, Security and Preparedness (OS&P). Since the tragic events 
of September 11, 2001, we have made substantial investments to address 
the Department's security and preparedness, and to meet our primary and 
critical emergency response missions. VA is the only pre-deployed 
nationwide health care system. We must be prepared for any disaster 
response. OS&P will play an important role in the Federal government's 
continuity of operations in the event of an emergency situation. The 
new office is formed with the specific intent of improving VA's ability 
to respond to any contingency with minimal disruption to services for 
veterans and their families. This office will coordinate all VA 
involvement with the Office of Homeland Security, FEMA, the Department 
of Health and Human Services and DOD.
    Madam Chair, that concludes my formal remarks. Although many 
challenges lie ahead, I am proud of the accomplishments that have taken 
place over the past year. Our budget request for 2003 is a good budget 
for veterans and positions us for continued success. I thank you and 
the members of this Committee for your dedication to our Nation's 
veterans. I look forward to working with you. My staff and I would be 
pleased to answer any questions.

                      SENATOR MIKULSKI'S COMMENTS

    Senator Mikulski. Well, thank you very much, Mr. Secretary, 
for that testimony and really the very serious both policy and 
appropriations issues that are raised in the course of 
appropriations testimony to policy and the changing nature of 
the enrollment in the veterans health care system.
    In my enthusiasm for wishing Senator Bond a happy birthday, 
we did not go to opening statements. But also, I am just going 
to ask unanimous consent that all Senators' opening statements 
go into the record. And then we can move very promptly to 
questions, knowing that other subcommittee hearings are 
pressing other colleagues.
    I would also like to ask unanimous consent that the letter 
from the veterans organizations that--every year they do an 
analysis of the Veterans Administration budget request. They do 
an outstanding job and, I believe, a service to the Nation. 
Their covering letter to the committee and appropriate people, 
I would like to have those introduced into the record just as 
their views. And then we will be meeting with them separately 
on another occasion.
    [The information follows:]

                   Letter From The Independent Budget

                                                   January 7, 2002.
The Honorable George W. Bush,
President of the United States, The White House, Washington, DC.
    Dear Mr. President: On behalf of the co-authors of The Independent 
Budget, AMVETS, Disabled American Veterans, Paralyzed Veterans of 
America, and the Veterans of Foreign Wars of the United States, we are 
writing to strongly urge your Administration to fully fund veterans' 
medical care spending to $24.5 billion in fiscal year 2003.
    The brave men and women called to service after the tragic events 
of September 11, to defend our interests here and abroad, will be 
tomorrow's veterans. We implore you to ensure that these service 
members and those who have served before them in defense of our nation 
will have the health care and benefits they have earned and deserve 
from the Department of Veterans Affairs (VA).
    The fiscal year 2002 VA medical care budget falls $1.5 billion 
short of what is recommended by The Independent Budget. We are 
extremely disappointed that the Administration and Congress have gone 
forward with a VA appropriation that will not even fund the pending 
mandated wage increase for VA's employees. We are especially concerned 
about reports of VA facilities having significant waiting lists for 
initial services once a veteran is enrolled in the system, as well as 
closed enrollment at some hospitals. Most disturbing are reports of 
severely disabled veterans having to wait for health care services and 
specialized services such as home health care.
    We understand that VISN directors were recently informed health 
care allocations for fiscal year 2002 include a two percent 
``efficiency'' cut. One medical center director reported his VISN must 
slice $80 million from its budget to help make up for the deficit in 
the budget. He added that the VISN was required to submit its plan to 
reduce spending to the VA by December 28, 2001. It is outrageous that 
hospital directors, already struggling to meet demand, are now being 
forced to make further cuts. New mandates coupled with an insufficient 
budget, will undoubtedly result in rationed health care and closed 
enrollment. VISN directors will have no choice but to close beds, 
consolidate services, and reduce the number of full-time employees. 
This two percent cut could equate to a loss of 13,000 full-time 
employees. This pressure on the system will especially hurt sick and 
service-connected disabled veterans and affect their access to timely 
health care.
    We appreciate the Administration's decision to provide additional 
funding to allow the Department to continue to enroll all veterans in 
its health care system for next year. Unfortunately, the fiscal year 
2002 budget shortfall and continued open enrollment have stretched the 
Veterans Health Administration to its limits, making it extremely 
difficult for VA to provide timely, quality health care services 
veterans deserve. Current spending is a least $400 million below needs 
according to Secretary Principi. We understand the deficit is actually 
closer to $750 million if you factor in inflation and maintain workload 
at current levels. At the very least, in order to continue enrollment 
of all veterans, Congress and the Administration must find the 
additional funds necessary to address this shortfall.
    Without additional funding, VA is unable to meet veterans' health 
care needs and provide the high quality care it is capable of 
delivering. The Veterans Health Administration (VHA) is a national 
treasure, responsible for training most of the nation's medical care 
workforce. It is also responsible for great advances in medical science 
due to VA research. These advances in medical science have benefited 
all Americans, not just veterans. Finally, VHA is the most cost-
effective application of Federal health care dollars. Research shows 
VHA provides care for at least 25 percent less than comparable Medicare 
services. Given the proper resources, VA can effectively function as a 
backup to the Department of Defense during a time of conflict or to the 
Federal Emergency Management Agency during a national emergency. 
Therefore, it is an excellent investment, and it makes good fiscal 
sense to keep this system functioning well, especially now while our 
nation is at war. Our treasured way of life and freedom is a result of 
the sacrifices and commitment made by the men and women serving in our 
armed forces.
    The Administration can no longer ignore the serious financial 
problems VA is now facing and its negative impact on sick and disabled 
veterans. Mr. President, the Administration must increase VA medical 
care spending to $24.5 billion in fiscal year 2003 to ensure a secure 
and stable future for those who have served our nation through military 
service.
    We urge you to continue to support our nation's veterans by 
providing VA with the funding needed to maintain a viable health care 
system now and in the future.
            Sincerely,
                                   Robert Jones,
                                                Executive Director.
                                   Robert E. Wallace,
               Executive Director, AMVETS Veterans of Foreign Wars.
                                   Delatorro L. McNeal,
                                                Executive Director.
                                   David W. Gorman,
Executive Director, Paralyzed Veterans of America Disabled American 
                                                          Veterans.

                SENATOR MIKULSKI'S GOALS FOR THE HEARING

    Senator Mikulski. Mr. Secretary, my goals for this hearing 
are two-fold: one, to ensure that in fiscal 2003 promises made 
are promises kept; and that, at the same time, to be good 
stewards of the taxpayers' dollars. I am concerned about 
several major issues. But the two most dominant are those where 
we know that the VA told us that they had a $400 million 
shortfall in 2002 after the subcommittee had provided $350 
million over the President's request, and actually $1 billion 
more. I--and then that somehow or another Congress is at fault. 
I am going to come back to that.
    Then there is the issue of the priority 7 veterans and the 
deductible that you are proposing. I think you raise very 
challenging issues. But we really do not want a moat. It is one 
thing for there to be policy priorities. But we really do not 
want a money moat around veterans health care. And these are 
other areas that we will want to pursue. And, of course, I know 
the issues around construction and the maintenance of 
facilities are a significant issue, as well as the CARES.

                     $400 MILLION BUDGET SHORTFALL

    But let me go right on to my first set of questions here. 
Last year, when we provided more money, there was an 
announcement by you that there was a $400 million shortfall and 
that actions were going to be taken, which essentially would 
have very much limited veterans' health care. And somehow or 
another, it looked like it was our fault that we did not give 
you enough money, when we gave you more money than the 
President asked and more money than this subcommittee gave last 
year.
    Could you tell us why you had this shortfall? And I do 
not--this is not to be brusque or a spring hazing. I have so 
much respect for you. But was it that the VA could not count? I 
mean, we had a hearing; we had a discussion. And then we got 
this $400 million shortfall and a letter going out to the 
veterans, really limiting their access. So could you tell us 
why, number one; number two, how you made it up; and number 
three, how we do not get into a jackpot this coming year after 
we have done what we think is our job in trying to help you do 
your job to protect our veterans?
    Secretary Principi. Yes. I fully understand, Madam Chair. 
Our workload projections for fiscal year 2002 were based upon 
the workload growth that we had seen for the period 1998 
through the year 2000. We had been seeing a 5 percent growth in 
workload during that period of time and projected that the 
growth would remain around 5 percent.
    Well, it doubled. It doubled in 2001 and then again in 
2002, 11 to 12 percent a year. I think that is attributable to 
many factors. One, a little bit of a fluctuating economy, so 
more and more veterans are coming to us for care. With open 
enrollment, any veterans, irrespective of service-connected 
disability or not, income, poor, or middle income, can come to 
us any day of the year; and indeed they have.
    Senator Mikulski. Well, Mr. Secretary, excuse me. Are you 
saying that the shortfall, the $400 million shortfall, that you 
announced, I believe, last summer--am I--when did you make that 
announcement?
    Secretary Principi. In the fall.
    Senator Mikulski. Excuse me. In the fall. Was that due to 
the fact of the increased enrollment from priority 7? Or was it 
just that, taken over in the transition, there were so many 
loose ends? And I am going to acknowledge, you overtook a 
situation that had not been well-managed for a significant 
amount of time. So I am going to acknowledge that when you 
walked in, you had your hands full. But was it because of more 
people or because the estimates were not proper?
    Secretary Principi. No. I think the estimates were not 
proper for the most part. There may have been some other 
smaller issues. At that time, we also thought that the TRICARE 
for Life Program enacted into law by Congress, was a great 
program for military retirees and they would leave VA at age 
65, but have some 600,000 military retirees enrolled in our 
health care system.
    When Congress passed TRICARE for Life, so that these 
military retirees could now receive their care through the 
TRICARE Program, we estimated that a significant number would 
go to Tricare. We did not see that early on in the program. 
Their pharmacy benefit is a little bit more generous than our 
pharmacy benefit. It is only $9 for a 90-day supply. We thought 
that the transition would be a lot faster.
    I think the shortfall really had to do with inaccurate 
projections of workload.
    Senator Mikulski. Well, are we going to have--do you think 
you have estimated right this time? See, I have my doubts. And 
then again, let me tell you why I have my doubts. And I would 
like you to come back.
    Number one, there are certain assumptions in your request, 
one of which is that you are going to be able to recover a 
significant amount of money from third parties. The VA has 
never been able to meet their own targets. That is number one.

               $1,500 DEDUCTIBLE FOR PRIORITY 7 VETERANS

    Number two, you are proposing a $1,500 deductible for 
priority 7 veterans. That is an assumption which the Congress 
has not agreed to and, as you know, is enormously 
controversial. It gives many of us great pause about--in other 
words, if you can afford--my own--if you can afford the $1,500, 
would you be in another program? In other words, is this really 
the cost of what you think their prescription drugs are?
    But those two items there tell me that you really--that I 
really question the--I really question your request, because I 
believe the assumptions are faulty. Would you like to comment? 
Because I really do not want a jackpot this fall for our 
veterans or for this committee.
    Secretary Principi. You are absolutely right, Madam Chair. 
It is a dilemma. Without the deductible, we, in my view, are 
over $1 billion short, $1.1 billion. That is why the deductible 
was proposed. We have a 7 percent increase of $1.5 billion 
requested which, relative to other Federal programs, is a good 
increase. But without the deductible, we cannot get there from 
here.
    MCCF, medical care cost recovery. On the one hand I am 
pleased to see a 13-percent improvement in our collections. We 
are 13 percent ahead of our projections. But we have a long way 
to go.

                       MEDICAL CARE FUNDING NEEDS

    Senator Mikulski. So what do you think you are really going 
to need? And then I am going to defer to Senator Bond.
    Secretary Principi. Madam Chair, it depends on whether we 
work out some cost-sharing arrangement for the priority 7s. 
Congress directed that I make an enrollment decision every year 
on who we can afford to care for. Without some form of 
deductible or some form of cost-sharing, I would probably make 
the decision to limit enrollment for priority 7s, rather than 
reduce the quality of care and the timeliness, which is getting 
worse.
    So my choices are very narrow. Limit enrollment, as the 
Congress asks the VA Secretary to decide annually, because this 
is a discretionary program, or work with Congress to see if 
there is a cost-sharing arrangement that can be worked out for 
the priority 7s.
    Senator Mikulski. Or ask for more money in the 
appropriations.
    Secretary Principi. Yes, more money in the program.
    Senator Mikulski. Well my time has expired. I know other 
members would want to pursue this.
    Senator Bond?

             OPENING REMARKS BY SENATOR CHRISTOPHER S. BOND

    Senator Bond. Thank you, Madam Chair. And I want to thank 
you for the birthday gift. I would have to say that the 
greatest gift I have throughout the year is the fact that we 
have such a good working relationship, whether it is ranking 
member and chair or chair and ranking member. I have my 
preferences. We are not going to get into that today.
    Senator Mikulski. We do not get a veterans preference here.
    Senator Bond. I would say to my colleagues that my high 
regard for the Senator from Maryland is well known. I am going 
to be roasted by a charity in Kansas City this spring. And they 
all wanted Senator Mikulski to come out, because they have 
heard so much about her and figured that she would probably do 
the most effective job on me that anybody could do.
    But I do want to turn to our leader on the Republican side, 
who has to go to another hearing. So it would be my pleasure to 
yield to Senator Stevens for his questions.
    Senator Stevens. Well, Madam Chair, if you go, I will go 
and turn the spit. All right?
    Senator Mikulski. Okay.
    Senator Bond. Oh, that is dangerous.

                         ALASKAN VETERAN ISSUES

    Senator Stevens. And I am grateful to both of you for 
allowing me to participate quickly. We have a defense hearing 
this morning, and I hate to interrupt a birthday party. You all 
do know it is Senator Bond's birthday, right?
    Senator Bond. Oh, yes. That is what----
    Senator Stevens. All right. Let me say that I am grateful 
to you for a conversation we had the other day about the 
homeless problems in Anchorage. And I do hope that we can find 
some way to work on that outreach center. I do not know if you 
all know but we have the largest number of veterans per capita 
in the United States. And it is becoming increasingly difficult 
to deal with that high portion of that population under some of 
the limitations we have.
    For instance, that 30-year rule, it applies to those who 
have been involved in the rate reduction program, the bond 
program we have. As I understand it, there is a provision that 
cuts off veterans who served in Vietnam and the Persian Gulf 
and other conflicts. But those lapse in 2007. Those people 
would no longer be eligible unless they have been out of the 
service for more than 30 years. I do not understand that 30-
year rule. I would urge you to take a look at that.
    And I would also ask if you would help us on another 
problem. I am really not asking questions. I would just make a 
statement, if I can. We have States, 5 States, that are 
eligible for a program on housing. As I understand it, it is--
we have a cap on these States. My State is one that has, as I 
indicated, so high a percentage of veterans, it is hard for us 
to work under that cap.
    Are you familiar with that? We are allowed to--we are told 
that we are down to a level of--let me be sure. The current 
allocation for Alaska is $303 million limit under the AHFC 
program. That is the Alaska Housing Finance Corporation dealing 
with the VA bond cap. I want to talk to you about whether or 
not we could find some way to either put an escalator for 
States that have a high percentage of veterans in their 
population. Either that or lift the cap. It has been in place 
for a long time and it is not relevant to our program.
    We are prepared, through the Alaska Housing Finance 
Corporation, to assist veterans. But we cannot do it unless we 
can issue bonds for veterans housing under the Federal 
authorization. I would urge you to take a look at that.
    Secretary Principi. I will do that, sir.
    [The information follows:]
                   Alaska Housing Finance Corporation
    We are aware that the basic criteria for Alaska Housing Finance 
Corporation (AHFC) Veterans Mortgage Program (VMP) are that the veteran 
must have entered the service prior to 1977 and cannot have been 
discharged for more than 30 years. AHFC requires that when veterans 
apply to them for a loan, they submit a VA issued Certificate of 
Eligibility along with their DD214 so that it can be determined when 
they went into the military and what date they were discharged. 
However, this program is administered by AHFC, not VA. Therefore, we 
have no authority over the provisions of the program.
                       maximum federal bond rate
    VA has no knowledge of or authority with respect to a Federal cap 
that may exist on bond issues.

    Senator Stevens. Lastly, when I was in Juneau, I was made 
aware of an issue there. The Juneau VA replaced a long-serving 
staff member there. And the replacement staffer has 25 years 
with the VA but is not authorized to approve medical treatment. 
It is now my understanding that--that a problem is near 
solution, but it is on your desk. Is that right?
    Secretary Principi. I have not seen it.
    Senator Stevens. Are you familiar with that?
    Secretary Principi. I have not seen that issue, but I will 
look for it as soon as I return.
    Senator Stevens. Well, I am sure you know that for someone 
who is in Southeastern Alaska to have to go either to Anchorage 
or Seattle for authorization, when there is a staffer that has 
25 years experience in VA but is not authorized to approve 
medical treatment, is a difficult situation.
    Secretary Principi. I will find out and I will report to 
your office.
                       Medical Services in Alaska
    The Alaska VA Healthcare System and Regional Office (AVHSRO) 
operates a one employee VA office within the federal building in 
Juneau, Alaska. A Contact Representative GS-11 employee staffs this 
office. Her duties include general health care and benefits information 
and assistance to veterans in southeast Alaska. One major customer 
service area for this position is support to the Fee Basis 
authorization program. Juneau, Alaska is 550 air miles from Anchorage 
and is not accessible by ground transportation. Juneau is the capital 
of Alaska and VA has a long history of providing a VA office there.
    The individual who currently is staffing the VA office in Juneau, 
Alaska reported for duty there December 4, 2001. The employee was 
previously on staff at our Anchorage facility working within the 
Veterans Benefits Administration (VBA) Regional Office component of our 
operation.
    The AVHRSO is currently addressing the training and technical 
support needs of our new VA representative. During the week of February 
11-15, 2002, the employee returned to Anchorage for training on the 
medical care authorization process. During this visit we also had a 
lengthy discussion of the computer problems she had been experiencing.
    As a result of this training visit to Anchorage it was determined 
that a visit by our Technology Management Service (TMS) staff was 
necessary to fix her computer and printer problems. These are necessary 
fixes in order for her to provide the level of service expected by our 
Juneau area veterans. The TMS staff traveled to Juneau during the week 
of February 25, 2002 to March 1, 2002. Computer related access issues 
were corrected during this visit to allow our employee to process 
medical authorizations.
    Throughout the training cycle and during periods of computer 
outage, staff in Anchorage is providing service regarding the 
authorization of medical claims. In fact our Coordinated Care 
Department has organized along regional boundaries and one team is 
dedicated to Southeast Alaska. Statewide veterans are able to reach VA 
by a toll free number and receive service via the Southeast Alaska 
Regional Team. Our Juneau representative will soon be an additional 
source of assistance for the Juneau area veterans.
    It is important to recognize that the employee on staff now in 
Juneau, Alaska has many years of VA experience; she spent the past ten 
years working in the VBA Regional Office. The authorization of a Fee 
Basis Medical Claim often requires a clinical decision. It was never 
intended that this employee would be able to independently authorize 
all the medical care that Juneau area veterans will need. However, when 
the decision can be made based upon reasonable judgment and the care 
will obviously be approved, the Juneau office is delegated authority to 
issue such an authorization. This is a local operational issue 
regarding support and training for a new employee. It does not 
represent a new process in Alaska and does not require action in VA 
headquarters. During the training and development process the amount of 
direct service provided in Juneau has been more limited than under her 
predecessor. This should improve quickly as the Contact Representative 
gains experience and familiarity with the authorization process.

    Senator Stevens. Thank you. Thank you for your courtesy.
    Senator Mikulski. Senator Johnson?

                       MEDICAL CARE SUPPLEMENTAL

    Senator Johnson. Thank you, Madam Chairwoman. And thank 
you, Secretary Principi and your staff, for joining us today. I 
am also very appreciative of your willingness to spend some 
time just the other day with me, talking through some of the 
budget issues that veterans in South Dakota have raised with 
me.
    Very quickly, again, you announced a $400 million shortfall 
for the current fiscal year last fall. Would you share with us, 
very briefly, the prospects for a supplemental appropriation 
and at what level you anticipate that supplemental might be 
requested for?
    Secretary Principi. Yes. I was prepared again to suspend 
enrollment for new priority 7s, because I felt that the funding 
was not adequate to maintain the quality that we desired. In 
the eleventh hour, so to speak, I received a commitment for 
supplemental funding of $142 million. And I believe that--
supplemental is being worked on. It should be coming up to the 
Hill very, very shortly, possibly as part of the DOD 
supplemental that is being prepared. We expect the request for 
supplemental funding to be forthcoming very, very soon.
    We have taken management actions to offset the balance of 
the $400 million through efficiencies in centralized funding. 
We have recently distributed $162 million to the field, so the 
actions we are taking in conjunction with the $142 million 
supplemental will allow us to get through 2002 without 
eliminating enrollment to anyone who comes to us.
    Senator Johnson. If the shortfall is $400 million and the 
supplemental is $142 million, that is a significant difference. 
So what you will not be able to do that you would have done had 
you had the full $400 million?
    Secretary Principi. We re-estimated the impact of the new 
CHAMPVA for Life Program, a health care program for spouses of 
deceased service-connected men and women. We have re-estimated 
that program, and there is a $94 million saving there.
    There are certain information technology procurements that 
we felt we could defer to out-years. There are a number of 
centrally controlled programs, all of which have yielded 
resources that we have been able to distribute to the field to 
meet more high priority items.
    There is a combination of management actions, some of which 
do result in deferrals of information technology programs, but 
that yield resources we can apply to needed areas.

                     HOT SPRINGS, MSD SURGICAL UNIT

    Senator Johnson. With a budget shortfall within VISN-23, it 
is beginning to have a negative impact on patient care. For 
example, there are some discussions now regarding the surgical 
unit at the Hot Springs VA Medical Center in South Dakota. The 
Hot Springs surgical unit has had difficulty recruiting and 
retaining professional staff. And one of the proposals under 
consideration is to close that surgical unit to all but minor 
outpatient procedures and move the remaining surgeries to Fort 
Mead Medical Center.
    Can you update me at all on the current situation with the 
Hot Springs surgical unit? And are there any solutions to how 
we can keep the surgical unit fully operational?
    Dr. Murphy. Sir, we just received that proposal from the 
network in Headquarters. Our routine is that--that proposal 
would be reviewed by the surgical service. And we will look at 
not only their proposal but alternatives to maintain the 
services to veterans. And we will be happy to provide you 
information once we have had a chance to fully look at that 
proposal and all the alternatives.
    [The information follows:]
                       Hot Springs Surgical Unit
    The surgical unit at Hot Springs Medical Center is currently short 
two nurses; one operating room nurse and one nurse manager. The VA 
Black Hills Health Care System has developed a very aggressive and 
creative plan to fill these positions. In addition to the typical 
markets where the VA Medical Center in Hot Springs normally recruits 
nurses, the facility has expanded its search for nurses to wide ranging 
markets such as Sioux Falls, South Dakota; Omaha, Nebraska; Denver, 
Colorado; and Minneapolis, Minnesota. In addition, the VA Black Hills 
HCS is offering a $5,000 sign-on bonus for the nurse manager and a 
$2,000 sign-on bonus for the Operating Room nurses. VA Employees are 
being offered a $500 ``finders fee'' if they assist in the successful 
recruitment of operating room personnel at the VA Hot Springs medical 
facility. The community of Hot Springs has also been helpful in the 
search for VA staff. The Job Service office is engaged in local (Rapid 
City area) recruitment at no cost to VA. Every effort is being made to 
assure uninterrupted surgical service at the Hot Springs VA Medical 
Center. VA officials are optimistic that the positions will be 
successfully recruited.

                       $1,500 DEDUCTIBLE PROPOSAL

    Senator Johnson. Well, thank you. And I appreciate any 
effort you can do to retain full service wherever possible at 
our VA's.
    As we discuss priority 7s--and I share the concern 
expressed by my colleagues here this morning about the need for 
full services to all veterans. But one of the concerns I have, 
particularly one that we have in rural States, where assets, 
such as land, are included in the calculation of income, we 
have a lot of farmers and ranchers in my State who own land 
that, on paper, is worth a fair amount, but whose annual actual 
income, whose revenue flow, is far, far below the VA threshold.
    The administration's proposal to impose a $1,500 co-pay on 
category seven vets is going to be particularly onerous on 
these people who simply do not have a lot of cash income, 
despite the fact that they do have some land. Do you support 
changing the law regarding eligibility standards to address 
that problem, or do you have any ideas about how to address the 
people who fall under this circumstance?
    Secretary Principi. I know it is an issue in rural America, 
and I think it is an issue in urban America, too, where 
veterans own small businesses, and they have a lot of their 
assets tied up in a little shop or dry cleaners or whatever it 
might be. Those assets count toward their overall assets. It is 
a real problem.
    We could take a look at the income thresholds. Maybe they 
need to be revised; different thresholds at which certain co-
payments would kick in or not. We could look at the percentage 
of reasonable charges as a way of keeping the co-payments and 
the deductible down.
    Again, if our costs, for example, for an outpatient visit 
are $100, we would go to the insurance company first for that 
$100 to be applied toward the deductible. If the veteran does 
not have insurance, then the deductible for which the veteran 
is responsible would be a percentage of that. We started at 45 
percent. We are looking at 20 percent. So it could be $20 or 
$45, which would be applied to the deductible.
    And many, many veterans would not come anywhere near the 
$1,500 limit, which would not be applied to the pharmacy 
benefit. Prescriptions would still be $7 each. And there would 
not be any further co-payment that would have to be paid.
    If veterans could not afford it, we would never turn them 
away. We would have a repayment plan. So we tried to take as 
many steps as possible, recognizing that people with incomes of 
$25,000 to $30,000, and maybe assets tied up in the ranch or 
the farm, do not have disposable income. Whether it be $10 a 
month, or whatever the veteran could afford, we would work out 
some kind of payment plan. The fact of the matter is that we 
need to address this growth.
    Senator Johnson. In the end, you would need better funding. 
But in the meantime----
    Secretary Principi. Oh, yes.
    Senator Johnson [continuing]. As long as you have these 
priority issues that you have to grapple with, I hope that you 
will be sensitive----
    Secretary Principi. Sure.
    Senator Johnson [continuing]. To the actual resources 
available to many of our veterans.
    Thank you, Mr. Secretary.
    Senator Mikulski. Senator Bond.
    Senator Bond. Thank you very much, Madam Chair. I would 
like to submit, for the record, the questions that Senator 
Domenici left for the Secretary.
    Senator Mikulski. Without objection.

                 OTHER FUNDING OPTIONS FOR MEDICAL CARE

    Senator Bond. Mr. Secretary, we congratulate you on the 
steps you have taken. I know that you are making real progress 
trying to tackle the claims benefit processing problem.
    You are addressing problems of homeless veterans. I think 
certainly veterans in my State are excited about your 
leadership. I congratulate you on this. There are problems, 
obviously, with funding. You have continually, the Department 
of Veterans Affairs continually, from year to year, has 
received the greatest increase in any budget from our 
subcommittee. And we are going to continue to do so, but we 
need to look at some of the other alternatives.
    VA, I guess, has sought the authority to bill private 
insurers and Medicare. And the tax-writing committees do not 
want to approve that. A lot of people have focused on the GAO 
reports that concluded, when compared to the private collection 
efforts, private sector collection efforts, the VA is not 
collecting enough money. We need to find out if there are ways 
that you can improve the collections.
    But beyond that, I look at the numbers on priority seven 
participants. And it is obvious that your suggestion of a 
$1,500 deductible was not well received, I think, might be a 
happy euphemism for the response it got. But if you look down 
the road, if the cost of medical coverage for priority 7s 
continues to grow from an increase of $1.1 billion this year to 
$5 billion on top of all the other needs, we are going to be 
very fortunate in this subcommittee if we can get anything like 
the allocations we would need to keep up with that.
    So I would ask what steps you are taking, first with 
respect to priority 7s. Are you meeting with the veterans' 
service organizations, the authorizers and others? Are there 
options that you can pursue that may not be as Draconian but 
might assist?
    Secretary Principi. Yes, I have met with the leaders of all 
of the service organizations. We have discussed this issue. I 
have explained the rationale. I have opened up the door to any 
recommendations they might have on how this deductible can be 
modified to address our needs, at the same time making sure 
that veterans can continue to access the system. I have engaged 
in high-level discussions with Secretary Tommy Thompson, 
talking about the issue of coordination of benefits, and 
Medicare subvention. We are working on that. I do not see that 
happening for the reasons you indicated. The tax-writing 
committees have been very, very reluctant to make any changes 
there.
    So yes. We will meet day or night, whenever, to sit down 
and address this important policy issue, because it is getting 
to crisis proportions. It really is. And we are failing 
veterans if we cannot provide care to them in a timely manner. 
I think some good decisions were made in the mid-1990's, but 
all were premised on additional funding outside of the 
appropriation process. Those decisions were premised on 
Medicare subvention and on increased MCCF collections.
    And guess what? It never happened. And we continue with 
open enrollment. We continued opening clinics. We continued 
giving people expectations. And we did not do too much about 
it. And now I find myself in the situation of having to tell 
veterans, ``I am sorry, there is no more room.''
    As I was telling Madam Chair, when a 100-percent service-
connected veteran combatant takes a bullet to the spine and 
goes to Florida, he is treated just like any other veteran who 
is non-service-connected or who may be wealthy; but by law they 
are both equal. To me, that is wrong. And we need to do 
something about it. But that is the way the law is structured 
by the authorizing committees.
    It seems to me that we have to address this in such a way 
that gets people to understand and attempts to meet their 
expectations, but to put some management processes in place to 
take a look at this growth and manage it appropriately, like 
any private sector health care company would. They have the 
same challenges we do.
    With our MCCF, we are making progress, but I am to the 
point of being totally frustrated. I am looking to bring in 
loaned executives from the private sector to tell me how we 
should do our billing and collection. We struggle with it. We 
do it in 163 hospitals around the country and at some networks. 
It seems to me there is a better way to do our collections. And 
we just continue to do the same things and we just do not get 
there. I do not want to be critical, but we just do not get 
there.
    I am at the point now where I really need to bring in some 
experts from the private sector; not consultants, per se, but 
experts in business, to come here and tell me how to fix this 
problem once and for all. Then go from there.
    Senator Bond. Well, Mr. Secretary, my time has run out. But 
I commend you for your willingness to address the much broader 
problem. We are going to do everything we can in this 
committee. We have always done as much as we can. The forces 
from the outside who keep thinking there are unlimited funds 
are absolutely, you know, in the wrong ball park; they are on a 
different planet.
    We have to focus on the severely wounded, service-wounded 
veteran. We have to focus on those who are poorest. And I am 
concerned that, if we do not get a handle on some of the lower 
priority ones, we are going to hear stories today about lack of 
care or delayed care and inadequate care for veterans who 
really are needy, whom we are not treating as well as we should 
because the resources are too short. And this is a problem that 
the authorizing committees, as well as some of the other 
committees on the Hill, need to be aware of. They think they 
can offer more benefits to everybody without providing the 
resources.
    And we will work with you. And I commend you for carrying 
that message.
    Senator Mikulski. That was good, very good.
    Senator Kohl?

                          KENOSHA, WI, CLINIC

    Senator Kohl. I thank you, Madam Chairman.
    Mr. Secretary, the significant increase in the medical care 
spending proposed in your budget, I believe, is well justified. 
I must also say, however, that in addition to what you have 
heard from the other Senators, I have heard from veterans who 
are concerned over your proposed $1,500 deductible initiation 
for priority seven veterans. In seeking new funding sources, I 
know you would agree that the VA must be careful not to erect 
new barriers for veterans who are seeking VA care.
    Mr. Secretary, as you may know, the State of Wisconsin's VA 
facilities are part of Veterans Integrated Service Network 12, 
known as VISN-12, which is the first network to undergo the 
VA's CARES for structuring process. The realignment package for 
VISN-12 that you recently approved will include the 
establishment of several new community-based outpatient clinics 
in my State of Wisconsin. The timely construction of these 
clinics will be critical in the effort to bring VA health care 
closer to the rural areas, where many of Wisconsin's veterans 
live.
    Over the past year, the VA has had difficulty in finding 
the money to construct a clinic authorized to be built in 
Kenosha, Wisconsin. Can you walk me through the clinic funding 
process and assure me that, with the budget that you are 
proposing, the VA will have the funding to build these clinics 
on schedule in my State of Wisconsin?
    Secretary Principi. Yes. Dr. Murphy can talk about the 
specifics, but with regard to Kenosha, that decision has been 
made. That clinic will open; we made a commitment to open that 
clinic. Some later decisions seemed to run counter to that, but 
I felt that, in view of the commitment, we needed to move 
forward. The network director has been so informed, and steps 
are being taken to ensure that the funding will be there for 
the clinic.
    Dr. Murphy can talk about Green Bay and Wisconsin Rapids.
    Senator Kohl. Yes.
    Dr. Murphy. You are absolutely correct, sir, that there 
were two community-based outpatient clinics that were proposed 
by the contractor as part of the CARES process and that 
Secretary Principi has approved options. We are moving forward 
very aggressively to develop an implementation plan within the 
network to get all of the changes that were approved in place 
in the shortest time possible.
    Some of the major changes that will be implemented will be, 
you know, the closure of inpatient beds at Lakeside. We will 
need to renovate the West Side facility in Chicago in order to 
do that transfer. There will be significant savings in terms of 
personnel and other management efficiency that will result from 
that. And those resources will go back to delivery of health 
care services for services within Network 12, including those 
in Wisconsin.
    So we expect to be able to implement those changes as 
quickly as possible. The implementation plan should be 
delivered to headquarters within the next several months. We 
would be happy to brief you on that when it is available.
    [The information follows:]
                         Clinic Funding Process
    Funding for VA Community-Based Outpatient Clinics (CBOCs) comes out 
of the budget allocated to the VISN. Each medical center within the 
VISN is then provided with an annual operating budget to support the 
full range of services and staff they provide. Clinics under their 
jurisdiction must be funded out of their operating budgets. The 
directive governing the establishment of CBOCs has a provision that 
requires the VISN to have sufficient operating funds to open and manage 
the clinic. The original business plan for the Kenosha clinic is being 
updated to reflect workload projections based on utilization of 
surrounding clinics and medical centers that was not included in the 
original plan. The clinic is expected to open later this year. Based on 
the outcome of the business plan and sizing model, we anticipate that 
North Chicago VA Medical Center will have the funds necessary to 
activate the Kenosha clinic later this year and anticipate future 
budgets will support on-going operations. The other clinics in the 
CARES Implementation Plan are to be funded with the saving by the 
realignment of inpatient services from Lakeside to West Side and Hines. 
In addition there would be operating funds generated by the Enhanced 
Use Lease of the Lakeside property.

    Senator Kohl. I thank you and I am encouraged by what you 
said about Kenosha. I would like to hope I could also be 
encouraged with what you said as it reflects Green Bay and 
Wisconsin Rapids.
    Dr. Murphy. Yes.
    Senator Kohl. Thank you.

                           CLAIMS PROCESSING

    Mr. Secretary, one of the major commitments made to 
veterans by the President was the reform of the inefficient 
claims processing system. Veterans in Wisconsin and across the 
country continue to wait too long, I am sure you would agree, 
to receive decisions on their claims for benefits earned. In 
your statement, you have emphasized that it is your goal to 
reduce the current claims processing time to 100 days for 
compensation and pension claims by the summer of 2003.
    Too often, I hear complaints from Wisconsin veterans that 
new and reopened claims are often taking as much as a year to 
process. While 100 days is worthy goal, can you outline what 
you are doing to achieve this goal in such a short period of 
time?
    Secretary Principi. Senator, as you may know, shortly after 
coming on board I convened a claims processing task force to 
recommend practical hands-on solutions. And I was not 
interested in recommendations that would deal with changes in 
law to curtail benefits or abstract theories of veterans' 
benefits. I just wanted practical hands-on solutions of things 
we could do to reduce the backlog.
    I am proud that that group, including leaders of the 
veterans service organizations, gave me 34 very concrete 
recommendations, like triaging when claims come in. A group of 
people decide which ones can be decided immediately and which 
ones need more claims development work, so that those that can 
be decided immediately can be signed off, rather than sitting 
on somebody's desk for 6 months before the file is even opened. 
Other recommendations called for more specialization, more 
accountability and performance standards.
    I created a tiger team specifically to address the claims 
of veterans over the age of 70 years old, whose claims had been 
pending more than a year. Since the tiger team has been in 
existence about 4 months in Cleveland, Ohio, with 9 additional 
sites around the country, they have decided 13,000 of the most 
complex claims that have been sitting on someone's desk for a 
year or 2 to 3 years.
    I think the totality of these steps, including a lot more 
focus and discipline on what we have to do, has resulted in a 
dramatic increase in the number of decisions to 62,000 each at 
the past 2 months, compared to 29,000 per month a year ago. We 
need to continue to do that. We also need to keep our eye on 
quality to make sure we are not making a lot of mistakes in the 
process of expediting these claims.
    I really do think, that by staying the course, we are going 
to get claims processing time down to 100 days, maybe less, 
maybe a little bit more, but we are going to stay on that 
track.
    Senator Kohl. Well, I thank you. And I am much encouraged 
by what you have said this morning.
    Secretary Principi. Thank you, Senator.
    Senator Kohl. Thank you so much.
    Thank you, Madam Chair.
    Senator Mikulski. Thank you.
    Senator Shelby.
    Senator Shelby. Thank you.

                      DISCRETIONARY FUNDING NEEDS

    Mr. Secretary, we appreciate you coming here today. And I 
think you feel the environment here is one to help you. We know 
you have a lot of problems confronting you, mainly in 
resources, funding. For example, I have had a couple to come to 
my attention recently. In a meeting with members from the 
disabled American veterans in my office here, two examples of 
the problems that you have questioned surfaced. And I am sure 
you have them all over the country.
    One veteran from Birmingham had fallen and knocked one of 
his teeth out. He was told it would be 4 months to receive a 
new tooth. Another veteran from Athens, Alabama, made an 
appointment for a routine eye exam. That exam is 6 months away.
    I think a lot of it is inability to provide you the 
resources you need. Do you agree?
    Secretary Principi. Yes, sir, I do agree. Again, it is 
infinite demand, finite resources. So yes, part of it is, the 
dollars we have available. Part of it is how well we manage our 
system. It is a complicated issue. I think, in the final 
analysis, it is dollars that we request of you and that you 
give us. I think the Congress has been extremely generous to 
us, but the workload continues to grow.
    And I think there are unfunded mandates, too. And again, I 
am not trying to take a shot at the authorizing committees.
    Senator Shelby. I think you are being honest.
    Secretary Principi. I grew up on an authorizing committee 
as a staffer. But as was said yesterday in the House, I think 
it is my curse.
    Senator Shelby. Welcome to the appropriations world.
    Senator Mikulski. Very good.
    Secretary Principi. I think, when the authorizers mandate 
some programs with no increased funding specifically for those 
programs, we have to take the resources for the new programs 
from existing programs. And it makes it difficult, because 
there is only so much of the pie to divvy up.
    Senator Shelby. Absolutely.
    Secretary Principi. It becomes a problem we have to deal 
with.
    Senator Shelby. Well, I guess sometimes the authorizers 
want to be Santa Claus. And we certainly do not want to be the 
Grinch. You know we want to help you and you understand that. 
Some of us also grew up on some of the authorizing committees. 
But at the end of the day, the resources have to come out of 
this committee. And we know you have a tough job. I know our 
leaders on the committee do, too. I believe all of us want to 
help you solve this job, because we are committed to the 
veterans.
    But I think you point out a good example. I think maybe 
they are relative commitments, you know, to the disabled, to 
the people who are disabled and wounded in combat. I think we 
owe them first; I do.
    Secretary Principi. I agree. The service-connected disabled 
followed by the poor.
    Senator Shelby. Absolutely.
    Secretary Principi. The system was designed for them. And 
to a degree it has always historically been as long as I can 
remember, that the higher income, non-military medical 
condition veterans were always treated on a space available 
basis. Again, I hope we can treat as many veterans as possible. 
I do not think we can treat all 25 million. The system is not 
built for that. We are up to almost 5 million now, 20 percent 
of the total.
    We have to concentrate and make sure that the service-
connected disabled and the poor have access to our system, 
because they are the ones that usually do not have other places 
to turn, either because they need the specialized programs of 
the VA, such as spinal cord injury, blind rehabilitation, 
mental health, and PTSD, or, of course, who are poor and who do 
not have insurance.

                    AVERAGE AGE OF WARTIME VETERANS

    Senator Shelby. Mr. Secretary, what is the average age of 
the Second World War veteran today, roughly?
    Secretary Principi. They are well into their 70's, I would 
think mid- to late 1970's.
    Senator Shelby. Towards the 1980's, are they not?
    Secretary Principi. Probably. Maybe even 1980's. Clearly, 
there are only 5 million remaining of the 16 million who 
fought.
    Senator Shelby. What is the average age of the Korean War 
veteran? I know it is a little below, but not much, is it?
    Secretary Principi. I think Korean has to be in the 65-to-
70 range, as well.
    Senator Shelby. And how many would that be, roughly?
    Secretary Principi. I will have to provide it for the 
record.
    Senator Shelby. You furnish it.
    Secretary Principi. We have about eight to nine million 
Vietnam veterans, five million World War II veterans. I think 
Korea is in the neighborhood of four to five million.
    Senator Shelby. What is the average age of the Vietnam 
veteran?
    Secretary Principi. The average age is probably 57/58 years 
old.
    Senator Shelby. You are using your measurement, right? That 
is good.
    Secretary Principi. I think I am 1970 vintage from Vietnam. 
So yes, probably about in the mid- to late-50's.
    Senator Shelby. Okay.
    Madam Chairman, thank you.
    Senator Mikulski. Thank you, Senator Shelby. And thank you 
for your sentiments to the Secretary that, really, we are 
troubled about what the VA is facing. And we can just see 
today, you yourself seem so troubled. But you are not alone 
here. And the veterans are not alone. And we really have to 
solve these issues.
    Senator Craig?

                          PREPARED STATEMENTS

    Senator Craig. Thank you, Madam Chairman. Let me ask 
unanimous consent that my opening statement be a part of the 
record.
    Senator Mikulski. That is without objection and we will 
also include statements from Senator Bond and Senator Domenici.
    [The statements follow:]

              Prepared statement of Senator Larry E. Craig

    Mr. Chairman, it is indeed a pleasure to welcome the VA Secretary 
Tony Principi and members of his staff. I applaud you and your team in 
your efforts to ensure our government honors our commitments to 
Veterans while implementing the most beneficial and cost effective 
programs. To do this, we must continually look for opportunities to 
reform the VA health care system, while maintaining as our number one 
priority, our combat veterans with disabilities and our veterans with 
low incomes who often rely exclusively on the VA for their care.
    The VA's Budget proposal totals $56.5 billion for Veterans' 
benefits and services, $30.1 billion for entitlement programs and 
includes $26.4 billion in discretionary spending, for medical care, 
burial services, and the administration of Veterans' benefits. This is 
an increase of almost $6 billion over last year's budget, and it 
clearly demonstrates the President's commitment to Veterans' Health 
Care.
    I strongly support a VA which is committed to providing accessible, 
high quality medical care and other Veterans benefits and services in a 
timely and effective manner. However, we must expand and improve the 
delivery of service and benefits so that all Veterans have equal access 
to high quality medical care, particularly in under served rural areas 
such as Idaho. I believe that a more localized care approach as opposed 
to a regionalized approach is most appropriate for areas of the country 
such as Idaho. Currently, the Veterans in Lewiston of my State have 
challenges getting appointments at facilities in Washington, 
specifically Walla Walla, and Spokane, as well as tremendous burdens 
trying to get to these facilities. I believe this area is a prime 
candidate for a Veterans Clinic. In the Southeast portion of my State I 
have major concerns with the doctor shortage we are currently 
experiencing in our Pocatello facility. It is of utmost importance that 
the long list of Veterans waiting to receive various services, 
especially medical care, are able to get it in a timely, courteous 
manner with a minimal amount of necessary travel time. In recent years 
there were tremendous staff reductions that resulted in reduced 
services. The necessary steps must be taken to reverse this trend. I 
invite the Secretary to come out to Idaho and discuss these issues with 
me and the Veterans of my State sometime soon.
    In closing, Mr. Chairman, there is no way to over emphasize the 
honor and respect this nation owes the military men and women who 
sacrificed so much to accomplish a strong national defense. I believe 
that this proposed budget is a good beginning for ensuring our Veterans 
will receive high-quality health care, that we keep our commitment to 
maintain Veterans' cemeteries as national shrines, and we have the 
resources to process Veteran Benefit claims in a more timely and 
accurate manner. I look forward to working with Secretary Principi to 
meet the many challenges that the VA will face in the coming years.
                                 ______
                                 

               Prepared Statement of Christopher S. Bond

    Thank you, Madam Chair. I also welcome back Secretary Tony Principi 
to our subcommittee. I am pleased to have Secretary Principi here today 
to discuss the fiscal year 2003 budget for the Department of Veterans 
Affairs. Even though you have been in your position for a little over a 
year, saying that a lot has changed over the past year would probably 
be an understatement.
    As the Secretary of VA, you face a number of daunting challenges 
that have plagued the Department for several years. I applaud your 
efforts to tackle the claims benefits processing problems and address 
the problems of homeless veterans, to name a few.
    However, my statement focuses on two other major challenges: (1) 
addressing the escalating growth of the so-called Priority 7s and (2) 
transforming VA's medical care infrastructure and services to better 
meet the needs of veterans.
    As you know, the most pressing budgetary problem facing the 
Department and the Congress is the cost of maintaining an open 
enrollment policy for the Priority 7 veterans without compromising the 
quality of health care services for all veterans served by the VA 
system. The fastest growing veteran group are those that have incomes 
above $24,000 annually and have no service-connected disabilities. 
These are defined as ``Priority 7'' veterans. VA projects that if no 
change to current policy is enacted, the costs of providing medical 
care services to this category of veterans will rise from $2 billion in 
fiscal year 2002 to over $5 billion in fiscal year 2007--a 126 percent 
increase! Currently one-third of VA's six million enrollees are 
Priority 7s and if no change in policy is enacted, this percentage is 
projected to increase to 42 percent by 2010.
    We can all be proud that VA is successful in attracting so many 
veterans to its services due to the recent improvements made in its 
delivery system and its generous benefits packages. However, there are 
significant costs for operating VA's medical care system, which must be 
addressed or else the system may collapse and become a victim of its 
own success. To address this issue, the Administration has proposed a 
new deductible or cost-share arrangement where Priority 7 vets would be 
charged at a rate of 45 percent of the reasonable charges, up to $1,500 
annually. VA proposed this deductible to not only stem the rapid growth 
in Priority 7s, but to insure that timely, high quality care can be 
provided for VA's higher priority veterans--those that are low-income 
and those with service-connected disabilities--without having to stop 
enrolling Priority 7s.
    Mr. Secretary, I am sympathetic to the Department's dilemma and you 
have my commitment that I will work with you to protect the long-term 
viability of VA's health care system. But I realize that you have 
already heard from the veteran service organizations and the 
authorizing committees that they will not support your proposal. And to 
further box you in, they have demonstrated their objection to any 
attempt to stop enrolling Priority 7s.
    Where does that leave us? Clearly, at the appropriators' door step. 
VA estimates that it will need an additional $1.1 billion for fiscal 
year 2003 to maintain open enrollment for Priority 7s, but there is 
more than just this one year cost as I stated earlier. If we do not 
make a policy decision this year on Priority 7s, then we will be 
looking at an additional $5 billion by fiscal year 2007. I believe that 
it is too optimistic and risky to expect that the appropriators will 
come up with $1.1 billion this year. The VA medical care account has 
been and always will be the top funding priority for this subcommittee 
but it cannot be at the expense of gutting other critical programs for 
affordable housing and disaster relief.
    We must work constructively with the VSOs and the authorizers to 
come up with a fair, balanced approach to ensure that the VA health 
care system continues to provide quality care for all of our veterans. 
And, Mr. Secretary, we need your commitment to improve VA's efforts in 
collecting funds due to VA from other health insurance programs. Your 
budget request is projecting collections totaling $1.45 billion, but I 
have heard that VA has more than $700 million in outstanding 
receivables. VA can obviously do a better job.
    The other daunting challenge for VA that also has major cost 
implications is realigning the VA medical care infrastructure. I 
congratulate you, Mr. Secretary, for your leadership in moving forward 
the Capital Asset Realignment for Enhanced Services or ``CARES'' 
program in network 12. I think I know as well as anybody that it was a 
difficult decision to implement CARES in that region but I cannot 
emphasize enough that it was the right thing to do.
    Many oppose CARES, including some members on Capitol Hill, but I am 
convinced that CARES is the right approach that is badly needed. CARES 
is critical in developing a long-term strategic plan to ensure that 
VA's capital infrastructure meets the healthcare needs of veterans in 
the most cost-effective manner while assuring the highest quality care 
system. For too many years, VA did not have a clear capital asset plan 
that would justify the need for new construction projects or address 
the massive excess infrastructure in the system. Before CARES, VA 
hospitals had been treated as trophies for members to bring home to 
their States or districts, built with too many beds and too much gold-
plating. Not too many years ago, new VA hospitals were opening with 
entire floors empty because they were not needed.
    It is also troubling to me that some VA facilities seem to exist 
primarily to serve the research and financial interests of the medical 
schools. This is an important part for VA as both research sites and 
teaching schools. However, in too many cases, veterans' medical care 
has become a secondary concern in justifying those hospitals. I was 
frankly appalled by the efforts of Northwestern University to block 
CARES in Chicago. While I appreciate the medical research work done by 
fine institutions such as Northwestern and am a big supporter of VA 
medical research funding, we all know in this room that medical schools 
have more resources at their disposal than the veterans who need 
medical care. Your decision, Mr. Secretary, was important because it 
sent out a signal that VA's first and most important priority is 
meeting the needs of the veteran.
    You took a major step with implementing CARES in VISN 12 but I 
believe that we are at a critical juncture. Chicago was a pilot in some 
respects but now we must tackle the Bostons, New Yorks, and San 
Franciscos of the country. You have shared with me some details of your 
plan to complete CARES for the rest of the Nation but there are some 
important questions that we--the Department and this subcommittee--need 
to work out. For example, I am concerned about the availability of 
resources needed to perform the studies and the expertise of those 
staff performing the work. Further, it is important that the process be 
objective and independent. I am concerned that if a VISN director is in 
charge of his or her own CARES study, there may be a conflict-of-
interest in carrying out the review. And, as demonstrated with Chicago, 
I am concerned about medical schools pressuring the network to retain 
facilities at the expense of the veterans and the taxpayer. In GAO's 
testimony to this subcommittee back in 1999, it reported that ``Medical 
schools' reluctance to change long-standing business relationships, for 
example, has sometimes been a major factor inhibiting VHA's asset 
management.''
    Lastly, we need to fund adequately CARES. We provided $100 million 
for fiscal year 2002 to fund CARES but your budget request for fiscal 
year 2003 only asks for $40 million. I do not understand why more CARES 
studies cannot be completed in fiscal year 2003. I am further puzzled 
by the budget request's inclusion of $94 million for seismic repairs at 
four California facilities, without any CARES review. You need to 
provide us a comprehensive, strategic plan on how CARES will be carried 
out in a timely, efficient manner and how we should fund the 
construction of new projects and disposal of old projects.
    Mr. Secretary, I look forward to our continued working relationship 
in addressing the needs of our veterans. Before I close, I want to 
express my sincere thanks for your visit to my State. The veterans in 
Missouri appreciate your hard work and efforts. Thank you.
                                 ______
                                 

             Prepared statement of Senator Pete V. Domenici

    Mr. Secretary, it is a pleasure to see you again. Thank you for 
being here today to discuss the enormously important issues that are of 
concern to our nation's veterans.
    We all have a great responsibility to assure that the needs of 
veterans throughout this country are being met, and I want to 
compliment you for the job you are doing to meet this challenge.
    People from all walks of life in New Mexico have a long and proud 
tradition of answering our nation's call to duty.
    Just last week about 40 members of the 49th Communication Squadron 
from Holloman Air Force Base in Alamogordo, New Mexico shipped out as 
part of Operation Enduring Freedom.
    I am personally very proud of them, and I know all of New Mexico 
is, as well.
    At this time when our nation is actively engaged in conflict 
abroad, and we hear reports of the danger our troops face everyday, we 
come away with a real sense of the sacrifice our brave men and women in 
uniform are making.
    For me, and I am sure this is true for you, too, Secretary 
Principi, the conflict in Afghanistan also evokes memories of the great 
sacrifices that our military servicemen and women made throughout the 
last century in order to preserve our liberty.
    And so it is vitally important that we provide our patriots with 
the very best care available and I am committed to doing that.
    As I travel around New Mexico, no matter where I go, I always meet 
a veteran who says, ``Senator, I served my country as part of the 
military. I am so proud to have sacrificed for my country, and the VA 
has truly been a great provider for my health needs. But in a rural 
State like New Mexico, I am forced to travel great distances to access 
a VA facility for the care that I require. What can be done?''
    Mr. Secretary, I know you, too, have traveled all around this 
country to listen to veterans, including the rural parts of the country 
and heard similar concerns. In my questioning today, I will be 
interested to hear what steps the VA will take to address this problem.
    Another issue that is very important to all veterans is that of 
having a fitting resting place, where the memory of their service to 
country will be preserved in an honorable and dignified manner.
    In New Mexico, this issue is manifesting itself in the reality that 
by 2008, the Santa Fe National Cemetery will run out of sufficient plot 
space.
    Last year, I sought a solution to this problem by introducing 
legislation calling on the VA to initiate a planning study that would 
lead to the establishment of a National Cemetery in Albuquerque.
    I will continue to pursue this highly important issue because I 
believe it is a pressing problem that needs to be addressed soon in 
light of our aging veteran population. It is critical that they have a 
place where they can be laid to rest alongside their comrades.
    So I will seek your thoughts on this, as well, Mr. Secretary.
    And with that, I would, again, like to welcome you Secretary 
Principi, and thank you Chairman Mikulski for calling this hearing.
    Thank you.

                   PHYSICIAN FOR POCATELLO, ID CLINIC

    Senator Craig. Mr. Secretary, thanks for your passion. I 
think we all feel it here and appreciate it. I get sensitized 
by it on a regular basis, and I am sure some of my colleagues 
have the same experience. I had to call a mom and a dad in 
Idaho yesterday, because I was tracking their injured son in a 
hospital in Turkey, who was involved in that firefight last 
weekend and got beat up pretty badly. A young man from 
southeastern Idaho, who some day is probably going to need the 
help of the Department of Veterans Affairs, because he got beat 
up pretty badly.
    And I think about the time we think periods of population 
transition occur by age and reality. We just went through with 
Senator Shelby the litany of, of course, World War II and Korea 
and Vietnam. And while this current peace effort we are 
involved in is going to bring less veterans, too, I hope, that 
need care to the system, it is going to bring some.
    And many of my colleagues have covered the issues, the 
priority 7 issues, and how we deal with that medical 
deductibility. Yes, veterans in Idaho are reacting the same 
way. And I know you are trying to resolve that. With resources, 
it would be easier to do.
    Let me give you an example, though, of a problem that is 
current in southeastern Idaho. We, out West, ask our veterans 
to travel phenomenal miles. And when World War II veterans and 
Korean War veterans get in their cars and drive 300 miles to 
the clinic, over snow-covered roads, not to get the services 
they need, finding that they may need to stay overnight, to go 
back the next day, that kind of thing, often times is very 
frustrating.
    Pocatello, Idaho, a facility there, lost one of its doctors 
3 years ago; and, at that time, convinced me that--that doctor 
deficit could be dealt with through a nurse practitioner. That 
has simply proven not the case. Now those veterans, who were 
once serviced on that 250-mile drive from Salmon to Pocatello--
or I guess it is about 200, now have to add another 150 miles 
to go on to Salt Lake.
    They are out recruiting. They say they cannot find at least 
someone to meet that. We have a residence program in the 
vicinity. And it appears there is ample supply of willing and 
able medical professionals. I think that is something we ought 
to focus on in the Pocatello facility. It is of need there.
    Secretary Principi. Yes. Dr. Murphy has some information 
specifically on that.
    Dr. Murphy. Senator Craig, I am happy to report that we 
have just hired a physician for the Pocatello clinic.
    Senator Craig. Hallelujah.
    Dr. Murphy. Pardon?
    Senator Craig. Hallelujah.
    Dr. Murphy. Hallelujah. That physician is scheduled to 
begin work in July of 2002. We are hoping that we will be able 
to bring them on board sooner than that. But that will--that 
will bring the staffing level up at Pocatello----
    Senator Craig. Good.
    Dr. Murphy [continuing]. And hopefully resolve some of the 
issues that are very important to veterans in Idaho.
    Senator Craig. Well, I try to get into all those facilities 
at least once or twice a year to see how they are doing. And it 
is very important that those clinics, outside the major 
facilities, service because of the distances involved. It is 
not just a drive across town. Back here it is a drive across 
several States to get to a facility, comparatively speaking. 
And that is something that is just very, very important.

                           CLAIMS PROCESSING

    You have walked through how you are approaching the claims 
issue. I will leave that question alone. I was--I just wondered 
why you chose 100 days. I think it is probably the conclusion 
of the group recommendation--when I would have suggested, gee, 
maybe 90 days or even 30 days, Tony, would have been the right 
way to go here. But maybe 165 days down to 90 days is in itself 
a substantial accomplishment.
    Secretary Principi. Indeed. I think that was done in 
consultation with the leadership of the Veterans Benefits 
Administration and the task force. And we felt 100 days was a 
very aggressive goal, to shoot for that. I certainly would like 
to see it 90 or 60 days.
    But, you know, sometimes it takes us so long to get the 
medical and military records from DOD, or the archives, and 
then to schedule exams. So you are building in a delay right at 
the outset. But we are taking steps to deal with that, too. And 
I am making progress in working out memorandums of 
understanding with the Records Processing Center in St. Louis 
to get those records much, much quicker. And we are making good 
progress.
    Senator Craig. Well, Madam Chairman, thank you very much. I 
have other questions I will submit for the record.
    We appreciate you being here. We are certainly going to do 
all we can do. And I know that it is the commitment of the 
chairman and our ranking member to make that happen within all 
of the allocation we can grab hold of. And your anticipated 
budget increase is certainly respectable. We hope we can get 
there. Thank you.
    Secretary Principi. Thank you, sir.
    Senator Mikulski. Thank you, Senator Craig. And, you know, 
we do not have mountains in Maryland like you have. And even 
though we welcome the President to Camp David, I do not know if 
he calls them mountains, but they are mountains to us. And our 
own veterans up there, when you know that you have got--you are 
old or you are sick and you have a colostomy bag and you are 
riding over these very rugged terrains somewhere, that we are 
very sympathetic to your situation.
    Senator Craig. I have had the privilege now of being to 
Camp David. It is a nice little rise in a flat place, you know.
    Senator Mikulski. I am being sympathetic to you. Do not----
    Senator Craig. Thank you.
    Senator Mikulski. Do not push it.

                         PRIORITY 7'S VETERANS

    Senator Mikulski. Mr. Secretary, first of all, what you 
hear from the Senators is that we are on your side. We know 
that when you took over the administration of VA that you 
faced, in some ways, an administrative brown field. It had been 
long neglected, and so we know that you have--that you are 
dealing with a very big job.
    And that would even be the usual and customary systems. 
Now, this demographic explosion that you are facing is just 
eclipsing everything. There are so many other questions that I 
would like to pursue today, like facilities, the issue of long-
term care, home health care, the work force shortage--like, 
related to nursing, that I would like to be able to bring up.
    But the priority 7 issue, I think, is eclipsing everything. 
And your testimony on page 6, I think, is really a bombshell. 
When you talk about--since 1996 the priority 7 veterans 
increasing 500 percent when they were 33 percent earlier, now 
they are 33 percent of the workload. They are projected to 
increase to 42 percent by 2010 with an enormous increase of, 
well, between now and 2007 of $20 billion. That is almost 
doubling what we currently have, which would take us to about 
$45 billion. Now, this is no finger-pointing to the priority 7 
veterans. There is a reason that they are coming. And I am 
talking about the reasons. But before I do, I just want to 
alert the committee that it could get worse. Senator Bond and I 
represent industrial workers. You know we are facing a big 
crisis right now, with something called legacy cost.
    If that steel industry goes down the tube, we have over 
600,000 retirees in the steel industry. Okay? They will lose 
their health care. As you know, there were no draft counseling 
or draft dodging lines at the steel mills. You know that. The 
movie ``Deer Hunter,'' I think, told us and taught us a lot.
    Secretary Principi. Sure.
    Senator Mikulski. Just as between us. This all could come 
to the VA. These men who fought, if they lose their health 
care, they are going to find it another way. And this is not 
dire predictions. So let me go to the priority 7. I am a data 
driven--we have to be data driven here.

               DEMOGRAPHIC PROFILE OF PRIORITY 7 VETERANS

    My question is: Have you, with the priority 7 coming in, do 
you have a demographic profile of the priority 7 veterans 
entering the system related to geography, age, income, and the 
reason they seek you out? Because my hypothesis is that the 
lack of a universal health care policy, lack of health 
insurance for some, the lack of a prescription drug benefit for 
the older veterans, and then also the lack of a national long-
term care policy, which is quite piecemeal, could you--let us 
start with the demography. Do you have--because I think if they 
knew the age--first of all, the geography. Is this focused on 
particular geographic area?
    Second, what are their ages? And are they rich, or are they 
just kind of working stiffs who do not have the money or is--or 
do not have health insurance? Do you see where I am heading? 
That for the younger veteran it might be one reason; for the 
older it might be another.
    Dr. Murphy, do you have a demographic profile? You do not 
seem to have it handy.
    Dr. Murphy I am searching for it.
    Senator Mikulski. While you are looking----
    Secretary Principi. We will provide the precise information 
for the record.
    Senator Mikulski. But do you even have it now, in terms 
conceptually?
    Secretary Principi. I think it is fair to say first that, 
many priority 7s are coming to us for prescriptions only.
    Senator Mikulski. But is that like 60 percent, 70 percent, 
10 percent?
    Secretary Principi. I would be speculating, Madam Chair, 
and I apologize for that.
    Dr. Murphy, perhaps you can.
    Dr. Murphy. We do know that about 57 percent of the 
priority 7 veterans use less than $400 worth of health care. 
And that would be their primary care visits plus other 
medication or----
    Senator Mikulski. So 57 percent will come. But you see what 
I am getting at? Can you tell me why they are coming and how 
old they are? And is this the absence of other national 
policies? Again, we are not passing judgment here. We are 
trying to get the data.
    So, you are saying 57 percent use less than $400 worth of 
care?
    Secretary Principi. Yes.
    Senator Mikulski. But why do they come?
    Secretary Principi. I think they are----
    Senator Mikulski. And how old are they?
    Secretary Principi. I think they are older. I think they 
represent the veteran populations generally coming to us. I 
think they tend to be older, World War II veterans. This is 
based upon all the town hall meetings that I have attended over 
the past year. They are using our primary care facilities, our 
clinics, a great deal. I think they are in the age range of 65-
70 years old.
    Their incomes tend to be a little bit higher than the 
threshold for priority 7, but I do not think they are rich 
people. We do have a few who are wealthy and come to VA for 
their prescriptions. They are eligible. And rather than paying 
$400 a month, they pay $7 a month.
    Senator Mikulski. Okay. Well, I understand that, but--go 
ahead. I am sorry. Go ahead.
    Secretary Principi. I think the vast majority of priority 
7s that come to us have incomes around $30,000. They are not 
making a lot of money. They are ordinary Joes, who are working 
in the factories and on the farms, who have lost their health 
care coverage or who do not or may not have it.
    Senator Mikulski. But do we have a natural demographic 
profile, Dr. Murphy?
    Dr. Murphy. We do. And I----
    Senator Mikulski. You do not have it with you.
    Dr. Murphy. I apologize, Madam Chairman. I thought I had 
that data with me. And I know that we can pull it. Some of the 
income data that we have is based on a survey that was done in 
1999. In my memory of the income profile of priority 7 veterans 
is that approximately 30 percent of them, about one-third, have 
incomes above $35,000 a year. So the majority----

                 INCOME PROFILE OF PRIORITY 7 VETERANS

    Senator Mikulski. Wait, wait, wait. Incomes above what?
    Dr. Murphy. Incomes above $35,000 a year. But I can get 
those specific statistics.
    Senator Mikulski. Well, let me tell you what the committee 
wants and--because, again, we need to be data driven to also 
help you parse out our recommendations, knowing that the 
recommendations are a stopgap. First of all, the $1,500 is a 
non-deductible, is a non-starter. And we will not do it unless 
the authorizers pass it.
    At the same time, we know that there is a crisis here. It 
is a crisis for the people who are turning to you, and it is 
therefore a crisis for those of us who have to provide the 
service and pay the bills. They are not coming to you because 
it is a leisure choice option. They are coming to you for a 
reason. Some, if they--they might like the--but most of all, I 
think it is the lack of policy in other areas.
    So we need data. We need a demographic profile, first of 
all, of geography. Is it concentrated in, say, the rural areas? 
This is going to help us get to our management solutions while 
we look to more long-term systemic. We need geography.
    Second, we need age. And I am really interested, 
particularly, under the age of 65, the whole issue of every 5 
years, if I could. One of the policies would be people, 
primarily men, who had jobs but are now not working after 60, 
either the collapse of an industry or whatever, but they are 
too young for Medicare, but they cannot get health care 
anywhere else.
    So, you see where I am heading in terms of the age? Or are 
young men coming, younger men, because of the lack of health 
insurance? So you see, one is the age; then, the other will be 
income, because I think we have to face it. If it is people 
with incomes over $70,000 coming to you for a prescription drug 
benefit, that is very different than somebody coming for 
$27,000 or $32,000, the combined pension maybe, et cetera. And 
then that would be the age-income.
    And then, if you could, even anecdotally, do a survey of 
why are they coming. Is it they like the Veterans--particularly 
now, when there seems to be longer waiting times, work force 
shortages, other challenges that you are facing in the system?
    So you see where we are heading?
    Secretary Principi. Yes.
    Senator Mikulski. Because that, I think, will tell us a lot 
about what we need to do. You know, do we do an age--and I am 
not talking about what is the methodology for containing this 
issue.
    Secretary Principi. Sure.
    [The information follows:]
                     Priority 7 Demographic Profile
    The following information is provided for the record (fiscal year 
2001 information is provided except as noted):
  --Priority 7 Enrollees and Users by VISN fiscal year 1999-fiscal year 
        2001 with comparisons to growth rates for Enrollees and Users 
        in Priorities 1-6
  --Priority 7 Enrollees and Users by VISN also shown as a Percentile 
        of all Priority 1-7 Enrollees and Users, fiscal year 1999-
        fiscal year 2001
  --Average Ages of Priority 7 Enrollees and Users by VISN fiscal year 
        1999-fiscal year 2001 with comparisons to the Average Ages of 
        Enrollees and Enrolled Users in Priorities 1-6
  --Fiscal year 2001 Priority 7 Enrollees and Users by VISN and Age 
        Group with comparisons to Priorities 1-6
  --Priority 7 Average Annual Cost Per User fiscal year 1999-fiscal 
        year 2001 with comparisons to Average Annual Cost Per User for 
        Priorities 1-6
  --Priority 7 Average Overall Cost Per User and Average Outpatient 
        Pharmacy Cost Per User with Comparisons to Average Costs for 
        Priorities 1-6
  --Priority 7 Average Cost of Users Under 65 Years Old compared to 
        those Age 65 and Over with further comparisons to Average Costs 
        for Priorities 1-6
  --Priority 7 Average Cost and Age comparisons with comparisons to 
        Average Cost and Age for Priorities 1-6
  --Priority 7 Inpatient and Outpatient Reliance with comparisons to 
        Inpatient and Outpatient Reliance for Priorities 1-6
  --Projections of Priority 7 Health Care Users (Unique Patients) by 
        VISN and Age Group--fiscal year 2002-fiscal year 2010 with 
        comparisons to Projections for Priorities 1-6
  --Projections of Priority 7 Enrollees by VISN and Age Group--fiscal 
        year 2002-fiscal year 2010 with comparisons to Projections for 
        Priorities 1-6
    VA will provide a more in-depth analysis by May 27, 2002, to 
include distributions of the above data by State and information on:
  --Average income by priority group and State
  --Employment status by priority group and State
  --Insurance status by priority group and VISN
  --Health status by priority group and VISN




























    Senator Mikulski. Now my time is up, but--because I want to 
come back to the veterans' prescription drug benefit. I think 
we have a lot of lessons learned as we ponder what to do about 
Medicare. But let me turn to my colleague and I will come back 
to talk about a prescription drug benefit.
    Senator Bond. Thank you very much, Madam Chair. And I 
really appreciate your pursuing this line of questioning, 
because I think it is very important. And you were talking 
about steel workers being laid off. I have to tell you that 
heavy industry in Northeast Missouri, where I come from, used 
to be refractories. It is a high-quality ceramic products that 
line the furnaces of steel and for aluminum. They are all being 
shut down because of asbestos litigation; 300,000 asbestos 
claims. All of the plants, heavy industry plants, in Northeast 
Missouri are being shut; they are in bankruptcy. And they are 
going to move the industry to Canada or Mexico.
    And we are going to have an additional load on the 
Department of Veterans Affairs, because there are many veterans 
who have been employed in those industries. And they are--as I 
said, they are all in bankruptcy. So, we are getting it in a 
number of areas, as well.
    But we have a lot of things to cover. I am going to have to 
leave. And I am going to leave some questions. But, Mr. 
Secretary, there are a couple of things that are very important 
that I wanted to touch on.

                                 CARES

    First, I congratulate and I thank you for making the 
capital asset realignment for enhanced service, or CARES, 
program work. That is not the most popular thing especially 
worth a lot of folks on Capitol Hill. But I am convinced that 
CARES is the right approach. It is badly needed. There was no 
capital asset plan before CARES. VA hospital had been treated 
as trophies for members to bring home to their States or their 
districts, often built with too many beds, too much gold-
plating. VA hospitals were opening with entire floors empty 
because they were not needed.
    Well, I think we are beginning to turn that around, 
although there is opposition here on the Hill. But one of the 
things that is really troubling me, and I want to lay it out on 
the table. Some VA facilities seem to exist primarily to serve 
the research and financial interests of medical schools. It is 
an important part of the VA to work as research sites and 
teaching schools. This works very well together.
    In too many cases, or in some cases at least, veterans' 
medical care has become a secondary concern in justifying those 
hospitals. I was frankly appalled by the efforts of 
Northwestern University to block CARES in Chicago. I appreciate 
the medical research work done by fine institutions such as 
Northwestern. And it is one of the very good ones. And I am 
very big supporter of VA medical research programs. But we all 
in this room know that medical schools have more resources at 
their disposal than the veterans, who need medical care, the 
ones that Senator Shelby mentioned, the examples you set out.
    Your decision, Mr. Secretary, was important because it sent 
out a signal that VA's first and most important priority is 
going to be meeting the needs of veterans. And for that, I give 
you sincerest thanks.
    Now, by closing this, you are going to construct a new $40 
million spinal cord and blind rehabilitation center and 
creating new community-based outpatient clinics. You are going 
to save money, adding these new facilities, because you were 
able to close one of the four VA hospitals in Chicago.
    Secretary Principi. Correct.
    Senator Bond. You are going to be able to provide more 
specialized care, open community clinics, and still save money? 
Could you tell us how that works?
    Secretary Principi. That is correct. It was the right 
decision. It was a difficult decision, and we were very 
sensitive to the concerns of our veterans and our employees. I 
appreciate the important role that medical schools play with 
the VA, but at the same time, our first mission is treatment of 
veterans in modalities that make sense for the 21st century.
    The Chicago CARES decision was the right decision for the 
veterans of that area. I intend to implement the decision 
aggressively, thoughtfully but aggressively. We need to get on 
with the modernization of the West Side facility, including an 
expansion of the number of beds, get Lake Side closed down and 
get an outpatient clinic built in the downtown area to address 
the outpatient needs of our veterans in that area.
    We are going to move forward and we are going to move 
forward with the next phase of CARES, because we need to 
rationalize the infrastructure of the VA system and make sure 
that we are properly structured for going forward and not back 
to the century gone by.

                              CARES STUDY

    Senator Bond. A few questions about the next phase. Do you 
have the in-house expertise and staffing resources needed to 
perform the CARES study? And two, how will you ensure the 
studies are objective? Because on that second part I am worried 
that if the division directors who are in charge are conducting 
their own studies, there may be a conflict. If you bring it up 
to your level, Mr. Secretary, you are not going to have an 
outside consulting firm to blame it on. You are going to get 
the heat, all the heat, without being able to shuffle it off.
    Secretary Principi. That is correct. I sincerely believe 
that we have the talented people, the skills and the right 
disciplines to develop a national plan for the future. The VISN 
directors will play a role in providing data and input into the 
process, based upon a template, and upon a specified data call. 
But that plan will be developed with our team in Washington. We 
will rely upon outside experts on an as-needed basis.
    I do not want to spend $20 million to $40 million on a 
consultant, most of whom will contract with former VA 
employees. I think we can do it. But you are absolutely right 
that we need to ensure that the data is validated. The process 
and the data have to be absolutely perfect. People who do not 
want to see a facility closed or its mission changed will take 
shots at us. The data is so terribly important, and we are 
going to take great pains to ensure that the data are 
validated.
    I intend to keep the process objective. I intend to stay 
out of it until such time as the recommendations of the 
commission come to me. And then I will approve or disapprove 
those recommendations. We have an aggressive timetable. I think 
it can be done. And I think it is absolutely necessary to 
address the category seven problem, for example. There is an 
awful lot of money there that can be used to treat more 
patients.
    Senator Bond. Well, Madam Chair, if I might impose for one 
more question.

                          LEGISLATIVE MANDATES

    And I congratulate, Mr. Secretary, because you have to--we 
have to cover up the shortfalls in the care, in the health 
care, for the highest priority. And you have touched on it, but 
let me go back to it one more time.
    Based on new benefit requirements authorized over the last 
few years, I understand that--that has put a big hit on your 
budget. And I am concerned that we are still short of the money 
we need to provide health care. And I thought, maybe, you could 
outline for us some of the new mandates affecting veterans' 
health care services. What are the costly new requirements? And 
what impact do these have on the basic health care that you can 
provide that we discussed earlier?
    Secretary Principi. Clearly, there have been a number of 
mandates that we have been required to fulfill. For example the 
Millennium Health Care Benefits Act, placed a floor on VA 
nursing home beds. I agree we need to maintain a level of VA 
nursing home beds because they are much needed beds. But, we 
need to also rely upon our State veterans' homes and our 
community nursing homes, which are closer to where the veterans 
live, and to the non-institutional programs, which also are so 
beneficial to keeping veterans in their homes: hospital-based 
home care, adult day care, respite care.
    We could do so much more, treat so many more veterans that 
way, than we can by putting them into an institutional bed. The 
way the law is constructed, it requires me to have 13,400 VA 
nursing home beds. We are currently 1,200 beds short of that 
floor. We have requested that the floor include State veterans 
nursing home beds and community nursing home beds and the non-
institutional care census. But the committees have been 
reluctant to do that.
    That means I have to find somewhere in the neighborhood of 
$150 million out of existing programs, maybe the State veterans 
home program or other programs, to achieve that floor, as set 
by statute.
    The wonderful provision about emergency room care, to allow 
veterans who are enrolled in the VA system to go to any private 
hospital for emergency room care, when fully implemented, will 
cost us $441 million. I do not know where the money will come 
from. It may have to come out of the community-based outpatient 
clinics, because it is a zero-sum game.
    We operate wonderful programs for the homeless. I think we 
are doing great things for the homeless. But the new bill that 
came out of the last session will cost hundreds of millions of 
dollars for new homeless programs. Again, where do I get the 
money from?
    I think it is that kind of laws that do, in fact, impede 
our ability to address some other programs.
    Senator Bond. Thank you, Madam Chair.

              DEMOGRAPHICS PROFILE OF PRIORITY 7 VETERANS

    Senator Mikulski. Thank you, Senator Bond. You raised, 
again, very important questions.
    I want to come back now again, in terms of the demographic 
profiles that I have asked for; Dr. Murphy, we would like to 
have, really within 2 weeks, a demographic profile of the 
information you currently have. I do not know if you are 
keeping the data the way I have just said it, but we would like 
it to us the way we asked for it, in addition to any other way 
you want to get it to us. But I need to know the geography, the 
age, and the income. Okay? So, that is one thing.
    And then we would like to have another report around 
Memorial Day where you have had a chance to even take a better, 
more in-depth probing look. So, we want to have a first look-
through. And then--and hopefully, Mr. Secretary, you will then 
keep these type of records, so that we can then get our handle. 
Because I think they are coming for different reasons and 
different age groups. And we should not have a one-strategy-
fits-all.
    The failure to have a long-term--my dear dad died of 
Alzheimer's. We used geriatric evaluation. We did not use the 
veterans. Dad was not a veteran. He had 2 children when the war 
began. But we used geriatric evaluation to get appropriate care 
for him. We used adult day care that had a cognitive stretch-
out program for an Alzheimer's person. Then we had to turn to 
long-term care.
    When we look at our aging population--and we had means. 
When we look at veterans, many of them do not have anything. So 
they are coming to you exactly for what you said. The 
prescription drug issue is another. The younger vet or the in-
between vet, the 60-to-65 who has lost everything through no 
fault of his own, because of a factory closing or the loss of 
the family farm.

                       PRESCRIPTION DRUG BENEFIT

    So, this is what we are going to look for. But let us go to 
the prescription drug benefit. Because the long-range solution 
is national policies to address universal health care, a 
prescription drug benefit for our seniors, and a long-term care 
policy that does offer a continuum of care so you use it 
appropriately for the patient and appropriately for the person 
paying for the care.
    Now, according to December, 2000, the VA's Inspector 
General said the use of the prescription drug benefit was due 
to the fact that 90 percent really did not have a prescription 
drug benefit, either because they were on Medicare or because, 
if they were not on Medicare, their health insurance did not 
pay for a prescription drug benefit. And not only might they 
have a catastrophic situation needing drugs, but they might 
have a chronic situation that required--let us take diabetes. 
You have to buy the equipment, the daily testing, the 
medications, et cetera.
    So let me get to where I am getting. Could you tell me--
could you give me a description of the veterans' prescription 
drug benefit? And what does that cost you every year? And who 
are most likely to use it?
    Secretary Principi. I will start out and then I will let 
Dr. Murphy add, if I err or if I am not complete. Any veteran 
enrolled in VA health care is entitled to have their 
prescriptions filled by VA for a cost of $7 per prescription 
per month. That has gone up from $2. It had not been increased 
since its enactment some 10 to 12 years ago, when the co-
payment went into effect.
    We spend in the neighborhood of $2.5 billion for 
ingredients only and approximately another $600 million in a 
very large pharmacy program, the consolidated mail-out pharmacy 
program. Our pharmacy benefit is in the neighborhood of $3 
billion a year and growing. It was $750 million some years ago, 
and it is now up to $3 billion.
    I think we have done a tremendous job. Our country and HHS 
and others can learn much by the way we have managed our 
pharmacy program through our national formulary. Clinical 
judgment is always the overriding issue. We do sensitize our 
physicians to costs. I think it is important that they be 
sensitized, but that they make the clinical judgment about what 
they consider to be the right drug.
    I think we manage the pharmacy budget very well. We do a 
lot of national contracting. Our formulary lets us do that, so 
we can drive the prices down.
    Senator Mikulski. What does national contracting mean? 
Could you elaborate on that?
    Secretary Principi. It means that we will buy through a 
national contract, if you will. Through the large volume that 
we purchase, we command a discount off the price of the drug. 
Although we do very, well in our pricing, the law that was 
passed back when I was deputy secretary, and played a very 
small role in enacting, gave the VA very favorable pricing for 
pharmaceuticals, a 24-percent discount off of the manufacturers 
average drug price. In some cases, we negotiated even a greater 
discount off of manufacturers' average price, so we command 
excellent pricing in pharmaceuticals.
    We also procure pharmaceuticals for the Indian Health 
Service, the Public Health Service, and the Bureau of Prisons. 
In many cases, we are the procurer of pharmaceuticals for the 
Department of Defense, so our procurement activity is very 
large. Through that consolidated program, we are able to 
command even better pricing.
    I think we are also the model for the government in a 
pharmacy program that utilizes generic drugs.

                          PHARMACEUTICAL COSTS

    Senator Mikulski. Well, yes. First of all, I think the cost 
speaks for itself. And I am going to come back to how--what is 
the majority of the use, for what purpose? But the Nation has 
to consider a prescription drug benefit for its seniors; it 
just has to. When Medicare was invented under Lyndon Johnson, 
it was to deal with--but people were afraid that if you had a 
heart attack, you could lose everything. You would stay in the 
hospital for a month.
    Dr. Murphy, you remember, I am sure----
    Dr. Murphy. Yes.
    Senator Mikulski [continuing]. In your studies. You were 
not practicing then.
    Now, it is really--it is Part--B that is the big issue. And 
it is the management of chronic illness or the chronic 
progressive illness, whether it is the diabetic, the heart 
person, et cetera.
    Now, coming--so we are getting these kinds of estimates for 
a garden variety, okay, Chevy Lumina/Ford Taurus prescription 
drug benefit. They are talking about $400 billion a year over 
10 years. Looking at TRICARE, what TRICARE is spending; at the 
rate that it is going, it could be $720 billion. So, we are 
looking, but I believe that there are lessons learned. I 
believe that there are lessons learned from VA. I believe that 
there are lessons learned from TRICARE. I believe that there 
are lessons learned for what we Federal employees get. I have a 
prescription drug benefit.

                MEDICAL SUPPLY COST CONTAINMENT MEASURES

    And the lessons learned, which is how do we do a formulary 
that also allows clinical flexibility--because it is not one 
drug fits all. That is why you see a doctor and not the coin-
operated dispensers--and at the same time do cost containment. 
Now as I listen to you, the cost containment measures have been 
mail order and consolidated discounts and then an awareness on 
the part of the physician that, given 2 choices with the same 
safety and efficacy appropriate to the patient, that one might 
be a little bit cheaper than the other.
    But could you furnish, then, for the committee what your 
cost containment measures have been and how you regard them 
with success? For example, on mail order, what does it work 
best for? Because there are those who say sometimes this 
results in waste and inappropriate use. But I know, coming back 
to my own dear mother, who was a diabetic, it would have been 
very appropriate for her to get her diabetic testing strips in 
the mail, to get her lancets, in other words, but not if she 
had her--she was very susceptible to urinary tract infections, 
a well-known complication issue with diabetics.
    She needed to be able to go without a big surcharge on her, 
to really get her--when she had an infection usually related to 
the chronic situation. So you see where I am heading here?
    [The information follows:]
                          Pharmaceutical Costs
    A physician's ability to have access to necessary pharmaceuticals 
is unquestionably an essential component of any clinically sound 
formulary management process. There are at least four acceptable 
mechanisms that can be designed into a formulary system; (1) 
encouraging the appropriate use of drugs, (2) reducing the unit-cost of 
drugs, (3) streamlining distribution of bulk drugs, and (4) increasing 
prescription dispensing efficiency.
    Inappropriately restricting access to medically necessary drugs and 
unnecessarily shifting drugs costs to the patient are unacceptable cost 
containment practices that are unfortunately sometimes used. This is 
not to say that a properly administered tiered co-payment structure is 
unacceptable. On the contrary, if well designed and properly 
administered, a tiered co-payment system can be an effective formulary 
management tool that does not impose an unnecessary financial burden on 
the beneficiary.
    Encouraging the Appropriate Use of Drugs: By far, the cost 
containment strategy that has the potential to yield the most 
significant cost containment while assuring quality medication therapy 
is the use of evidence-based clinical guidance to encourage appropriate 
drug utilization. Guidance should be aimed at encouraging the cost 
effective and appropriate use of pharmaceuticals and discouraging their 
inappropriate or cost ineffective use. Such guidance should be 
evidence-based, relevant, up-to-date and easily accessible by 
prescribers. Providers should be actively encouraged to provide input 
into guidance development to ensure greater acceptance of the final 
documents. Further, efforts must be made to educate prescribers on the 
evidence-based criteria if it is to be accepted into their clinical 
practice. Regular feedback should be provided to prescribers regarding 
their prescribing patterns. Physician awareness of cost differences 
among alterative therapeutic regimens is also critically important. VA 
experienced this success when coupled with the plan to ensure the 
electronic medical record is available throughout the healthcare 
system. As the patient need changes from ambulatory care to acute care, 
home based primary care and nursing home care, the access to the 
electronic medical record provides a continuous medication history and 
the clinical reasoning for use of appropriate drugs.
    Reducing the Unit Cost of Drugs: In high-volume, high-cost drug 
classes where therapeutic interchange opportunities exist, significant 
cost containment can be achieved only by driving market share to a 
subset of all of the available products; therefore, limiting physician 
flexibility to some degree is unavoidable. While there are several ways 
to drive market share within a therapeutic class, and each has its own 
advantages and disadvantages, the most effective approaches require 
limiting access to pharmaceuticals within a drug class to some number 
of drugs less than all commercially available products and negotiating 
discounts with drug manufacturers in exchange for increased market 
share for their products. Regardless of which method of market share 
manipulation is employed, medically necessary clinical flexibility can 
be achieved by assuring that a non-formulary or waiver process is in 
place. A good non- formulary request process should be timely and final 
decisions should be based on medical evidence as opposed to prescriber 
``preference'' (which can be highly influenced by pharmaceutical 
manufacturer's marketing practices) or the payer's cost containment 
goals.
    The use of generic products must be encouraged and should rely on 
Food and Drug Administration guidance regarding product acceptability. 
Mandatory contracts for generic products can also help ensure adequate 
product availability to meet the market share and inventory management 
goals. It is important to reduce the dispensing of multiple generic 
brands to the same patient, as this practice is likely to lead to 
patient confusion. A good formulary process allows for the prescribing 
of brand name products, when patients have any adverse drug events to 
generic products. Patients should not be charged a higher co-payment 
when a brand name product is deemed necessary to achieve a desired 
clinical outcome. A higher co-payment may reduce patient compliance and 
increase potential for a poor outcome.
    Streamlining the Distribution of Bulk Drugs: Opportunities exist 
for large integrated health care systems that purchase bulk drugs to 
reduce their distribution costs by contracting with a single 
Pharmaceutical Prime Vendor (PPV) for reduced distribution fees. The 
reduced fees are possible if the purchaser uses a ``prompt pay'' 
mechanism whereby the PPV invests the purchaser's payments in short-
term financial markets before it is required to pay the manufacturer 
for the goods delivered. In addition, it is possible to negotiate with 
the PPV to charge the purchaser contract prices, rather than commercial 
prices when the purchaser has contracts in place with pharmaceutical 
manufacturers. The PPV can then complete a ``charge-back'' to the 
manufacturer to recapture the difference in its wholesale cost of the 
drug versus the contract price. Lastly, contracting with a PPV reduces 
inventory carrying charges because the PPV can provide ``next-day'' 
deliveries and there is no need to keep a large amount of product on 
the pharmacy shelves.
    Increasing Prescription Dispensing Efficiency: Improvements in 
prescription dispensing efficiency can be achieved through the use of 
automation, such as that seen in VA's Consolidated Mail Outpatient 
Pharmacies (CMOPs). In addition, automation of prescription dispensing 
has been demonstrated to positively impact quality by introducing 
significantly fewer dispensing errors than manual processes. For this 
discussion, it is important to differentiate between the mechanical 
aspects of prescription dispensing versus the clinical aspects of 
patient education and counseling. How the prescription is filled is not 
nearly as important clinically as is making sure the patient is 
thoroughly educated and knowledgeable about his or her drug therapy.
    When VA designed its CMOPs, it purposefully uncoupled the 
mechanical aspects of prescription dispensing from the provision of 
patient education and counseling so that each aspect of drug delivery 
could be optimized (i.e, make filling prescriptions as efficient as 
possible, and make sure patients have access to pharmacist counseling 
and education as part of a multidisciplinary, integrated health care 
delivery process). Medication counseling is best performed in person, 
by a pharmacist so that the pharmacist can gauge a patient's 
understanding of his or her medication therapy. Further, face-to-face 
interaction is important so that the pharmacist can ask probing 
questions about over the counter drugs use, use of dietary supplements, 
alternative medicine, etc. This type of patient-pharmacist encounter is 
critical to assure that drugs are used appropriately and effectively 
and to obtain information about side effects, intolerance, etc., which 
if not attended to can reduce the effectiveness of prescribed 
medications, or lead to drug induced morbidity.
    Systems which use automated prescription dispensing, with an 
appropriate level of patient education can reduce the overall costs of 
prescription dispensing. In addition, dispensing chronic medications 
for patients that are stabilized on them in multi-month quantities 
(i.e., up to 90 day supplies) can also reduce the cost of processing 
prescriptions. VA has conducted analyses which show the cost associated 
with unusable multi-month supplies (lost prescriptions, changes in drug 
therapy, patient death, etc.) are more than offset by reduced 
production costs. A carefully designed Medicare drug benefit, which 
uses a Federal CMOP could avoid a significant amount of necessary cost 
while increasing the quality of the dispensing process.
    A flexible formulary that incorporates cost containment should:
  --Be clinically rather than financially driven
  --Be developed with input from end user clinical staff
  --Be evidence-based
  --Rely on the use objective drug use criteria
  --Minimize the impact of marketing practices on clinical decision-
        making and prescribing patterns
  --Use generic drugs products whenever appropriate
  --Leverage purchasing power by using therapeutic interchange whenever 
        clinically feasible
  --Leverage distribution by using PPV contracts and good inventory 
        management practices
  --Optimize prescription dispensing efficiency by using automation.
  --Integrate patient education and drug therapy counseling to the 
        greatest extent possible
  --Have a non-formulary waiver process
  --Measure outcomes and provide feedback to prescribers

    Secretary Principi. Absolutely.
    Senator Mikulski. So we are looking at mail order, but mail 
order does not solve everything, et cetera. So we are really 
want--I need you, and I believe the Nation--and I know the 
Nation needs you right now to tell us what works and, quite 
frankly, what has fizzled and flopped or that gives you yellow 
flashing lights around the efficacy of both patient care and 
cost containment. Sometimes they are like this. Sometimes 
exactly efficacy is good cost containment, because it manages 
the disease.
    Secretary Principi. I am half smiling. I am always a little 
concerned that we are so good it will ultimately drive our 
prices up somewhat at the VA, that if HHS replicates our model.
    Senator Mikulski. Maybe those priority 7 guys or gals--
remember we cannot forget the China Beach women--that this 
might ultimately save money, because they are not coming to 
you.
    The second thing is that, also, the better access you have 
for the management of chronic disease that is systematic, 
regular, and monitored, ultimately saves that kidney failure 
and heart disease and all these other complications from 
chronic disease.
    Secretary Principi. I think the pharmacy management program 
is really one of the great success stories of the VA. They have 
done great work, but there are other things we can do. We need 
to export what they have done in the pharmacy program to 
medical-surgical supplies and high-tech equipment. That is the 
next avenue we are going to look at: why do we need 300 
different styles of surgical gloves? Surgical gloves are 
surgical gloves. And we do not command the best pricing because 
we just buy locally.
    We buy using credit cards. We need to do in med-surg and 
equipment what we have done in pharmacy. I think there are so 
many dollars there that we are leaving on the table.
    Senator Mikulski. Yes. And I believe some of our excellent 
academic centers of excellence can offer you a tremendous 
number of lessons learned. The reason I go to the academic 
centers is they face the variety of patients that you do, and 
very often, because they are academic centers, they are in 
urban areas serving a tremendous, often very poor, population 
that is uncompensated.
    In other words--and they cannot raise their rates or their 
fees. So I believe that they offer tremendous lessons for you.
    Secretary Principi. I think so.
    Senator Mikulski. And without--because they are academic 
centers of excellence, they do not sacrifice patient care or 
the worker safety issues. Which takes me to another issue. I am 
going to talk about workers.

                       RECRUITMENT AND RETENTION

    You know, I am so impressed with the dedication of the 
people who work for the VA, particularly in the health care 
area. And I remember when we had shut downs at all some years 
ago in the midst of ice storms. Those men and women were 
showing up at Baltimore VA and the clinics, even though they 
were told they were unnecessary, they were not getting paid. 
And you know what? They just showed up, even though they had 
child care and so on. So they were just fabulous.
    But I am concerned, how are we doing in being able to 
attract and retain particularly the nurses, the pharmacists, 
the others that are so important to the team? I am particularly 
worried about the nurses' shortage. And we are also facing a 
shortage in other health professionals that are critical to the 
team.
    Dr. Murphy?
    Dr. Murphy. I think that there is a national shortage of 
health care providers across the country. It is not a problem 
that is unique to VA as a department. And it starts with 
nurses, physicians, physicians' assistants, all mid-level 
providers, pharmacists, technicians of all kinds.
    One of the things that we have proposed is that a number of 
our professional groups that provide health care need to be 
switched from Title 5 to Title 38, to allow us to more 
effectively and quickly----
    Senator Mikulski. What is that? What is Title 5 and Title 
38?
    Dr. Murphy. Title 5 is the regular GS schedule. Title 38 
gives us more flexibility in recruitments and some additional 
flexibility in salary scale. And we think that--that would 
certainly help us with our recruitment.
    There was legislation passed last year that did give us 
some improvements in our nurse recruitments and our education 
programs for nurses, that we believe will allow us to better 
retain and give career progression to nurses in the VA.
    I think patient safety is an important issue. And I was 
recently talking with the dean of the School of Nursing at 
Johns Hopkins. And Sue said that she tells all of her graduates 
in the School of Nursing to go apply to VA. And the reason she 
does that is she believes that we are at the forefront of 
medical innovation; that the quality, the occupational health 
and safety, the patient safety programs that we have in the VA 
are second to none, that it is an exciting place to work.
    So, our focus on quality and safety have really positioned 
us to be able to recruit and retain the best health care 
professionals.
    Senator Mikulski. Well, what we would like, as part of our 
work--and I know I speak for Senators Rockefeller and Specter 
on authorizing, as well as Senator Bond. We, of course, believe 
that we rely upon our physicians, but the physicians rely upon 
a team. And if the team is not there, you cannot have--I mean, 
the doctor is not able to give the highest and best care that 
we want.
    So, we would welcome what we could do on the Appropriations 
Committee to be able to give you the tools to be able to both 
recruit and retain. Because the best way to recruit is through 
the people you have now, who are very satisfied, who tell their 
classmates, et cetera, to do this.
    The second thing is that, also speaking for the 
authorizers, because I know they are very keenly interested in 
this, is what other authorizing frameworks that we need--we 
need to do. And we are working on this in another committee.

                     GRANTS FOR VETERANS EMPLOYMENT

    Let me then switch gears, though, to the job training item 
in there. This is somewhat controversial. The move from the job 
training programs that you spoke of in your testimony from DOL 
back to VA or to VA, could you tell us what you are going to do 
and why you want to do it? And that will be our last question 
for today.
    Secretary Principi. I tried to articulate, Madam Chair, the 
deficiencies in the current program that have led to a high 
unemployment rate among veterans who are seeking employment. I 
think the Department of Labor has many missions. And they are 
responsible for labor programs for veterans and non-veterans 
alike. I am not sure that veterans receive the priority that 
they deserve.
    VA was established to address the needs of veterans. And 
just like our education programs, our health care programs 
could sit in other agencies, but they are consolidated in the 
VA because our focus is on veterans' issues. That priority is 
very, very important to everyone in VA.
    I want to create a short fuse commission to make 
recommendations to me on how we can adopt this program to the 
new century, to the new way of employing people, Internet-
based, with outreach to Fortune 500 companies, not just to 
McDonald's and Burger King, where veterans can find jobs; but 
rather good, meaningful jobs in corporate America. I think that 
linkage needs to be there.
    But most importantly, Madam Chair, I would make it 
outcomes-based. The program is very process-oriented today. 
Congress appropriates $200 million; appropriations are divvied 
up and sent to the States. Whether they perform well or not, 
the following year another grant is going to be made. I would 
send a grant to the governor of the State and have the governor 
decide how that money should be allocated. It could be to the 
States' Department of Veterans Affairs or the States' 
Department of Labor. I would put performance standards on the 
grant to say that grant recipients are expected to find 
suitable employment for x percentage of the veteran population.
    Through establishing standards and accountability, I think 
we could improve the outcomes of the program.
    Senator Mikulski. Well, Mr. Principi, I think, first of 
all, in the President's budget he said he would send us 
legislation on this.
    Secretary Principi. Yes.
    Senator Mikulski. So, I know it will go to the authorizer. 
We, too, are troubled by the same issues that you are troubled. 
And I hope that we could see this as an opportunity for 
veterans for the new century. One of which I would like to just 
put on the table for discussion is lifetime learning, which is 
not use it or lose it, but if you do not use it--because many 
of our veterans come out, but they reach a point in their life 
where, in order to really be a viable member of the work force, 
that is when they go back to school.
    So--and I am not say let us do this. I am saying let us 
look at it----
    Secretary Principi. Sure.
    Senator Mikulski [continuing]. In the context of what we 
are doing.
    Secretary Principi. Absolutely.

                         JOB TRAINING VETERANS

    Senator Mikulski. And second, for those who need initial 
training, but also those who need retraining. So that, for 
example, the veteran who might have worked in a factory and 
that factory is closing, but who had--maybe he was an 
electrical technician, maybe this is the time that they can at 
a community college become a Microsoft engineer, which is a 
certificate program, not a degree program, and go into $65,000 
a year.
    Do you see how I want new thinking in this area? And we 
have this.
    The other thing is, I really--and I say this because I am a 
member of the Health, Education, Labor Committee--I do not have 
a lot of confidence in a lot of these job training programs. I 
do not. I think they were process driven. I do not think that 
they are related to the work force shortages in communities.
    And, you know, I am a big believer in the community 
college, not only for a degree program but for these 
certificate programs. And they welcome all ages, et cetera. So 
I think we need new thinking. And let us do it through the VA.
    Secretary Principi. Sure.
    Senator Mikulski. And let us view this as an empowerment 
initiative----
    Secretary Principi. Absolutely.
    Senator Mikulski [continuing]. For the veteran, where those 
who right now might not be able to make the highest and best 
use of the talents God gave them, but we really have an real 
opportunity matter. And I am ready to shake up the 
establishment on this.
    Secretary Principi. I am grateful for your position.
    Senator Mikulski. Really.
    Secretary Principi. Yes.
    Senator Mikulski. I am--you know, my own social work 
background says we have lessons learned from welfare reform, 
which you might be able to learn. But in welfare reform, for 
years it was very process-oriented. How many this, and the 
workshop, and did you comb your hair. I mean, these men are 
veterans. They already had authority training. What they need 
is real training----
    Secretary Principi. Sure.
    Senator Mikulski [continuing]. For real jobs where they are 
really needed. Let us look at the unions. Let us look at 
apprenticeship programs. We have a terrible work force shortage 
right now for plumbers, for electricians, and so on. And what 
about that? Because right now, if you are really a master 
electrician in Maryland, you can earn over $40,000 a year. And 
the ads are just all the way down.
    Secretary Principi. That is right.
    Senator Mikulski. So, you see, let us not just say, ``Oh, 
let us give it to a governor, let us give it to these 
agencies.'' I am not so sure the best job training programs are 
job training for the people wanting the job training. And they 
are going to be really upset when they hear what I am saying 
here. But we have new ways. Maybe we have to contract out to 
technical schools, but not the sham schools that ripped us off 
on the tuition benefit.
    So we have a lot of lessons learned. But at the end of the 
day, when a veteran walks into a job training program, I want 
them first to get the training and then get the job. And that 
is what the emphasis needs to be on. Are we on the same broad 
band here?
    Secretary Principi. Oh, we certainly are and look forward 
to working with you. I think it is very exciting. I am also 
thinking, as you were speaking, Madam Chair, about licensure 
and certification. We have so many skilled people in uniform. 
When they come out, there is the whole issue of their getting 
licensed in the State and getting certified so that they can 
get that job as an aviation mechanic or in the trades with the 
unions. There is just so much that needs to be done and should 
be done. And I welcome the opportunity to work with you on it.

                   VETERANS EMPLOYMENT OPPORTUNITIES

    Senator Mikulski. And I want to give you an idea today, as 
we wrap this up, right now, as you know the United States 
Government and its Federal aviation security is under a 
significant mandate to federalize airport security. For those 
veterans that are coming to you that are unemployed, who have 
already demonstrated their patriotism, already demonstrated 
their commitment to defend America and took an oath to do so, 
why do we not see if there can be a referral to the Department 
of Transportation where these veterans--we could use, one---
first of all, we can use their patriotism. It deals with the 
citizen issue.
    But also, these are going to be Federal jobs. Think about 
that.
    Secretary Principi. To me, it is a no-brainer, Madam Chair. 
I cannot think of a better population, than skilled, motivated, 
team workers, a drug-free workforce:, people that would make 
better Federal security officers than the men and women who are 
leaving active duty. It is mind boggling to me that we do not 
take advantage of these highly trained individuals.
    Senator Mikulski. Well, why do you not look at that? Why do 
you not leave here and go call up Norm Mineta and see----
    Secretary Principi. I am going to be with him Friday night 
at a banquet honoring our Japanese-Americans. I am absolutely 
going to sit next to him and talk to him about this issue and 
tell him that we talked.
    Senator Mikulski. Yes; and there you go.
    Secretary Principi. I am going to do it.
    Senator Mikulski. Okay.
    Secretary Principi. I will be with him.
    Senator Mikulski. Okay. And when I am going through 
Baltimore-Washington Airport and somebody says, you know, I was 
Corporal So-and-So, thanks for this idea, I will look forward 
to shaking their hand.
    Secretary Principi. I am going to do it; we will do it.
    Senator Mikulski. Okay. This committee stands in recess----
    Secretary Principi. Thank you so much.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

           Questions Submitted by Senator Barbara A. Mikulski

                     $400 million budget shortfall
    Question. Why is there a $400 million shortfall in VA Medical Care 
in 2002, even though the Subcommittee provided $350 million more than 
requested?
    Answer. The 2002 shortfall is the result of increased usage of VA's 
health care system, some of which we could not have anticipated. Some 
Medicare Health Maintenance Organizations (HMOs) have withdrawn from 
participation in the Medicare program, and VA is now treating some 
patients who previously relied on these HMOs for their health care 
needs. VA health care is now more accessible, due largely to the 
opening of many new community-based outpatient clinics. We are 
experiencing an increase in patients as a result of the Department's 
continual improvements in the quality of the care provided. Where 
comparable data exist, VA outperforms the private sector for all 
indicators in health promotion and disease prevention. It is notable 
that VA has been able to achieve these improvements in the quality of 
care while simultaneously achieving year-to-year decreases in the 
average costs per patients treated.
    In an effort to improve our workload projection capability, VA has 
enlisted the support of a well-known actuarial firm, Milliman USA, to 
provide us with assistance in making forecasts of the patient 
population. This has placed us in a much stronger position to evaluate, 
and account for, the impact of a variety of different factors on the 
size and distribution of our future patient population. The 
Department's fiscal year 2003 budget is the first to present workload 
projections that reflect the expert assistance of this actuarial firm.
    Question. Are you aware that the Statement of Administration Policy 
(SAP) for the 2002 VA-HUD Conference Report said that this increase was 
not necessary to ``optimize Federal resources?''
    Answer. Yes, I am aware that the SAP for the 2002 VA-HUD Conference 
Report said that the increase of $350 million was not necessary to 
``optimize Federal resources.'' Subsequent to the SAP, the VA health 
care system experienced increased usage, some of which could not have 
been anticipated. We continue to experience increases at unexpected 
rates due to HMO withdrawals from the Medicare program; access to new 
community-based outpatient clinics; and improvements to the quality of 
care in the VA health care system.
    Question. Did the VA underestimate the number of veterans who would 
use the VA healthcare system? By how much?
    Answer. Yes. The fiscal year 2001 estimate used for the fiscal year 
2001 budget was 3,894,864 unique patients; the actual number was 
4,247,204 unique patients. The fiscal year 2002 estimate in the fiscal 
year 2002 budget submission was 4,118,565 unique patients. The current 
fiscal year 2002 estimate in the fiscal year 2003 budget submission is 
4,737,518. As mentioned above, among the factors responsible for the 
increase are the withdrawal of many Medicare HMOs, improved access to 
VA health care, and the Department's continual improvements of the 
quality of care provided.
    Question. The SAP also said that VA would get a $235 million 
savings because military retirees would move over to the DOD healthcare 
system. Was this savings realized?
    Answer. The TFL benefit became effective on October 1, 2001. It is 
still too early to determine the full impact on VA. We will be happy to 
share this information with Congress when we have analyzed the 
information.
    Question. How has VA made up for this shortfall? Specifically, what 
changes are included in the VA's 2003 operating plan to address this 
shortfall? Will VA have a Supplemental funding request?
    Answer. Based on the continuation of full enrollment, VHA 
determined there would be a shortage of about $441 million in fiscal 
year 2002. Approximately $300 million in management savings is 
anticipated in fiscal year 2002. We expect that these savings will be 
generated from a multi-year effort to improve standardization and 
compliance in the procurement of equipment, pharmacy, and medical 
supplies. Other savings are expected from program efficiencies related 
to new criteria to assess community-based outpatient clinics and 
centrally managed programs. The balance of the fiscal year 2002 
shortfall, $142 million, associated with the continued enrollment of 
new priority 7 veterans, is anticipated as an fiscal year 2002 
supplemental. The request for the supplemental was forwarded to 
Congress in on March 21, 2002.
    Answer. As previously stated, the Department's fiscal year 2003 
budget is the first to present workload projections that reflect the 
assistance of the actuarial firm, Milliman, U.S.A. The President's 
budget for fiscal year 2003 incorporates a ``Base Health Care Demand 
Adjustment'' initiative that identifies and requests the resources 
required to support an actuary estimate of the demand and case mix 
changes needed for all seven patient priorities in fiscal year 2003. 
Based on this initiative, the budget estimates should better account 
for the relationship of planned workload requirements and the full 
funding needed.
    Question. Are the VA's networks being asked to make staff cuts as a 
result of this shortfall?
    Answer. At this time, we are not aware of two any networks that are 
considering have performed reductions-in-force (RIFs) due to budgetary 
constraints. Based on the continuation of full enrollment, VA 
determined there would be a shortage of about $441 million in fiscal 
year 2002. Approximately $300 million in management savings is 
anticipated in fiscal year 2002. The balance of the fiscal year 2002 
shortfall, $142 million associated with the continued enrollment of new 
Priority Group 7 veterans, is anticipated as an fiscal year 2002 
supplemental.
    Question. How do VA's estimates about its workforce compare to 
reality?
    Answer. A comparison of the estimated and actual Medical Care full-
time equivalent (FTE) employment for fiscal year 1999, fiscal year 
2000, fiscal year 2001, and fiscal year 2002 is provided below:

----------------------------------------------------------------------------------------------------------------
                                                                            Fiscal year
                Medical Care FTE                 ---------------------------------------------------------------
                                                       1999            2000            2001            2002
----------------------------------------------------------------------------------------------------------------
Estimate........................................         180,411         179,206         181,500         179,300
Actual..........................................         182,661         179,520         182,946     \1\ 181,500
Percent Change..................................             1.2             0.2             0.8            1.2
----------------------------------------------------------------------------------------------------------------
\1\ Current Estimate.

    Question. How can the VA-HUD Subcommittee help VA get its estimates 
on target?
    Answer. In an effort to improve our workload projection capability, 
VA has enlisted the support of a well-known actuarial firm, Milliman 
USA, to provide us with assistance in making forecasts of the patient 
population. This has placed us in a much stronger position to evaluate, 
and account for, the impact of a variety of different factors on the 
size and distribution of our future patient population. The 
Department's fiscal year 2003 budget is the first to present workload 
projections that reflect the expert assistance of this actuarial firm.
               $1,500 deductible for priority 7 veterans
    Question. Tell us about Priority 7 veterans--How many veterans are 
Priority 7? How old are they? What is their average income? Where do 
they live?
    Answer. The attached table shows the distribution of Priority 7 
veterans by State as projected for the end of fiscal year 2002.



Priority 7 Veteran Population Projection by State as of 9/30/2002

        STATE                                                 Priority 7
ALABAMA.................................................         238,715
ALASKA..................................................          36,494
ARIZONA.................................................         253,924
ARKANSAS................................................         119,483
CALIFORNIA..............................................       1,265,007
COLORADO................................................         218,009
CONNECTICUT.............................................         158,201
DELAWARE................................................          44,777
DISTRICT OF COLUMBIA....................................          23,635
FLORIDA.................................................         883,266
GEORGIA.................................................         394,607
HAWAII..................................................          54,943
IDAHO...................................................          57,864
ILLINOIS................................................         502,354
INDIANA.................................................         304,172
IOWA....................................................         128,495
KANSAS..................................................         115,323
KENTUCKY................................................         189,955
LOUISIANA...............................................         185,842
MAINE...................................................          76,289
MARYLAND................................................         296,798
MASSACHUSETTS...........................................         280,784
MICHIGAN................................................         488,031
MINNESOTA...............................................         229,020
MISSISSIPPI.............................................         106,360
MISSOURI................................................         296,595
MONTANA.................................................          45,363
NEBRASKA................................................          70,768
NEVADA..................................................         122,256
NEW HAMPSHIRE...........................................          71,330
NEW JERSEY..............................................         348,246
NEW MEXICO..............................................          87,946
NEW YORK................................................         672,474
NORTH CAROLINA..........................................         376,443
NORTH DAKOTA............................................          24,869
OHIO....................................................         551,307
OKLAHOMA................................................         162,889
OREGON..................................................         181,727
PENNSYLVANIA............................................         610,029
RHODE ISLAND............................................          47,412
SOUTH CAROLINA..........................................         214,241
SOUTH DAKOTA............................................          36,322
TENNESSEE...............................................         267,954
TEXAS...................................................         866,942
UTAH....................................................          72,624
VERMONT.................................................          30,251
VIRGINIA................................................         373,058
WASHINGTON..............................................         313,182
WEST VIRGINIA...........................................          92,669
WISCONSIN...............................................         253,582
WYOMING.................................................          24,412
PUERTO RICO.............................................          70,328
                    --------------------------------------------------------
                    ____________________________________________________
    Total...............................................      12,937,564

                household income of priority 7 enrollees
    In 1999, VHA Office of Policy and Planning conducted a survey of 
veteran enrollees, ``The 1999 Survey of Veteran Enrollees' Health and 
Reliance Upon VA''. The major purpose of the survey was to provide 
national and VISN level input into actuarial enrollment, utilization 
and expenditure projections for use in the Secretary's annual 
enrollment level decision analyses and other policy analyses. There 
were some 20,000 respondents to the telephone survey and results were 
weighted to be representative of all 3.6 million veterans who were 
enrolled as of February 1999. Surveyed veterans were asked to say which 
income group their total household income fell within: <$16k, $16,001-
$25K, $25,001-$35K, or $35,001 or over, and most surveyed veterans 
provided a response.
    The following table shows the results from the 1999 Survey of 
Enrollees for Priority 7 enrollees responding to the question of total 
annual household income. This table does not include data on assets, 
which is also used to determine eligibility for Priority Level 7 
status.

                      TOTAL ANNUAL HOUSEHOLD INCOME
------------------------------------------------------------------------
                                                            Cumulative
                 Income                       Percent         Percent
------------------------------------------------------------------------
<$16K...................................           14.11           14.11
16K-25K.................................           24.28           38.39
26K-35K.................................           23.01           61.40
>35K....................................           38.60          100.00
------------------------------------------------------------------------

    NOTE: Generally, income of enrollees is self-reported to VA and has 
not been validated recently, and income reporting is only required of 
veterans who must be means tested. Priority 7 veterans do not have to 
report income if they agree to make copayments. Thus, surveys are often 
good sources for more complete and accurate data on veteran incomes.
    Question. VA tells us that the number of Priority 7 veterans in the 
VA system is skyrocketing. Do you think this is because of VA's 
Prescription Drug benefit?
    Answer. VA is currently looking at this issue and is also working 
with the General Accounting Office who is conducting an independent 
study of this issue. It is recognized that VA fills the gap by 
providing uncovered services such as prescriptions for many of our 
nation's veterans. For many Priority 7 enrollees, the VA health care 
system is a ``safety net'', costing nothing to enroll and paying for 
services as they are needed/used. VA has realized a tremendous increase 
in demand for health care services from veterans in recent years. The 
total number of patients has increased by over 11 percent from fiscal 
year 2000-2001. The growth rate for Priority 7 medical care users has 
averaged more than 30 percent annually for the last 6 years, and they 
now comprise 33 percent of enrollees in the VA health care system. 
Based on current law, this percentage is expected to increase to 42 
percent by 2010. These increases reflect the fact that very few 
Priority 7 veterans were treated before eligibility reform. In 
addition, many Priority 7 veterans rely on the VA for only a portion of 
their care and pharmacy accounts for a greater portion of their overall 
cost of care than that for all other priorities. VA's pharmacy benefit 
and co-payment structure remains an attractive choice for these 
veterans.
    Question. Do you think that VA is faced with absorbing this new 
demand because of a lack of national policies to address the aging of 
America and the collapse of many HMOs?
    Answer. We believe these are two of the significant factors 
affecting veteran's desire to access VA health care. VA health care 
integrates a full continuum of care for veterans of all ages, including 
mental health services and prescription drugs. VA also emphasizes 
preventive care and leads the nation in many measures of performance in 
this regard. VA also provides many services that are tailored to meet 
the needs of service-disabled veterans. So, in addition to the economic 
factors, we believe many patients come to VA because of the quality of 
care that we provide.
    Question. Does VA know how many Priority 7 veterans have other 
health insurance?
    Answer. Currently, we have identified that approximately 18 percent 
of all veteran users of VA health care have billable health insurance. 
This reflects the fact that VA is prohibited by law from billing 
Medicare and Medicaid. In addition, Health Maintenance Organizations 
(HMOs) and Preferred Provider Organizations (PPOs) do not recognize VA 
as preferred providers and consequently do not usually pay. Of the 
billable insurance identified, one-third is generated from Fee for 
Service policies and two-thirds from Medigap policies. This information 
reflects the findings from a national contracted survey. Although we do 
not have priority-specific information from this survey, based on the 
higher incomes of Priority 7 veterans, we suspect they have a higher 
percentage of billable insurance than average. We are examining ways to 
obtain more accurate information about insurance coverage by all 
veterans.
    Question. Are veterans required to tell the VA if they have other 
health insurance?
    Answer. Veterans are asked, but not legally required, to disclose 
health insurance information to VA. Legislation is under consideration 
within the Administration to require veterans to disclose health 
insurance information.
    Question. What authority does VA have to require this deductible?
    Answer. VA does not currently have authority to require this 
deductible and has thus proposed legislation that, if enacted, would 
authorize the deductible.
    Question. Does it require a specific change to the authorizing 
statutes?
    Answer. Yes, and VA has proposed legislation to make the change.
    Question. VA estimates that it will collect an additional $400 
million as a result of this new cost share proposal, and that this 
funding will go back into the system to pay for veterans' care. But VA 
couldn't accurately estimate its total number of patients for this 
year. How can we be sure that VA is able to accurately estimate this 
savings?
    Answer. In an effort to improve our workload projection capability, 
VA enlisted the support of a well-known actuarial firm, Milliman USA, 
to provide us with assistance in making forecasts of the patient 
population. This has placed us in a much stronger position to evaluate, 
and account for, the impact of a variety of different factors on the 
size and distribution of our future patient population. The 
Department's fiscal year 2003 budget is the first to present workload 
projections that reflect the expert assistance of this actuarial firm.
    Milliman USA projected the reduced workload usage associated with 
this cost sharing proposal. Approximately 10 percent fewer Priority 7 
patients will likely use VA health care services altogether. There will 
be an overall 31 percent reduction in workload expenditures, since many 
patients who remain will use fewer VA services when faced with this 
charge. We project $885 million in savings directly related to the 31 
percent workload reduction. Collections in fiscal year 2003 from the 
proposed cost sharing initiative are estimated at $260 million.
    Question. The VA also tells us that if Congress rejects the cost 
share proposal, we will have to appropriate an additional $1.1 billion. 
Again, if VA couldn't accurately estimate its total number of patients 
for this year, how can we be sure that VA is able to accurately 
estimate this cost?
    Answer. In an effort to improve our workload projection capability, 
VA enlisted the support of a well-known actuarial firm, Milliman USA, 
to provide us with assistance in making forecasts of the patient 
population. This has placed us in a much stronger position to evaluate, 
and account for, the impact of a variety of different factors on the 
size and distribution of our future patient population. The 
Department's fiscal year 2003 budget is the first to present workload 
projections that reflect the expert assistance of this actuarial firm. 
In addition, this budget does incorporate a ``Base Health Care Demand 
Adjustment'' initiative that identifies and requests the resources 
required to support an actuarial estimate of the demand and case mix 
changes needed for all seven patient priorities in fiscal year 2003. 
Because of this initiative, the fiscal year 2003 budget estimates 
should better account for the relationship of planned workload 
requirements and the full funding needed.
                           prescription drugs
    Question. Can the VA quantify how the lack of a Medicare benefit 
impacts the VA health system?
    Answer. As mentioned above, VA and the GAO are looking at the 
impact of the lack of a Medicare benefit for prescription drugs on VA 
health care. More than 50 percent of VA users are Medicare enrolled. 
Priority 7 Medicare enrollees increased 138 percent between fiscal year 
1999 and fiscal year 2001. Based on fiscal year 2000 data, age 65+ 
Priority 7 pharmacy costs accounted for 29 percent of their total cost, 
compared to 13 percent of the total cost for Priority 1-6, age 65+.
    Question. What is the VA's Prescription Drug benefit? How does the 
VA's program work?
    Answer. VA provides medically necessary pharmaceuticals to enrolled 
veterans if prescribed by a VA authorized physician. This includes 
prescription and over-the-counter medications (OTC), as well as medical 
and surgical supplies. For over 50 years, VA has used drug formularies 
or drug lists. Over the years, the VA formulary has evolved from a 
static list of drugs that are available to VA physicians and patients 
to a dynamic process where the use of drugs is actively managed using 
the objective evidence culled from the medical literature.
    Today, drug use in VA is managed through the VA National Formulary 
(VANF) process. The VANF process has a centrally managed drug list 
which is considered its core formulary (i.e., drugs listed on the VANF 
must be made available at VA medical treatment facilities, however, 
each VISN has the option of establishing a VISN formulary which can be 
used expand the list of drugs available through the VANF to meet the 
unique needs of a VISN). The VANF also incorporates a non-formulary 
request or waiver process whereby medically necessary drugs which are 
not included on the VANF or on the VISN formularies may be requested by 
individual physicians to meet the needs of individual patients.
    Except for a very small number of exceptions, outpatient 
prescriptions are filled exclusively in VA operated pharmacies. Mail 
prescription service is provided through VA Consolidated Mail 
Outpatient Pharmacies (CMOPs), while in other cases, prescriptions are 
made available for pick-up at pharmacies located in VA medical 
treatment facilities. Maintenance medications are generally supplied in 
90-day quantities though the VA CMOPs.
    VA's pharmacy benefit also includes a co-pay system. In February 
2002, the co-pay was increased from $2 for each 30-day supply of 
medication to $7 for each 30-day supply. Medical and surgical supplies 
and any medications used to treat a service-connected condition are 
generally exempt from co-payment. In addition, some veterans are exempt 
from all prescription co-payments (i.e., veterans that fall below the 
means test threshold and veterans who are greater than 50 percent 
service connected.
    Question. How much does VA spend each year on pharmaceuticals?
    Answer. In fiscal year 2000 VA spent $2.2 billion on 
pharmaceuticals, and $2.5 billion in fiscal year 2001. The estimate for 
pharmaceutical expenditures in fiscal year 2002 is $2.9 billion and 
fiscal year 2003 is $3.3 billion. VA manages costs by utilizing generic 
drug products whenever possible, by encouraging the appropriate use of 
drugs through the VANF process, by lowering unit costs through 
standardization contracting, by decreasing the cost of the distribution 
of bulk drugs products through a Pharmaceutical Prime Vendor, by 
lowering the cost of dispensing prescriptions through the use of VA 
CMOPs, and by dispensing chronic medications in 90-day supplies.
    Question. In December 2000, VA's Inspector General (OIG) 
recommended changes to make VA's prescription benefit more efficient. 
One of the recommendations is for the VA to fill privately written 
prescriptions. The Inspector General estimated that this would save VA 
over $1 billion per year. What is VA's response to this recommendation?
    Answer. VA does not support the OIG's recommendation. OIG 
recommended that VA stop providing medical care and only provide 
pharmaceuticals. VA contends that this recommendation would lead to 
fragmentation of care and that it is not in the best interests of 
veterans. Additionally, if VA were required to fill privately written 
prescriptions for any veteran, the system would be overwhelmed due to 
insufficient infrastructure and resources to accommodate the additional 
workload. Using current expenditures, it is estimated that for each one 
million veterans who are provided the pharmacy benefit, VA's costs 
would increase by $1 billion annually. Further, VA would need to 
increase its staff of pharmacists by a very large number in an 
environment where they are in short supply and are able to command 
increasingly high salaries.
    Question. What mechanisms does VA use to manage: drug use? 
distribution of drugs? costs?
    Answer. To manage the appropriateness of drug therapy, the 
distribution of drugs, and the costs of drugs, VA uses a variety of 
formulary management mechanisms and techniques. VA created a Service 
Line call the Pharmacy Benefits Management (PBM) Strategic Health Care 
Group in 1995 to coordinate the VANF process and encourage the 
appropriate use of drugs by veterans. The VANF process involves several 
tools designed to encourage the appropriate use of medications and to 
positively impact the unit cost of drugs. Some of the tools include the 
development and dissemination of evidence-based clinical guidance [Drug 
Use Criteria, Pharmacologic Management Algorithms, Drug Monitoring 
Criteria, Drug Class Reviews and other clinical guidance documents, 
managing drug utilization data to impact prescribing behavior, 
performing national standardization contracting, encouraging 
improvements in inventory management, and engaging in pharmaceutical 
outcomes research.
    To manage the distribution of pharmaceuticals to VA treatment 
facilities, VA uses a Pharmaceutical Prime Vendor, which distributes 
products to VA facilities at prices that are negotiated with the drug 
manufacturers. The current contract results in savings of over $50 
million per year for VA below the VA contract price for 
pharmaceuticals. Distribution of drug products to individual veteran 
outpatients is accomplished by dispensing at VA treatment facilities 
and through VA mail prescription service. Over 50 percent of all VA 
prescriptions dispensed are mailed to veterans.
    As a result of these initiatives, the average cost of a 30-day 
supply of medication in VA has increased very little over the past 3 
years.
    Question. And VA is able to do this without compromising the 
quality of care for veterans?
    Answer. Yes, all indicators of care reflect improvements in 
veterans care. These include but are not limited to measures in the 
care of diabetes and blood cholesterol. In the Congressionally mandated 
study on the VA National Formulary, the Institute of Medicine concluded 
that there is no indication that the quality of care in VA has 
decreased as a result of the VANF process. Additionally, in its studies 
of the VA formulary management process, GAO concluded that the VA 
formulary process is clinically sound and that it meets the needs of 
veterans.
    Question. VA's formularies help contain cost, while still ensuring 
that veterans have access to the best medical care. How are these 
formularies developed?
    Answer. The foundation for formulary management decisions is a 
comprehensive review and analysis of the published medical literature. 
These reviews and analyses, performed by VA clinical staff, result in 
evidence-based decisions regarding which products should be included on 
the VANF, how those products should be used, and the place in therapy 
of those products relative to alternative drug therapies. The review 
processes focus primarily on a drug's safety and effectiveness, as well 
as on other measures of quality. Cost considerations, while important, 
are secondary to quality considerations when determining a drug's 
formulary status and place in therapy in VA.
    Final decisions on formulary management are made by two groups of 
field-based clinical staff in VA. These two groups are the VA Medical 
Advisory Panel (MAP) and the VISN Formulary Leaders Committee (VFL). 
The first group is comprised of 12 VA practicing physicians and one 
Department of Defense physician. This group provides physician 
oversight of the VANF process. The second group is comprised of 21 
pharmacist or physician representatives from each of the 21 VA VISNs, 
the Director of the VA CMOP program, a National Center for Patient 
Safety pharmacist representative, a pharmacist representative from VA's 
National Acquisition Center (NAC), and a pharmacist representative from 
the Department of Defense's Pharmacoeconomic Center (PEC). VA physician 
subspecialty representatives groups are often invited to provide input 
on issues of interest prior to MAP and VFL formulary decisions.
    VA offers one of the most generous pharmacy benefits and does so at 
an affordable cost, due to the managed formulary process. With rare 
exception, all available therapeutic drug classes of drugs available in 
the United States are represented on the VANF. The VA formulary 
management process provides a high level of access to pharmaceuticals 
for VA clinicians and veteran patients. VANF drugs comprise 
approximately 92 percent of all drug dispensing in VA, while VISN drugs 
comprise an additional 6 percent. Considering that VA provides medical/
surgical items and OTC products, it is inarguable that the VA formulary 
process meets the needs of veteran patients and VA clinical staff.
    Question. In January 2001, GAO reported some networks were not 
applying the formularies in a standardized way. Some networks were 
adding and omitting drugs on an ad hoc basis. What is VA doing to 
ensure that there are national standards for all VA networks--so that 
all veterans have access to the same drugs--no matter where they are?
    Answer. VA has rewritten its policy on the national formulary 
process to address GAO's concerns, has made adherence to the VHA 
Directive on the VANF a topic for discussion in many forums with VA 
pharmacists and clinical leaders, and has made explicit requirements in 
the Directive for national, regional, and local clinical and 
administrative staff.
    VA has taken the following specific actions: development of a 
template for VISNS to use for considering drugs for inclusion on their 
VISN formularies; review of all formulary actions taken by VISNS and 
distribution of that information among VISNS, requiring a national 
review of all New Molecular Entities approved by the FDA before a VISN 
can add it to its formulary, and a requirement that if a medication is 
added to 10 or more VISN formularies, a national review and decision 
will occur. Additionally, VA has added a requirement that if a veteran 
has therapy initiated in one VISN and transfers his care to another 
VISN, that the therapy will not be changed due to any variations with 
VISN formularies. Lastly, VA has started to review access to 
pharmaceuticals (down to the individual facility level) where there 
could be potential problems (i.e., drugs which are high cost, under 
used, over used, etc.) and is reporting that data to VISNs on a regular 
basis with a request for follow-up.
    Question. How could VA's pharmacy benefits management initiatives 
serve as benchmarks for a future Medicare drug benefit?
    Answer. VA's comprehensive approach of addressing the contracting, 
distribution and clinical use of drugs clearly demonstrates that 
evidence-based formulary management can reduce cost while maintaining 
or improving the quality of care and access to pharmaceuticals.
    Evidence-based formulary decisions and contracting within a 
therapeutic class can manage cost and not compromise the quality of 
care. VA has been able to achieve high compliance to both the formulary 
and contracts. Utilization management through the use of disease and 
drug treatment guidelines also has application. Key to the success of 
either program is organizational buy-in. VA utilizes practicing 
physicians within the VA system as decision makers. Additionally, VA 
uses experts within the health care system when decisions are to be 
made in specific diseases, i.e., HIV/AIDS, diabetes.
    Additionally, the use of a Pharmaceutical Prime Vendor, a 
Consolidated Mail Outpatient Pharmacy and clinical pharmacists who can 
help manage individual patient care would positively impact the system. 
Of course, considerable opposition to the inclusion of some of these 
tools in a Medicare drug benefit by various stakeholder groups should 
be anticipated.
    Question. VA recently increased the Prescription Drug copayment 
from $2 to $7. How did the VA arrive at this amount?
    Answer. VA may not require a veteran to pay an amount in excess of 
the actual cost of the medication and the administrative costs related 
to the dispensing of the medication. VHA conducted a study of the 
pharmacy administrative costs relating to the dispensing of medication 
on an outpatient basis and found that VA incurred a cost of $7.28 to 
dispense an outpatient medication even without consideration of the 
actual cost of the medication. This amount covers the cost of 
consultation time, filling time, dispensing time, an appropriate share 
of the direct and indirect personnel costs, physical overhead and 
materials, and supply costs. It was thus determined that $7.00 would be 
an appropriate co-payment.
    Question. Does the VA plan further increases or adjustments to the 
co-pay? What process will be used to determine any future changes to 
the co-pay?
    Answer. The amount of the medication co-payment will be reviewed on 
an annual basis. Increases will be based on the Prescription Drug 
Component of the Medical Consumer Price Index.
                            nursing shortage
    Question. Does the VA agree that a quality work environment for VA 
nurses translates directly into quality of care for our veterans?
    Answer. VA agrees that a quality work environment for nurses 
translates into quality of care for our veterans. Research has shown a 
strong link between positive nursing work environments (including the 
involvement of nurses in decisions that can have impact on patient 
care) and enhanced patient outcomes.\1\
---------------------------------------------------------------------------
    \1\ Aiken, L. et al. ``Nurses' Reports on Hospital Care in Five 
Countries,'' Health Affairs, May/June 2001, 43-53.
    Havens, D. S., & Aiken, L. H. (1999). Shaping systems to promote 
desired outcomes: The Magnet Hospital Model. JONA, 29(2), 14-20.
---------------------------------------------------------------------------
    The American Nurses Credentialing Center's (ANCC) Magnet Hospital 
Recognition Program is designed to recognize excellence in nursing care 
based on a quality work environment.\2\ Research has shown that magnet 
hospitals demonstrate outstanding outcomes in patient and staff 
satisfaction, staff productivity, and reduced length of hospital stay 
for patients. The Tampa VA Medical Center is the first in VHA to have 
attained Magnet status.
---------------------------------------------------------------------------
    \2\ ANCC refers to Magnet status as representing a culture of 
excellence that includes: nurses who have the status needed to 
influence people and procure necessary resources; good collaboration 
between nurses, physicians, and administrators; and established systems 
needed to insure nurse participation in policy decisions.
---------------------------------------------------------------------------
    Question. More and more, VA nurses are asked to perform duties that 
are not directly related to the care of veterans--like administrative 
and janitorial duties. But the VA doesn't allow nurses to negotiate 
over these duties. How does this affect retention of VA nurses? The 
quality of care for our veterans?
    Answer. The Report of VHA's Nursing Workforce Planning Group 
states: ``In VA, nurses are routinely required to ``substitute'' for 
absent allied or ancillary staff, such as laboratory or clerical 
support, simply because in the past there have always been nurses 
present in the care environment to do so. This substitution for other 
workers diminishes nurses' capacity to provide nursing care and worsens 
the effect of the nursing shortage.''
    VA recognizes that while the quality of our veterans care remains 
high, such utilization takes nurses and other healthcare providers away 
from patient care processes and results in strong employment 
dissatisfaction that impedes both retention and recruitment of staff.
    Question. Would giving nurses collective bargaining authority 
provide a ``double value'' by both increasing the ``quality of life'' 
for nurses, and ``quality of care'' for veterans?
    Answer. The Congress, in section 7422, title 38, U.S.C. extended 
collective bargaining rights to title 38 personnel to include nurses.
    VA nurses currently have and utilize all collective bargaining 
authorities available to Federal employment. In addition, VA nurses are 
active participants in partnership councils at all levels of the 
organization.
    Question. The VA Nurses Recruitment and Retention Act created a 
National Commission on VA Nursing. What is the status of this 
Commission?
    Answer. The membership of the Commission has been appointed. The 
Commission will hold its first meeting in May 2002.
    Question. Could the Commission look into the collective bargaining 
issue?
    Answer. Yes. The Commission has been charged to consider 
legislative and policy changes to enhance recruitment and retention of 
nurses, and to make recommendations in these areas as appropriate.
    Question. What other steps is the VA taking to recruit and retain 
nurses?
    Answer. Understanding the gravity of the future nursing shortage 
situation, VA recognized the need to bring together nursing and health 
care management experts to fully explore all issues that have an impact 
on VA's ability to maintain a highly qualified nursing workforce. As a 
result, the Future Nursing Workforce Planning Group (Planning Group) 
was established in August 2000.
    In January, VHA released A Call to Action--VA's Response to the 
National Nursing Shortage. The report is the product of VA's National 
Nursing Workforce Planning Group whose membership was made up of nurses 
from a variety of positions, labor partners, VA medical center 
administrators, and Human Resources experts. This group consulted with 
national experts in nursing, government and academe, conducted an 
extensive review of the literature and met with VA employees. What 
emerged as a result is a frank discussion of VA's ability to compete in 
today's nursing labor market and the barriers that impede nurse 
retention, recruitment and utilization. Recommendations for diminishing 
these barriers are presented; they range from the need for legislative 
initiatives to the need for flexibility and respect in the work 
environment.
    To disseminate the Report's content, VHA has held policy level 
briefings and produced a national broadcast for all employees using the 
VA Knowledge Network. The report and its recommendations will be the 
subject of national meetings and will be considered by the VA Workforce 
Task Force and the National Commission on VA Nursing.
    VA has placed significant emphasis on the education and training of 
its nurses. The National Nursing Education Initiative (NNEI), 
implemented in March 2000, is a VA established subcomponent of the 
Employee Incentive Scholarship Program (EISP) that supports educational 
opportunities for VA's registered nurses to expand their formal 
education. It helps ensure that VA nurses are educationally prepared to 
provide the highest quality of health care to veterans across the full 
range of clinical practice roles. Additionally, the NNEI will prepare 
nurses for their new and evolving roles as VA continues its 
transformation from a hospital-based system to one that focuses on 
primary care and care management in outpatient, home, and community 
settings. As of September 30, 2001, the NNEI accounted for nearly 90 
percent of all the EISP participants. Academic year 2000-2001 was the 
first full year of operation of the NNEIEISP. At the conclusion of 
fiscal year 2001, 2,087 VA employees had been awarded EISP 
scholarships, including 1,870 registered nurses under the NNEI 
subcomponent. The total cost of these scholarships, many of which are 
multi-year awards that in some cases continue into academic year 2005-
2006, is approximately $23.3 million. The portion of the EISP funding 
that was specifically for the NNEI amounted to $21.3 million.
    Additionally VA has increased its emphasis on recruitment outreach 
for registered nurses. In fiscal year 2001, VA has more than doubled 
the number of the number nursing conventions, job fairs and other 
recruitment forums where it sponsors exhibits to promote VA as an 
employer of choice. Similarly, VA has increased its nationwide 
advertising which includes eye-catching display ads prominently placed 
in major newspapers and professional journals and internet advertising 
with links to VA's health care recruitment web site.
    VA is in the process of implementing the Education Debt Reduction 
Program (EDRP) that provides the authority to implement to help 
recently appointed health care employees such as nurses reduce the 
interest and principle on government and commercial loans that they 
obtained to fund their health care education. It appears that some 
concerns with the National Partnership Council have been resolved and 
that the award process will begin in the very near future. The EDRP is 
expected to be a highly effective tool for recruiting nurses.
    As another initiative, a senior VA nurse executive is now a member 
of the staff of the Healthcare Staff Development and Retention Office 
to facilitate the utilization of existing recruitment and retention 
programs and the creation of new programs.
    Question. What will the VA spend on these initiatives in 2003?
    Answer. Up to $10 million will be spent on the NNEI in fiscal year 
2003 and $1.7 million is in the budget for VA Learning Opportunities 
Residency Program (VALOR). About $5 million is available for the EDRP. 
The lion's share of the VA's national health care advertising budget, 
which totals about $1.5 million, will be shifted to nursing.
    Question. How can the VA-HUD Subcommittee help bolster these 
initiatives?
    Answer. It is critical that VA be a competitive employer of new 
nursing graduates. The VA Learning Opportunities Residency Program 
(VALOR) \3\, which has had a positive impact on nurse recruitment in 
the past and has won national acclaim, is a rich source of new nurses. 
VA will promote a positive work environment for nurses and all 
employees and will continue to develop recruitment and retention 
strategies that enable competitive employment of a qualified nursing 
workforce.
---------------------------------------------------------------------------
    \3\ The nationally acclaimed Veterans Affairs Learning 
Opportunities Residency Program (VALOR) is an honors program 
administered by local VA facilities but funded centrally. VALOR 
provides specialized summer educational and clinical experiences to 
nursing students with GPA's of 3.0 or higher. Participants are paid 80 
percent of RN pay and if they elect VA employment after graduation they 
are given special salary consideration. In fiscal year 2001 there are 
267 VALOR students being supported in 77 VA medical centers.
---------------------------------------------------------------------------
                              collections
    Question. The 2003 budget assumes that VA will collect $1.4 billion 
in 2003, an increase of about $500 million above the 2002 level. How 
much of this amount does VA estimate would come from the proposed 
$1,500 deductible?
    Answer. An estimated $260 million revenue increase is expected to 
come from the $1,500 deductible proposal. This proposal is also 
expected to generate an overall net workload expenditure reduction of 
$885 million, for an overall reduction in the appropriation request of 
$1.145 billion for veterans' health services in fiscal year 2003.
    Question. Last month, the VA's Inspector General reported on missed 
billing opportunities, backlogs of claims worth a billion dollars, and 
poor follow-up on bills. GAO has found similar problems about VA's 
collections efforts. What is VA doing to collect what veterans and 
taxpayers are owed?
    Answer. For the past 4\1/2\ years VA has contracted with a private 
vendor to follow-up on third parties receivables over 90 days old. This 
contract has resulted in collections totaling $200 million at a cost of 
a little more than $4 million. This contract required the contractor to 
submit 5 additional follow-up letters to an insurance company for 
payment to VA for the service provided.
    Additionally, the VHA Revenue Office is in the process of 
``testing'' the concept of outsourcing follow-up activities between one 
VISN and the Allied Interstate Company (a collection company). For a 
period of 120 days, the company will attempt to resolve aged billing 
claims while on location in a VISN facility. This test will provide 
insight into how well a private sector billing company can provide 
outsourcing for billing services.
    We have simultaneously encouraged VISNs to identify outsourcing 
opportunities, not only for follow-up activities, but also for coding 
and billing. A number of VISNs are in the process of developing 
statements of work for outsourcing and several others have issued 
solicitations.
    Question. How much does VA spend on its collections efforts? For 
example, for every dollar spent on collections, how much does VA 
actually collect?
    Answer. VA's cost to collect from third-parties is very difficult 
to compare with private industry's cost to collect. VA's measurement 
for this process is a cost to operate. VA's data systems cannot provide 
data for collections and costs to differentiate between first and 
third-parties. The cost accounting system records only total 
collections and cannot identify cost expenditures to the first and 
third-party level. There have been cost assessment studies done in 
prior years by contractors and one currently underway; both of which 
have shown (show) how the cost to collect/operate has declined over the 
past few years. This decrease in cost to operate can be attributed to a 
number of improvements in the process for billing and collecting of 
first and third-party receivables. These enhancements include the 
electronic generation of patient statements from one location, the 
receipt of payments for first party charges through a lock box bank, 
and the automatic posting of those payments to a patient's account. 
Additionally, improvements made to the third-party billing process 
include facilities using an Electronic Data Interchange (EDI) in the 
near future to submit bills to insurance companies electronically, 
centralization/consolidation of like collection functions, and 
outsourcing/contracting out follow-up activities.
    Systems Flow, Inc., has been contracted to study and develop annual 
reports to Congress on an assessment and an interim evaluation of 
alternative business models presented in VHA's Business Plan for 
Revenue Collection. Systems Flow, Inc. reviewed three VISNs on various 
subject matters including cost to collect data. A draft based on 
preliminary data results (using December 2001 data) was issued February 
12, 2002. The cost to operate on average for three VISNs for third-
party collections averaged 22 cents to collect $1 and averaged 16 cents 
to collect $1 of total collections (first and third-party).
    Question. Does the VA know to what extent it is owed by deadbeat 
third parties? Is VA able to estimate how much?
    Answer. We are unable to systematically identify payers that 
routinely or frivolously deny payment of our claims. However, field 
staffs occasionally provide anecdotal information on the subject. 
Therefore, to provide an accurate response will require substantial 
systems development for monitoring and reporting on such occurrences. 
We anticipate a greater capacity to monitor such activity with advent 
of the Electronic Data Interchange (EDI).
    Question. Why has the VA chosen to keep billing in-house, rather 
than contracting it out to the private sector, which has more 
experience in billing issues?
    Answer. VA is in the unique situation of dealing with service 
connected and non-service connected veteran patients for billing 
purposes. Due to the various rules and regulations that deal with this 
situation, many private sector billing companies will have to modify 
their software in order to bill for VHA services. VHA's study of 
commercial-off-the-shelf billing products identified several vendors 
that could provide billing outsourcing with effective training and the 
upfront work with the VistA software to extract the episode of care 
information. To that end, the Office of Information's Software Design 
and Development section is in the process of making the VistA software 
``billing aware'' so that it can be integrated with potential private 
sector billing companies. Another issue hindering the outsourcing of 
billing is obtaining security clearances for individuals performing 
billing work for a potential contractor. Security clearances must be 
obtained for each individual accessing the VHA computer systems. 
Further, the contractor must be physically located on VA property to 
stay within the VA computer systems firewall to preserve the security 
of the data. Another issue hindering the outsourcing of billing is the 
lack of consistent documentation and use of the Computerized Patient 
Medical Record System (CPRS) at all clinics within a medical center. 
These issues are being addressed by VHA management.
    The VHA Revenue Office is in the process of ``testing'' the concept 
of outsourcing follow-up activities between one VISN and the Allied 
Interstate Company (a collection company). For a period of 120 days, 
the company will attempt to resolve aged billing claims while on 
location in a VISN facility. This test will provide insight into how 
well a private sector billing company can provide outsourcing for 
billing services. The Revenue Office will be conducting weekly 
conference calls on the status of this initiative with VISN 12, as well 
as receive monthly progress reports on the amount collected by Allied 
Interstate Company.
    In addition, we have simultaneously encouraged VISNs to identify 
outsourcing opportunities, not only for billing, but also for coding 
and accounts receivable management. In fact, several VISNs have such 
outsourcing situations in progress and several others have issued 
solicitations. The VHA Revenue Office maintains a list of VISN/Medical 
Center contracts from across the country. This listing will be 
available to VISN/Medical Centers for information on contracts 
available.
    The foregoing activities indicate a desire and commitment within VA 
to outsourcing options.
    Question. Has VA been able to develop a list of ``lessons learned'' 
to maximize collections?
    Answer. VHA has identified 24 action items to enhance revenue 
operations. Project Teams are pursuing the implementation of these 
action items in the areas of Billing, Coding, Insurance, Utilization 
Management and Accounts Receivable Management. These project teams will 
make recommendations for improvements to the Revenue program and 
develop training programs for facilities to implement best practices.
    We are consolidating information into a central resource vehicle to 
assist field revenue staffs in maximizing their collection efforts.
                             waiting times
    Question. What can the VA tell us about current waiting times? How 
long do veterans wait to get a doctors appointment? How long do they 
sit in the waiting room?
    Answer. Eighty seven percent of primary care appointments and 83 
percent of specialty care appointments are scheduled within 30 days of 
desired date. This measure includes ALL patients seeking an 
appointment. For new non-emergent patients seeking an appointment to 
primary care, the current waiting times is 58.7 days. In addition, 71 
percent of patients reported that they waited 20 minutes or less to see 
their provider.
    VHA tracks and monitors other information on waiting time to 
provide a richer context for evaluating performance. Information on 
performance for February 2002 is included in the table below. VHA 
tracks performance on these monitors over time to assess the 
effectiveness of corrective actions as well as to monitor the effect of 
other factors, such as eligibility changes and budgetary impacts on 
waiting times. Attachment A provides data on general trends of 
nationwide improvements for VHA's average wait times for primary care 
and specialty clinics.

             OTHER VHA WAITING TIME MONITORS--FEBRUARY 2002
------------------------------------------------------------------------
                                                                Actual/
            Measure               Specialty Clinic  Plan/days     days
------------------------------------------------------------------------
Average next available primary   (Primary)........         30         38
 care appointment.
Average next available           Audiology........         30       31.8
 specialty appointment waiting   Cardiology.......         30       35.8
 time.                           Eye Care.........         30       61.7
                                 Orthopedics......         30       34.4
                                 Urology..........         30       41.1
Average primary care new         (Primary)........         30       58.7
 appointment waiting time.
Average specialty new            Audiology........         30       53.5
 appointment waiting time.       Cardiology.......         30       35.7
                                 Eye Care.........         30       77.4
                                 Orthopedics......         30       38.6
                                 Urology..........         30       45.5
------------------------------------------------------------------------

    Question. What are the goals for patient waiting time?
    Answer. The Department level goals for waiting time for fiscal year 
2003 are provided below.: The strategic goal for each of the 
performance measures below is 90 percent by 2006.
  --89 percent of primary care veterans appointments will be scheduled 
        within 30 days of desired date (excludes new enrollees who are 
        pending scheduling of their first appointment);
  --87 percent of specialist appointments will be scheduled within 30 
        days of desired date (excludes new enrollees who are pending 
        scheduling of their first appointment); and
  --72 percent of patients will report being seen within 20 minutes of 
        their scheduled appointments at VA health care facilities.
    Note: pending scheduling is defined as a patient who has requested 
their first appointment and is waiting to be scheduled.
    Question. How were these goals developed?
    Answer. In 1995, a survey was conducted for actual wait times, by 
clinic. The data were analyzed to determine which clinics had the most 
problematic wait times. Measures were prioritized for those clinics 
with the highest wait times. Targets were set based on community 
expectations based on literature searches and discussions with other 
managed care groups.
    Question. What is the VA doing to develop a system to accurately 
quantify the current situation?
    Answer. VHA has identified some immediate issues that must be 
addressed:
  --The current ``30 days measures'' do not accurately reflect the 
        experience of new patients.
  --The present data exclude the wait time experience of new enrollees 
        whose application for enrollment has been received but not 
        processed and new enrollees who indicate a desire for primary 
        care appointment that has not been scheduled.
    VHA recognizes that data credibility is compromised as the current 
``VHA-OMB 30 day wait measure'' appears to be far better than 
anecdotally reported wait experiences. Whether due to absence of 
available slot or other reasons, ``waiting lists'' of Veterans to be 
entered into the scheduling system are known to exist. ``Waiting 
times'' is an area of intense concern among facility and Network 
leadership.
    In January 2002, VHA's Policy Review Board recommended and VHA's 
(Acting) Under Secretary for Health approved the following proposed 
actions:
  --Improve construction and communication of current measures to 
        better reveal wait experiences of both new and established 
        patients in primary and specialty care.
  --Transition OMB/GPRA/VA Strategic Measures to either supplement or 
        replace ``percent with 30 days'' with average wait times for 
        primary or specialty care categorized by ``all patient'' and 
        ``new patients''
  --Include new patient wait data in primary and specialty care in all 
        VHA wait times performance reporting
  --Improve business processes to support improved data:
  --Standardize the entry process for new enrollees, building on 
        processes developed in VISN 8. This should include standard 
        ``pre-triage'' questions to determine basic preference and 
        reveal urgency of clinical needs at the time of enrollment. 
        Consider use of triage clinics, if primary care slots not 
        available. Incorporate principles of advanced access, including 
        recommendations for primary care panel size range into standard 
        entry process design.
  --Formalize ``electronic wait list'' in VISTA to more consistently 
        and accurately reflect demand across VHA, and reduce risk of 
        enrollees lost to follow-up due to clerical error.
  --Conduct periodic survey of new enrollees at defined periods after 
        enrollment to assess their experience with waiting times.
    Question. How much funding does VA anticipate devoting to quantify 
this problem in 2003?
    Answer. The fiscal year 2003 budget includes a request for $159 
million to improve access and service delivery.
                        claims processing times
    Question. What is the current processing time for claims?
    Answer. The current (through February 2002) average completion time 
for rating claims is 222 days.
    Question. What is the goal?
    Answer. The fiscal year 2002 goal is 208 days.
    Question. What lessons has the VA learned from past efforts to 
improve processing times?
    Answer. Because of concern over the increasing VBA workloads and 
the length of time veterans were waiting for decisions on their claims, 
the Secretary established the VA Claims Processing Task Force. The Task 
Force was charged with assessing VBA's current operations and the 
impact of efforts to improve claims processing. The Task Force was 
asked to recommend measures and actions that would increase the 
efficiency and productivity of VBA operations, shrink the backlog, and 
reduce the time it takes to decide a claim.
    The Task Force found that previous efforts to improve processing 
times had focused on the ``back end'' of the process--from preparation 
of the rating decision to award and decision notification. Nearly all 
clerical positions had been eliminated and replaced with additional 
``decision makers.'' The Veterans Services Representative (VSR) 
position was created, which has been assessed to include over 10,900 
separate tasks (including clerical functions), any combination of which 
a VSR could be expected to perform on any given day.
    It was the assessment of the Task Force that the broad scope of 
duties coupled with the administrative ``clerical'' functions actually 
reduced the time available for the VSR and the Rating Veterans Services 
Representative (RVSR) to make decisions. Little attention was paid to 
assuring proper and complete evidence development. As a result, claims 
were delayed time and time again as essential evidence was not 
solicited until months after the claim had been received.
    We have learned that our attention must focus on the entire claims 
process, from the date the claim is received in the Regional Office to 
the time the final decision is made on the claim, including any appeals 
that might have been filed. The Task Force recommended specialization 
of claims processing in order to ensure complete and timely 
development, reduction of cycle time delays, improved quality of 
decisions and awards, and complete and understandable notification to 
claimants. In addition, the Task Force recommended re-establishment of 
a clerical position to handle the administrative function, thus freeing 
up more direct labor hours for the VSR and RVSR. We are confident that 
these actions will improve both the timeliness and quality of VBA 
decisions.
    Question. How much funding does VA anticipate devoting to improving 
claims processing time in 2003?
    Answer. For fiscal year 2003, $50 million has been budgeted for 
initiatives to improve claims processing. These initiatives focus not 
only on timeliness, but also on quality and other aspects of claims 
processing, and are not all short term initiatives. Examples are 
Virtual VA (VBA's imaging initiative), Systematic Individual 
Performance Assessment (SIPA), and Compensation and Pension Evaluation 
Redesign (CAPER).
    Question. How many new employees?
    Answer. These initiatives will require 106 additional FTE (20 for 
Virtual VA, 64 for SIPA, 6 for CAPER, and 16 for other VBA-wide 
initiatives).
    Question. How will VA train new employees so they will be able to 
make a real difference?
    Answer. Training programs have been created for delivery through a 
variety of media, but the cornerstone of training for both RVSRs and 
VSRs is the Compensation and Pension (C&P) Training and Performance 
Support System (TPSS). For RVSRs, formal training occurs over a period 
of 26 weeks. TPSS is supplemented with training by student and 
instructor guides that includes a variety of practical exercises. A 
great deal of time is also allotted for work with mentors, where 
students are expected to demonstrate application of the knowledge they 
have obtained through success with live cases. For VSRs, formal 
training is outlined in the ``VSR Field Guide''. The Field Guide to VSR 
training website contains 48 weeks of training materials including the 
course curriculum, schedules, and all materials for instruction. Last 
year's VSR course design called for 12 weeks of initial instructor-led 
training. The purpose was to deliver uniform training in a compressed 
timeframe with as little impact as possible to the resources of the 
individual Service Centers. Stations would then continue training the 
remainder of the 48-week curriculum as trainees became more productive.
    Question. How have the VA's new duty to assist requirements 
impacted processing times?
    Answer. The Veterans Claims Assistance Act (VCAA) required that VBA 
readjudicate more than 98,000 previously denied claims, as well as 
review the 230,000 claims in our pending inventory at the time VCAA was 
enacted to ensure compliance with the Act. This major increase in our 
workload had a significant impact on the average processing times.
    All VCAA claims have now been added to the inventory. At the same 
time, we have taken aggressive steps to increase rating production, 
which is the key to reducing the claims backlog and improving the 
timeliness of our decisions. From October 2001 through February 2002, 
VBA decided over 294,000 cases for a 5 month average of 58,800. This 
represents a 47 percent increase over fiscal year 2001 production 
levels. We expect our production to continue to increase as many of our 
recently hired employees gain additional experience and we begin to 
implement the recommendations of the Claims Processing Task Force.
    We believe our increased production levels and the Task Force 
initiatives will now enable us to make major inroads into the pending 
inventory. Our goal is to reduce the pending rating inventory to 
315,000 claims by the end of this year. Even though we project major 
reductions in our pending inventory, the average days to complete will 
continue to increase as we focus on completing the oldest claims in our 
inventory.
    Question. Is the VA developing safeguards to ensure times won't get 
worse as it does more to help veterans develop their claims?
    Answer. We have taken several steps to ensure our focus remains on 
timeliness and accuracy. We have developed output targets for each 
regional office, and established national standards for Veterans 
Service Representatives and Rating Veterans Service Representatives. We 
have established performance standards for regional office directors 
that include specific goals for improvement in the timeliness of rating 
claims, reduction in the pending inventory of claims, etc. These 
performance plans also state that if any goals are not met, the 
director must provide compelling mitigating reasons and identify 
actions being taken to improve the performance.
    Wellness plans have already been requested of some station 
directors who have thus far failed to achieve goals specified in the 
performance plan. The wellness plan is a detailed analysis of the 
current situation, causes for the non-performance, and development and 
implementation of countermeasures. If wellness plans do not result in 
performance improvements and no mitigating reasons exist, appropriate 
administrative action will be taken.
    We are currently piloting a recommendation from the Claims 
Processing Task Force to establish specialized teams within the claims 
processing functions of Triage, Pre-determination, Rating, Post-
determination, Appeals, and Public Contact. The Triage team will assign 
work to the appropriate team or work the case in the Triage unit if an 
issue can be quickly resolved. The Pre-determination team will ensure 
complete and timely development of rating claims received from the 
Triage team. By addressing the current cycle time delays at the front 
end of both the rating and non-rating claims process, we expect 
significant improvement in the overall timeliness of claims processing. 
National implementation of this pilot will be complete by the end of 
this summer.
                             long term care
    Question. What is the status of VA's implementation of long term 
care?
    Answer. VA has implemented a number of the major long-term care 
provisions of the Millennium Act. Section 101(a), Nursing Home Care 
Eligibility, as implemented in February 2000. Further guidance was 
provided in November 2000 with issuance of VHA Directive 2000-044. 
Section 101(c), Extended Care Services and Extended Care Copayments, 
has been partially implemented with issuance of VHA Directive 2001-061 
in October. This directive notes that VA will amend the regulations 
establishing the benefits package to include outpatient geriatric 
evaluation, adult day health care and home and community-based respite 
care. Home care, hospice/palliative care and inpatient respite were 
included in the benefits package under prior authority. The amended 
Medical Benefits Package, Copayments for Extended Care Services 
proposed regulation was published October 4, 2001. Final regulations 
were forwarded to OMB on March 14, 2002.
    Section 102--Long--Term Care Pilots-are in progress at three VA 
sites (Dayton, Columbia, SC, and Denver, CO). The first veterans were 
enrolled in the pilot in mid-2001 and the final report to Congress will 
be submitted in April 2005, 9 months following the conclusion of the 
pilots. Section 103--Assisted Living Pilot--is in progress in VISN 20, 
Pacific Northwest. The first veterans were enrolled in this pilot in 
January 2002 and the final report to Congress will be submitted in 
October 2004, 90 days prior to the conclusion of the pilot. Lastly, 
implementation of Section 207--State Home Construction Grants--is 
nearly completed. Proposed regulations were published June 26, 2001 and 
were utilized to establish the fiscal year 2002 State Home Construction 
Priority List. Publication of final regulations is expected in April 
2002.
    Question. How much will VA spend on long term care in 2003?
    Answer. VA projects that it will spend approximately $3.6 billion 
on long-term care in 2003. Of this amount, $3.2 billion is for 
institutional long-term care and $0.4 billion is for non-institutional 
long-term care.
    Question. What is the status of the assisted living pilots?
    Answer. VA's Assisted Living (AL) Pilot being conducted in Network 
20 (Washington, Oregon, Idaho, Alaska) started admitting veterans in 
the pilot study group to AL facilities in January 2002. Contract issues 
and Institutional Review Board issues delayed implementation of this 
pilot program from the planned start of mid-2001, but all of these 
issues have now been resolved. The pilot will be conducted for 3 years, 
and the report to Congress on the outcomes will be provided 90 days 
prior to the completion of the pilot as required in the Millennium Act. 
VA's Health Services Research Centers of Excellence are conducting the 
evaluation of this pilot.
                              fort howard
    Question. Will the VA continue to move forward with the Mission 
Change and Enhanced Use project underway at Fort Howard?
    Answer. Yes. The Mission Change is currently in progress. The 
estimated date to complete the Mission Change is September 2002. In 
addition, the planning process for the revitalization of the Fort 
Howard campus into a ``Continuum of Care Retirement Community'' 
utilizing Enhanced-Use legislation has been initiated. There is a lot 
of interest in the project. This community concept would be a first in 
the VA, and may likely prove to be a model for other VA sites 
nationally where aging buildings and abundant property are a capital 
burden on the VA system.
    Question. What changes can veterans, their families, and VA 
employees expect in the coming months?
    Answer. The changes that veterans, their families, and employees 
will see in the upcoming months will be the progressive relocation of 
inpatient programs and administrative functions to other VAMHCS sites 
where excess capacity exists. The planned relocations will provide a 
better environment and accessibility for serving the health care needs 
of Maryland's veterans. No current program offered at Fort Howard will 
be eliminated. As most of the program moves are dependent upon various 
construction projects, the estimated date to complete the Mission 
Change is September 2002. The 32-bed Substance Abuse and Residential 
Rehabilitation Treatment Program (SARRTP) was relocated to Perry Point 
in February 2001. The Medical Care Cost Fund (MCCF) Office, also known 
as the Revenue Office, was relocated to Perry Point in June 2001. The 
Ventilator/Respiratory Therapy beds (12-bed unit) were relocated to 
Perry Point in December 2001. Other planned relocations and 
construction projects will follow this spring and summer. When the last 
of the inpatient moves are completed, the current Fort Howard primary 
care outpatient clinic will be relocated from the main hospital 
building to Building 249, which is located behind the existing hospital 
building and adjacent to the main parking lot.
    Question. Will the outpatient services continue at the Fort Howard 
campus throughout the entire transition?
    Answer. Yes. As noted above, when the last of the inpatient moves 
are completed, the current primary care outpatient clinic will be 
relocated from the main hospital building to Building 249. Veterans who 
are currently receiving primary care outpatient services will continue 
to receive these services without interruption during the transition. 
Although Building 249, which was built in 1992, is the newest building 
located on the Fort Howard campus, construction is scheduled to begin 
in April 2002 to make the space more functional for the needs of the 
primary care outpatient clinic.
    Question. Veterans with inpatient needs will be referred to the 
Baltimore VAMC. What is the VA doing to prepare the Baltimore facility 
for its expected increase in workload? What facility improvements are 
being made? What is the VA doing to ensure that healthcare workers at 
the facility are able to provide quality customer service to an 
increased workload?
    Answer. There will be no increase in inpatient workload at the 
Baltimore facility as a result of the Fort Howard Mission Change. The 
Baltimore facility supports the acute and critical care needs of 
veterans for the entire VAMHCS. Fort Howard is a sub-acute care 
facility. Upon completion of the Mission Change, the Fort Howard 
inpatient programs will be relocated to more modern and comfortable 
accommodations at the Perry Point and Loch Raven facilities. Over $7 
million has been allocated for construction projects to accomplish the 
planned relocations (see attached list). The transfer of patient 
workload and staff from Fort Howard to the Perry Point and Loch Raven 
facilities will increase workload at these two locations; however, the 
overall system workload will not increase. Employees have been given 
the option to relocate with their programs, as appropriate. We believe 
that the veteran population will benefit from the planned relocations, 
and the current level of quality care and customer service will be 
maintained.

             FORT HOWARD MISSION CHANGE PROJECT COST SUMMARY
------------------------------------------------------------------------
                                                               Project
Site         Project title              Project number           cost
------------------------------------------------------------------------
     Fiscal Year 2000 Funding:
  LR     Renovate BRECC1 For    512-00-166...............     $179,650
          Rehab Therapy
          (Design/
          Construction)
  PP     Relocate Cardiology    512-00-321...............      246,372
          To 19H
  LR     Rehab/Admin Bumpout    512-00-168...............       52,500
          Addition (Design)
  LR     Renovate Animal        512-00-167...............       83,000
          Facility For
          Orthotics (Design)
  PP     Renovate 22H For       512-00-320...............       44,843
          SARTP (Design)
  PP     Add Bathrooms 23A      512-00-322...............       27,880
          (Design)
  PP     Renovate 13H For       512-00-323...............            0
          Admin Svcs (Design)
                                                          --------------
           Subtotal             .........................  \1\ 634,245
  PP     Renovate 14A & B       512-319..................  \2\ 3,920,0
                                                                    00
                                                          --------------
           Fiscal Year 2000     .........................    4,554,245
            Total
     Fiscal Year 2001 Funding:
  PP     Add Bathrooms 23A      512-00-322...............      152,500
  FH     Renovate Bldg 249      512-00-120...............       51,500
          (Design)
                                                          --------------
           Subtotal             .........................      204,000
     Fiscal Year 2002 Funding:
  LR     Rehab/Admin Bumpout    512-00-168...............      378,854
          Addition
          (Construction)
  LR     Renovate Animal        512-00-167...............      400,000
          Facility For
          Orthotics
          (Construction)
  FH     Renovate Bldg 249      512-00-120...............      375,000
          (Construction)
  PP     Renovate 13H For       512-00-323...............      390,071
          Admin Svcs
          (Construction)
  PP     Renovate 22H For       512-00-320...............      379,222
          SARTP (Construction)
                                                          --------------
           Fiscal year 2001     .........................  \3\ 1,923,1
            and 2002 total                                          47
     Funding Pending:
  BT     Provide A&MMS Space    SB-01-104................      359,000
          in Warehouse
  BT     Renovate 2nd Floor     .........................       20,000
          Audiology
  LR     Renovate B-4 basement  .........................       75,000
          area for EMS Offices
          & Linen Carts
  LR     Convert EMS Linen      .........................       25,000
          Cart Rm In BRECC to
          Offices
  LR     Add Offices In B-4     .........................       75,000
          Near Security (w/o
          bathroom)
  LR     Expand Dental Suite @  SB-02-202................       80,000
          BRECC
                                                          --------------
           Funding pending      .........................      634,000
            total
           Grand Total          .........................    7,315,392
------------------------------------------------------------------------
     \1\ $486,000 received in FCP 073 in fiscal year 2000.
     \2\ $3,920,000 approved for 14H.
     \3\ $2.0M received in FCP 1934 in fiscal year 2002.


    Question. Will the VA stick to the current timetable that calls for 
the Mission Change to be complete by September 2002, and for the 
Enhanced Use to be complete by January 2003?
    Answer. The VAMHCS is doing everything possible to ensure the 
timelines presented to date are maintained. As most of the program 
moves are dependent on the completion of various construction projects, 
the estimated date to complete the Mission Change is September 2002. 
The Enhanced-Use portion of the project is a more complex and difficult 
process to forecast. A contract was awarded to a consultant to conduct 
an Environmental Assessment and the historical, marketing, land 
planning, and financial feasibility studies for the Enhanced-Use 
portion of the project. These studies are necessary to properly 
validate the proposed concept and identify any potential concerns. The 
marketing, land planning, and financial feasibility studies have been 
completed. The historical study is currently under final review by the 
Maryland Historical Trust and the Historic Preservation Officer, VA 
Central Office. At or near completion of the Environmental Assessment, 
a formal request to continue pursuit of the Enhanced-Use portion of the 
project will be forwarded to VA Central Office for review and approval. 
Based on current estimations by the Office of Asset Enterprise 
Management, VA Central Office, the Enhanced-Use process takes 
approximately 12 months to complete which results in the awarding of a 
contract to a developer. It is unlikely that the formal Enhanced-Use 
process will be completed by January 2003 as previously planned.
    Question. Has the VA bid the Enhanced Use portion of the project in 
January 2002 as planned? If so, was notice provided to the Committee? 
If not, what is the delay?
    Answer. No. The formal Enhanced-Use process of the project was 
expected to begin in January 2002 with the submission of a Business 
Plan. This Business/Concept plan is the first step in the formal 
process leading to execution of an Enhanced-Use project. Subsequent 
steps necessary prior to ``bidding'' include plan approval, conducting 
a public hearing, and notification to Congress of the Department's 
designation of the site for an Enhanced-Use lease. As noted in the 
response above, prior to submission of the Business Plan (formal 
request to continue pursuit of the Enhanced-Use project) there are 
several studies that must be completed to properly validate the 
proposed project and identify any potential concerns. Most of these 
studies have been completed with the exception of the Environmental 
Assessment. At or near completion of the Environmental Assessment, a 
formal request to continue pursuit of the Enhanced-Use process will be 
forwarded to VA Central Office.
    Question. If the State does not authorize a new State Veterans Home 
at Fort Howard, what impact will it have on the Enhanced Use plan?
    Answer. If the State of Maryland does not authorize a new State 
veterans Home at Fort Howard, there will be no impact on the enhanced-
use plan. If the State does not build at Fort Howard, the land will be 
utilized to further enhance the retirement community, as appropriate.
                           major construction
    Question. The 2003 budget request includes 4 seismic projects in 
California totaling $94 million. While each of the 4 projects are on 
VA's priority list, the request skips over projects that are identified 
by VA as a higher priority--for example, projects in Cleveland and 
Anchorage are of higher priority to VA, yet they are not requested. 
What is the rationale for this?
    Answer. All of the mentioned projects are important to VA, however, 
when putting together recommendations for the President's fiscal year 
2003 budget request the concern for the life and safety risk associated 
with potential seismic related structural failure of the listed 
facilities outweighed the Cleveland and Anchorage projects.
    Question. What is the authorization status of each of the projects 
on the VA's fiscal year 2003 Priority Major Medical Construction 
Projects list? For each project that is authorized, please provide: the 
date the project was authorized, the legislative citation, and when the 
authorization expires. Please note each project that is not authorized. 
Please also note the CARES status of each project.
    Answer. The proposed SCI/Blind Rehabilitation Project for Hines is 
the only project on the List of 20, which is currently authorized for 
expenditure of funding. This is also the only project associated with a 
completed CARES study.
    Question. What are the VA's plans for the CARES process?
    Answer. The VA's current plans for Phase II of the CARES process 
will begin in Spring 2002. Phase II will call for all of the remaining 
Networks to develop CARES plans based on actuarial projections 
provided, space and facility assessments and other guidance and 
criteria provided to them by VACO. Preparations in VACO have begun to 
initiate this process. All studies and decisions should be completed 
within the next 2 years.
                           minor construction
    Question. The Committee has not yet received notification of the 
fiscal year 2002 minor construction projects. Please provide this list 
to the Committee.
    Answer. Attached are VHA minor projects that were approved by a 
Department wide workgroup (as required by the Committees) and included 
in the fiscal year 2002 operating plan. This plan may be revised as 
needed. VA will forward the operating plan to the Committees as 
revisions are made.











    Question. In fiscal year 2002, the Committee provided $32 million 
above the budget request for minor construction projects. Please 
identify the projects funded as a result of this increase.
    Answer. VHA received $17.2 million of the additional funds. Out of 
the $17.2 million, $6 million has been allocated to seismic projects 
and $11.2 million was distributed to the VISNs in support of their 
greatest minor construction needs. NCA received an additional $2.8 
million, VBA an additional $10 million, and Staff Offices obtained an 
additional $2 million over the original 2002 request.
    Question. What percentage of funding is for minor construction will 
support improvements to VA medical research facilities?
    Answer. Based on the fiscal year 2002 minor construction 
applications and operating plan, only one project was identified for 
research. That project totaled $3.7 million and equates to 2.3 percent 
of the appropriation of $161.5 million.
    Question. In fiscal year 2002, the Committee provided $25 million 
for CARES approved minor construction projects. How will VA allocate 
this funding?
    Answer. VISN 12 received $17.5 million in CARES funding with $1.5 
million set aside to fund design work for additional VISN 12 CARES 
projects. The remaining $6 million will be allocated to other approved 
CARES projects.
                           homeland security
    Question. VA's Fourth Mission is to serve as a backup to the DOD 
healthcare system in times of national emergency. What does VA propose 
to spend in 2003 to prepare for this mission?
    Answer. VA's Preparedness Review Working Group identified a need to 
provide direct interface and exchange of data with the DOD patient 
evacuation system to be better prepared to assess hospital capability 
and capacity, track active duty casualties transferred to VA, and 
maintain casualty data within VA's VISTA system while military active 
duty patients are receiving treatment within VA's healthcare system. 
The report also recommended providing 1-800 access capability for 
information and location of military patients.
                               geriatrics
    Question. The fiscal year 2002 Senate VA-HUD Report directed VA to 
report on the feasibility of extending geriatric fellowships to 2 
years, and to make additional recommendations to make geriatric 
fellowship more competitive with the private sector. The Committee 
appreciates receiving this report.
    While the report noted that VA had created a specialized 2 year 
geriatric fellowship, but did not address the issue of making all 
geriatric fellowships 2 years. What is the VA's response to this 
specific issue?
    Answer. VA supports two programs for physician training in 
geriatrics. The first of these is geriatric medicine residency (or 
fellowship) positions in Accreditation Council for Graduate Medical 
Education (ACGME)-accredited subspecialty residency training programs. 
The second program that VA supports is its Post-residency Special 
Fellowship Program in Advanced Geriatrics. VA established this program 
when some VA and non-VA geriatric leaders expressed concerns that 1 
year of geriatric medicine subspecialty residency training was 
insufficient to educate leaders in geriatrics. They asked VA to 
continue its residency training and to develop advanced geriatric 
medicine training opportunities. VA agreed. Continuing to fund ACGME-
accredited geriatric medicine and geriatric psychiatry residency 
training positions, it also established a 2 year VA Special Fellowship 
Program in Advanced Geriatrics.
    VA believes that it is important to support both of these programs 
to meet the clinical needs of geriatric patients as well as to develop 
leaders in geriatrics for academic centers and health systems. The 1 
year clinical residency programs accredited by the ACGME provide the 
credentials necessary for practice in the specialty of geriatrics. The 
program length is set by the accrediting agency. The 2 year, VA post 
residency Advanced Geriatrics Fellowship Program develops geriatrics 
leaders for VA and the Nation.
    Question. What is the VA doing to actually implement the 
recommendations of the report?
    Answer. VA established its Post-residency Special Fellowship 
Program in Advanced Geriatrics in 2000. This program is for post-
residency physicians who have completed ACGME-accredited subspecialty 
residency training in geriatric medicine or geriatric psychiatry and 
want to lead geriatrics in academic centers and health systems. Fellows 
receive 2 years of additional training in geriatric research, advanced 
education, and advanced clinical care. Fellows spend approximately 75 
percent of their time in geriatrics research and education and 25 
percent in advanced clinical care. In 2000, VA competitively selected 
seven Geriatric Research, Education, and Clinical Center (GRECC) sites 
to implement the Advanced Geriatrics Fellowship Program. The West Los 
Angeles/Sepulveda GRECC was selected as the hub site to coordinate 
fellowship activities. The first fellows were selected in 2001, and the 
second cadre will begin in 2002. The Hub site has coordinated 
curriculum development, recruitment and evaluation at the selected 
sites. Accomplishments include:
  --A coordinated series of recruitment activities has been undertaken.
  --A cadre of fellows have been recruited and participated in a 
        nationally coordinated curriculum of geriatrics education.
  --A series of two-way interactive videos has been initiated.
  --Fellows have been provided with travel and tuition assistance to 
        attend at least one national geriatrics meeting a year.
  --As fellows enter their second year of fellowship training, special 
        attention will be paid to mentoring in career development and 
        leadership development.
  --A plan for evaluation of the program has been developed and is 
        underway
                            medical research
    Question. The budget request is $394 million. What does that buy?
    Answer. The 2003 request of $409 million will allow VA to fund 
2,780 research and development projects and 2,907 full-time 
equivalents. After adjusting for the CSRS and FEHB accruals of $15 
million, the request is $394 million. This request consists of a 
program increase of $23 million. This program increase includes $12 
million for payroll and inflation adjustments and $11 million for new 
research initiatives. The new research initiatives include the 
following:
  --Two new Quality Enhancement Research Initiative Centers.
  --Chronic disease management for Myocardial Revascularization On and 
        Off Cardiopulmonary Bypass and Open Versus Endovascular Surgery 
        for Abdominal Aortic Aneurysms.
  --New studies focused on ensuring homeless and minority veterans in 
        rural areas receive equal access to health care and ensuring 
        quality of care outcomes for primary care for diseases of 
        particular importance in woman.
  --Diseases of the brain (e.g., Alzheimer's and Parkinson's) to 
        include the following initiatives:
    --New Parkinson's Disease projects include stem cell and fetal 
            transplantation research in animal models, advances in 
            neuroimaging technology to monitor the progression of the 
            disease, the role of neurotransmitters other than dopamine 
            in Parkinson's Disease, gene therapy, and mechanisms of 
            damage to nerve cells.
    --Neurorehabilitation researchers continue to capitalize on new 
            findings surrounding the brain and its ability to 
            reorganize following injury-ischemic or traumatic. Initial 
            success utilizing constraint-induced therapies for 
            restoration of upper limb functions in hemiplegic patients 
            requires evidence to assure optimal clinical 
            implementation. In addition, premliminary research into 
            motor therapy for lower limb function and speech-language 
            recovery, although not as advanced, is showing cause for 
            optimism in the neurorehab community. The coupling of 
            pharmacotherapies with physical therapy remains a course 
            towards recovery of function that is promising, although 
            not yet fully understood. An additional adjunctive therapy 
            with promise is functional electrical stimulation (FES), 
            which has only begun to be explored. Although intensive 
            physical therapy shows promise for recovery, it also 
            requires inordinate and expensive clinical resources. 
            Robotic technology is seen as a solution, not only in 
            response to manpower issues, but to delivering precise and 
            consistent therapy, thereby enhancing improvement. 
            Technology for the upper limb is under development with VA 
            sponsorship. Similar lower limb technology is not as 
            advanced. Finally, application of neurorehab approaches has 
            only just begun to be studies for Parkinson's Disease, ALS, 
            and Alzheimer's Disease.
    Other important areas that may receive additional funding include 
aging, micro technology, stroke, multiple sclerosis, chronic viral 
diseases, and patient outcomes in rehabilitative care.
    In addition to the $409 million in the Medical and Prosthetic 
Research appropriation, the Medical and Prosthetic Research program is 
supported with $401 million from Medical Care and $656 million from 
other Federal and private medical research organizations such as the 
Department of Defense, National Institutes of Health, and 
pharmaceutical companies. The $1.5 billion in total funding will allow 
VA to maintain research centers in the areas of Gulf War illnesses, 
diabetes, heart disease, chronic viral diseases (e.g., HIV/AIDS), 
Parkinson's disease, spinal cord injury, prostate cancer, depression, 
environmental hazards, and women's issues, as well as rehabilitation 
and Health Services Research and Development field programs.
    Question. How does VA prioritize research?
    Answer. VA currently focuses more than 99 per cent of its Medical 
and Prosthetic Research budget on its nine designated research areas: 
Aging and Age Related Changes, Acute and Traumatic Injuries, Chronic 
Diseases, Health Services and Systems, Mental Health, Military 
Occupational and Environmental Exposures, Sensory Disorders and Loss, 
Special (Underserved, High Risk) Populations, Substance Abuse.
    The Office of Research and Development receives input from multiple 
sources to prioritize research that will best meet the needs of the 
veterans population: the National Research Advisory Council, veterans 
service organization, other VA and VHA offices.
    Question. The budget request supports 3,167 FTE, the same as the 
2002 level. Why is the current estimate significantly lower--2,983 FTE?
    Answer. VA submitted a fiscal year 2002 budget request of $360.2 
million and 3,167 full-time equivalents (FTE). The fiscal year 2002 
current estimate of $371.0 million and 2,983 FTE is the result of 
fiscal year 2002 Congressional action, which supports the proposed 
increase in the fiscal year 2002 pay raise from 3.6 to 4.6 percent. The 
reduction of 184 FTE reflects the staffing requirement to maintain the 
mix of projects estimated for fiscal year 2002.
                                 ______
                                 

           Questions Submitted by Senator Christopher S. Bond

                              collections
    Question. I believe that VA must improve its collections from 
veterans' private health insurers. GAO recently testified that ``long-
standing problems in VA's revenue operations appear to persist, and 
when compared to private sector standards, VA's collections performance 
is poor.'' In fact, VA has over $700 million in outstanding 
receivables. First, how is VA improving its collection efforts? Second, 
what is VA doing to collect its outstanding receivables?
    Answer. For the past 4\1/2\ years VA has contracted with a private 
vendor to follow-up on third parties receivables over 90 days old. This 
contract has resulted in collections totaling $184 million at a cost of 
a little more than $4 million. The VHA Revenue Office is in the process 
of identifying requirements to develop a Request for Proposals (RFP) to 
outsource accounts receivable management of third-party accounts. We 
anticipate that multiple awards would be forthcoming from this effort 
and expect a September 2002 award. Several VISNs have outsourcing 
efforts in progress and others are in the process of soliciting bids.
    In addition, VHA has identified twenty-four action items to enhance 
revenue operations. Project Teams are currently implementing action 
items in the Billing, Coding, Insurance, Utilization Management and 
Accounts Receivable Management areas.
    Question. Some believe that VA should be able to collect more than 
$1.4 billion as projected in your budget request. Is this possible?
    Answer. The projected $1.4 billion includes $260 million for the 
proposed $1,500 deductible. If the $1,500 deductible is not 
implemented, the projected collection figure should be revised downward 
to $1.2 billion.

                                              [Dollars in Millions]
----------------------------------------------------------------------------------------------------------------
                                                                                    Fiscal year     Fiscal year
                                                                October-February  2002 projected  2003 projected
                                                                fiscal year 2002    collections     collections
----------------------------------------------------------------------------------------------------------------
MCCF..........................................................              380              805           1,084
HSIF..........................................................                1              225             364
Extended Care Revolving Fund..................................                0               20              40
                                                               -------------------------------------------------
      Total...................................................              381            1,050           1,488
----------------------------------------------------------------------------------------------------------------

                     cares--visn 12 implementation
    Question. Last month, you made an announcement recommending the 
realignment of facilities in VISN 12. Your recommendation includes the 
closure of one of four Chicago medical centers and the construction of 
a new $40 million spinal cord and blind rehabilitation center at Hines. 
Your recommendation also includes other costs such as the creation of 
new community-based outpatient clinics. Do you have a cost estimate of 
the total amount of funds that VISN 12 will need to implement your 
recommendation?
    Answer. The costs for each option were identified in the VISN 12 
report. The three approved options have costs of: Option B--$71.4 
million, Option G--$33.8 million, and Option I--$7.6 million, for a 
total of $112.8 million. This figure reflects the order of magnitude 
costs for easily identifiable major capital needs. It will be upwardly 
adjusted as a result of the implementation plan. That plan will include 
the full spectrum of capital investment requirements to put into 
operation the approved options B, G, and I.
    Question. One of your press releases stated that VA expected to 
save an ``estimate $720 million over the next 20 years.'' Can you 
explain this cost savings estimate? How will the appropriations 
committee see the impact of these savings in future budget requests? 
Assuming no additional legislative mandates are enacted, can the 
appropriators expect the savings from CARES to translate into lower 
budget request needs?
    Answer. A substantial portion of the estimated savings will be 
generated through the eventual closure or substantial downsizing of the 
Lakeside VAMC facility. Operating costs for utilities and the buildings 
and grounds, salaries for in-direct patient care staffing, and clinical 
program efficiencies all contribute to the savings. In addition, there 
is a potential for a revenue income if VA can successfully identify an 
Enhanced Use Lease partner for the property. Other savings accrue 
through a comparison of the life cycle costs for each option over the 
20 year period calculated. Cost savings will be re-invested throughout 
the VISN 12 facilities and CBOCs in order to increase clinical staffing 
(reduction of waiting times) and provide otherwise limited or difficult 
to obtain services to veteran patients. Two new CBOC's are planned to 
be established in order to provide more accessibility to VA health care 
services for Veterans.
                           cares--next steps
    Question. With the completion of CARES in VISN 12, I would like to 
hear about the next phase of CARES. VA's original plan was to implement 
the CARES studies in three phases. VA's fiscal year 2003 budget 
justifications specifies that after completing VISN 12, Phase II would 
be carried out, covering 8 networks, and then complete CARES for the 
rest of the Nation. Are your current plans to still carry out CARES in 
these Phases? What are your expected timeframes in completing these 
Phases?
    Answer. VA's current plans are to complete the CARES planning 
process in all of the remaining Networks in Phase II. The current 
expected timeframes call for the planning process to be initiated in 
the Networks in 2002. Networks would develop their proposed plans under 
guidance from VACO and with actuarial and other data. At the end of 
October, their proposed plans would be sent to VACO. Following a period 
of review in VACO, a CARES commission would review the plans, hold 
public hearings, take public comment and ultimately provide final 
recommendations to the Secretary. The Secretary would then make 
decisions on those recommendations and announce them sometime in Summer 
2003.
    Question. I am concerned about VA's in-house ability to perform the 
studies. Two questions: one, do you have the in-house expertise and 
staffing resources to perform the CARES studies and two, how will you 
ensure that the studies are objective? I am worried that if the VISN 
directors are in charge of conducting their own studies, there will be 
a conflict-of-interest.
    Answer. The VA will contract for actuarial studies to project 
veteran enrollment for 20 years for each Network and facility. The VA 
has the in-house capability, which may in some specific situations or 
issues that arise, have to be supplemented by contractors in the other 
areas required for the CARES plans. Staffing in VACO has been approved 
by VA, and recruitment is underway.
    The studies will be objective for several reasons. First, the 
Networks will be given specific guidance and criteria which they must 
use in order to complete their plans. Secondly, the VA CARES Office 
will be reviewing Network plans to make sure that the guidance has been 
followed. Thirdly, VA is planning to use a CARES commission, which will 
also review all the plans, hold hearings and allow for public comment.
                           funding for cares
    Question. The last area of CARES that I would like to ask you about 
is funding. Your budget request only proposes $40 million to fund 
CARES. This is a $60 million reduction from the fiscal year 2002 
enacted level. I am concerned that when the CARES studies are 
completed, there will not be adequate funding available to pay for the 
realignment costs. Based on the small funding request for CARES, is it 
your expectation that very little if any at all CARES studies will be 
completed and implemented in fiscal year 2003? If you expect the 
studies to be completed in fiscal year 2004, can we expect a major 
budget request for CARES projects? Do we need to examine any changes in 
the funding process to take care of current and future CARES project 
needs?
    Answer. Implementation of the VISN 12 CARES study options will be 
fully underway in fiscal year 2003 and the requested funding is 
expected to be sufficient to cover any design or design and 
construction initiatives expected to be obligated during that fiscal 
year. The remaining CARES service delivery options are expected to be 
developed in fiscal year 2003 so only minimal design dollars for a few 
of those selections are expected to be needed. It is expected that 
fiscal year 2004 and future budget years will be when the major funding 
needs for CARES initiatives will result. There are no changes in the 
funding process for CARES needs known at this time. As always, ensuring 
that initiatives are both authorized and adequately funded will require 
clear and open communications between VA and both authorizing and 
appropriations committees.
                          construction funding
    Question. I am puzzled by the request for $94 million in the major 
construction account to fund four new seismic repair projects in 
California and another $130 million in the minor construction account 
to fund other projects. VA is proposing to rehabilitate these 
facilities without any CARES review. Further, in its February 2002 list 
of priority major medical construction projects, the four California 
facilities are ranked 1, 3, 5, and 8. (#2 is for an ambulatory care 
project in Cleveland and #4 is for general upgrades in Anchorage). To 
add to my confusion, VA justified the inclusion of these four seismic 
projects because they were ranked #1, #2, #3, and #7 on its list of 73 
identified ``Exceptionally High Risk'' facilities based upon a 
government-wide seismic review. Your staff has also indicated that, 
despite the expected decrease in patient population, visits, and bed 
needs at these four facilities, the main structures proposed to be 
upgraded will survive a CARES review.
    First of all, can you explain why VA continues to propose funding 
for capital improvements in Major and Minor Construction accounts while 
we are awaiting the restructuring plans from the CARES assessments? Why 
do we even have these separate priority lists instead of having one 
just based on CARES? Can you explain to me how these four projects were 
included in the budget request even though they do not all rank in the 
top four of any VA construction list I have seen? Second, what criteria 
are you using to make these exceptions to the CARES process? How big is 
this ``exceptions to CARES'' universe? Lastly, how do you plan to 
reconcile the funding of these exceptions with the planned CARES 
studies? Will an area such as San Francisco have any incentive to 
perform a legitimate CARES study if they believe that their projects 
will get funded outside the process?
    Answer. There are many large veteran population areas that are 
currently only served by single VA facilities. VA fully expects to 
maintain a viable presence in these areas even though the type of 
services may change over time as the veteran population ages and 
demands changing services. Infrastructure projects, like the seismic 
structural projects or projects that upgrade the electrical 
distribution system within an aged facility are meant to ensure a 
continued viable presence for whatever functional need is defined 
through the CARES process. The CARES process will assist in defining 
the types and quantities of services these facilities should be 
configured to house. In the case of a campus facility with a large main 
building and multiple smaller buildings, the expectation is that as the 
workload at those facilities decreases over the next 20 years, that 
services will be consolidated into the main facility structures, making 
many of the ``out buildings'' unneeded by VA. The `` incentive'' for a 
facility like San Francisco is that they will need future projects 
other than the seismic upgrade to reconfigure their internal spaces to 
efficiently meet the changing missions they will be assigned through 
the CARES ``enhanced services'' realignment.
                          va-dod cost-sharing
    Question. Another area that I believe needs some further 
exploration is cost-sharing arrangements with the Department of 
Defense. I am aware that VA and DOD have made some joint arrangements 
such as in the pharmaceutical area. GAO reported last year that VA and 
DOD saved more than $40 million in fiscal year 2000. I understand that 
you created your own internal task force to examine VA-DOD cost-
sharing. Further, a Presidential Task Force was created last May by 
President Bush to improve coordination of health care delivery 
activities between VA and DOD in order to improve benefits and services 
for veterans. Could you elaborate on these cost-sharing efforts? What 
did your own internal task force accomplish? Also, I would like to hear 
your views on the Presidential Task Force and how you are supporting 
it.
    Answer. Section 3(e) of the VA-DOD Health Resources Sharing Act (38 
USC 8111) requires that ``any funds received through earnings in VA-DOD 
sharing agreements shall be credited to funds that have been allotted 
to the facility that provided the care or services.'' VA has followed 
this policy since the law was implemented. The law provides an 
incentive for VA facilities to enter into agreements with DOD and has 
benefited veterans by allowing facilities to provide services to 
veterans that would not otherwise have been available.
    While the primary focus of the law is to allow facilities to expand 
services for its beneficiaries, cost savings (cost avoidance) to the 
budget do occur, especially in the purchase of services. By spending 
less on goods and services facilities have more money available. VA 
purchased $22.6 million from DOD in sharing agreements in fiscal year 
2001 and estimates purchases of $22.9 million in fiscal year 2002 and 
$23.2 million in fiscal year 2002 and fiscal year 2003. VA provided 
reimbursement for VA/DOD sharing services of $38.6 million in fiscal 
year 2001 and estimates reimbursement of $39.6 million in fiscal year 
2002 and $41.3 in fiscal year 2003. However, VA purchases in facility-
to-facility sharing are difficult to quantify and are quite small. For 
fiscal year 2001, VA purchased $20.4 million from DOD in local sharing 
agreements (about .09 percent of VA's fiscal year 2001 budget).
    VA-DOD cost savings can be documented through joint procurement 
efforts, primarily in pharmaceuticals. As of the end of February 2002, 
there were 54 joint VA/DOD joint contracts for pharmaceuticals; 37 
additional joint contracts are pending award. Sixteen joint contracts 
were not awarded due to the lack of cost savings to the government 
through their award. The total estimated cost savings in fiscal year 
2001 for both Departments from these contracts were $98 million ($80 
million for VA and $18 million for DOD.
    The VA/DOD Executive Council, co-chaired by the VA Under Secretary 
for Health and the Assistant Secretary of Defense for Health Affairs, 
serves as an umbrella organization for coordinating policy decisions 
between the two departments. Last year the Executive Council 
established a new Financial Management Work Group to review and make 
recommendations to reduce financial and billing practice barriers to 
interagency coordination. The Work Group meets regularly and has 
conducted a detailed review of reimbursement policies and practices 
between the VA and DOD. The Financial Management Work Group has 
identified those VA and DOD policies and practices requiring 
clarification or modification to remove reimbursement barriers and 
disincentives and developed recommendations for streamlined financial 
processes and practices.
    One of the identified barriers to increased Departmental 
collaboration, execution of agreements and contracts has been the 
negotiation process, more specifically pricing issues. During the 
1990's, flexibility was given to VA and DOD personnel to establish 
locally developed rates for medical sharing agreements. This resulted 
in the proliferation of rate setting mechanisms, as well as many 
independent rate structures for these agreements. To streamline 
practices between the two Departments the Financial Management Work 
Group is exploring development of a single payment schedule for 
exchange of services between the two departments. The discussions 
center on developing a national pricing methodology that would be 
regionally adjusted. The Work Group recently reported its progress to 
the VA/DOD Executive Council and the Joint Executive Councils meeting 
hosted by the VA Deputy Secretary and the DOD Under Secretary for 
Personnel and Readiness. A final recommendation on the policy and 
proposed methodology is anticipated in late 2002.
    As you know, President Bush established the President's Task Force 
to Improve Health Care Delivery for Our Nation's Veterans (PTF) by 
Executive Order 13214 on May 28, 2001. The PTF is comprised of 15 
commissioners led by two co-chairs. Support includes a professional 
staff headed by an Executive Director and the PTF has established seven 
work groups to review specific areas of interest. VA provides staff, 
administrative and budgetary support to the PTF, as well as requested 
briefings and information. Both VA and DOD have provided detailees as 
subject matter expert staff to the PTF.
    The PTF conducts monthly open meetings attended by the Task Force 
members and the public. VA and DOD have appeared before the PTF and 
have presented overview briefings on the VA and DOD health care 
delivery systems benefits packages and the DOD TRICARE program. The VA/
DOD Executive Council Work Group Co-Chairs have provided the PTF staff 
with joint briefings on work group activities as requested. PTF members 
and/or staff have toured VA/DOD joint venture facilities in Alaska, 
Nevada, New Mexico, and Florida and plan multiple site visits around 
the country in the coming months.
                              homelessness
    Question. I do not understand why there exists a significant 
population of homeless veterans on our streets. To address 
homelessness, I have been working with a number of my Senate 
colleagues, such as Senator Specter on the VA committee, to develop a 
more holistic Federal approach to prevent and end homelessness. One of 
the group's recommendations that was recently enacted was the 
reactivation and funding of the Interagency Council on the Homeless. I 
am please that Secretaries Martinez and Thompson are participating in 
this council but it is important that other agencies, including VA play 
a active role. Can you tell me how VA plans to participate in this 
Council? HUD Secretary Martinez is the current chair but the position 
rotates annually. Is this something that you would be interested in 
chairing?
    Answer. On December 21, 2002 President Bush signed the 
Comprehensive Homeless Assistance Act of 2001 into law (Public Law 107-
95). Among the provisions this law calls upon VA, Housing and Urban 
Development (HUD) and the Department of Labor (DoL) to take cooperative 
actions to more fully address the problems of homelessness among 
veterans.
    Section 11 mandates that the Interagency Council on Homeless (ICH) 
..''shall meet at the call of its Chairperson or a majority of members, 
but not less often than annually.'' The ICH held its first meeting and 
HUD Secretary Mel Martinez was elected Chair, Health and Human Services 
(HHS) Secretary Tommy Thompson was elected Vice Chair and Mr. Phillip 
Mangano was selected as ICH Executive Director. I look forward to 
working on the ICH and plan to both actively participate and will take 
a leadership role with its work.
    I would like to inform you that on April 9-11, 2002 VA-HHS and HUD 
co-sponsored a policy academy for State-level planning teams to improve 
coordination within State planning efforts to end chronic homelessness. 
This type of effort is exactly the kind of joint Federal and State 
coordination that will make meaningful progress toward ending chronic 
homelessness in America. VA will continue to support these types of 
activities that will improve coordination of service delivery.
    Public Law 107-95 also creates a fifteen member homeless advisory 
committee to provide recommendations to the Secretary of Veterans 
Affairs. I have appointed the committee members and we expect that 
committee to hold its first meeting in June, 2002. In addition, ex-
officio members from the Departments of Defense, Labor, Housing and 
Urban Development, and Health and Human Services will actively 
participate. I am extremely pleased that these efforts, along with the 
tens of thousands that receive medical care and benefits from my 
Department is making a real difference in the lives of veterans and 
their family members.
           veterans equitable resource allocation (``vera'')
    Question. GAO recently reported that VA can make several 
improvements to its funding allocation to its networks. Although you 
concurred with GAO's findings and recommendations, it was unclear when 
you would make some of these improvements. Can you give me a sense of 
what changes to VERA you are considering and when they might go into 
effect? I would especially like to hear if you plan to include Priority 
7s in the formula and how you plan to address GAO's concerns about the 
use of the National Reserve Fund to supplement networks' funding 
allocation.
    Answer. The VERA Patient Classification Workgroup is currently 
reviewing the following potential VERA refinements for fiscal year 2003 
implementation and beyond:
  --Inclusion of Priority 7c veterans in the Basic Vested Care 
        component of VERA,
  --Use of multiple pricing groups, expanding from 3 to 10 price 
        groups,
  --Use most recent 1 year workload versus 3 years for Basic Care and 5 
        years for Complex Care,
  --Update the fiscal year 1995 allocation split between Basic and 
        Complex Care Price Groups to reflect changes in the 
        distribution of actual costs between the two groups,
  --Use of reinsurance threshold for high cost patients, and
  --Use of Diagnostic Cost Groups with reinsurance threshold and 
        Complex Care flags.
    The workgroup is expected to evaluate the above issues and complete 
its recommendations for refinements to the fiscal year 2003 VERA 
methodology for review by the VHA Policy Board by July 2002.
    Each year since fiscal year 1999, a supplemental funding process 
has adjusted VERA allocations. The need for adjustments to the VERA 
model does not necessarily mean that the model is flawed or that a 
particular VISN is inefficient or mismanaged. This does not mean that 
incentives to improve do not exist, however; a VISN could be very 
effectively managed but still require a VERA adjustment because of one 
or more factors. The reasons for the supplemental funding adjustments 
vary by network. However, some of the factors involved include: Amount 
of VHA budget relative to its workload; policy changes in the VERA 
model, workload changes in the VERA model, and variation in actual 
budget year execution from planning estimates for: (1) other revenue 
from 1st and 3rd party health insurance collections, (2) other 
anticipated reimbursements, (3) projected workload changes and 
estimated expenditure, and fixed infrastructure costs that cannot be 
changed in the short-term.
    Additionally, during the course of the fiscal year, VHA reviews the 
status of each network in terms of its projected workload and revenues; 
including VERA, 1st and 3rd party collections, and reimbursements; 
relative to actual and projected workload and expenses.
    Over the course of this year, and the next 5 years, the refinements 
to VERA should respond to various stakeholder concerns; be more 
consistent with enrollment policy; improve an existing system that is 
widely understood and independently validated; and continue to tie 
resources to clinical performance (i.e., patient workload). VHA is 
committed to ensuring that efficiently managed networks are not 
disadvantaged as a result of anticipated VERA changes and those that 
are not as efficiently managed will improve over time.
                           claims processing
    Question. Over the past 2 years, VA has hired hundreds of new staff 
to improve the processing of claims benefits. But, despite the new 
staff, VA still projects the average number of days to process claims 
to increase from 181 days in 2001 to 208 days in 2002. Can you explain 
why your projection is expected to increase?
    Answer. The primary reason for the increase in the average number 
of days to process claims is a significant increase in the volume of 
incoming work. The increased volume is attributed to the following 
factors:
  --The review of more than 98,000 previously-denied cases, as well as 
        230,000 claims in our pending inventory to ensure compliance 
        with the Veterans Claims Assistance Act (VCAA).
  --VA's expanded outreach efforts to separating service members 
        (Benefits Delivery at Discharge initiative).
  --Receipt of 66,000 Type 2 diabetes claims based on exposure to Agent 
        Orange.
  --The requirement to review 13,000 previously-adjudicated diabetes 
        claims under the Nehmer stipulation. (In the case of Nehmer v. 
        VA, plaintiffs' attorneys and VA agreed, in a 1991 Stipulation 
        and Order, on a process for applying an earlier than usual 
        effective date for certain claims for benefits based on Agent 
        Orange exposure. As a result of court decisions in the Nehmer 
        case, VA is required to re-adjudicate over 13,000 diabetes 
        claims.)
    All of the VCAA claims have now been added to the inventory. 
Following the initial surge of Type 2 Diabetes claims, the incoming 
volume of Diabetes claims is expected to taper off. We have also 
completed a significant portion of the Nehmer reviews.
    At the same time, the aggressive steps we have taken to increase 
rating production have had a positive result. In the latter months of 
fiscal year 2001 and into this year, production of rating decisions 
significantly increased--which is the key to reducing the claims 
backlog and improving the timeliness of our decisions. From October 
2001 through February 2002, VBA decided over 294,000 cases for a 5-
month average of 58,800. This represents a 47 percent increase over 
fiscal year 2001 production levels. We expect our production to 
continue to increase as many of our recently hired employees gain 
additional experience and we begin to implement the recommendations of 
the Claims Processing Task Force.
    We believe our increased production levels and the Task Force 
initiatives will now enable us to make major inroads into the pending 
inventory. Our goal is to reduce the pending rating inventory to 
315,000 claims by the end of this year. Even though we project major 
reductions in our pending inventory, the average days to complete will 
continue to increase as we focus on completing the oldest claims in our 
inventory.
    Question. Do you believe that VBA has enough staff or do you 
anticipate more hiring in the next few years?
    Answer. VBA secured funding during fiscal year 2001 to support the 
hiring and training of more than 1,000 new employees. The addition of 
this many employees in such a short period of time was critical to the 
Administration's ability to manage the increased workloads resulting 
from the Veterans Claims Assistance Act and the addition of Type 2 
diabetes to the list of Agent Orange presumptive conditions. A hiring 
initiative of this magnitude strains VBA's training infrastructure and 
places a burden on its core of senior-level field employees.
    VBA must now continue to focus on maximizing the impact of this 
hiring and ensure employee retention. As these recent hires are 
assimilated into the organization and gain experience, we fully expect 
these employees to make a significant contribution toward achievement 
of our claims processing goals. Essentially, this is a period of 
stabilization as VBA assesses the recent hiring and training of the new 
employees and implements the Task Force recommendations. Once we 
achieve a more stable situation, we will be able to make a reasoned 
assessment of our future staffing needs.
    However, we do know that our hiring and training will continue 
based on the large numbers of decision-makers eligible to retire over 
the next few years. Therefore, although our fiscal year 2002 and fiscal 
year 2003 budgets maintain relatively stable staffing levels, our plans 
call for significant hiring to replace losses due to retirement and 
other factors. Even with our aggressive hiring over the past 2 years, 
26 percent of VBA's current workforce (nearly 3,350 employees) are now 
eligible or will be eligible to retire in the next 3 years. Based on 
experience, we know that at least 25 percent of those eligible to 
retire will do so, and that a certain percentage of non-eligible 
personnel will leave the Department as well. These figures demonstrate 
how critical our succession planning efforts remain.
             physicians pay and medical school affiliations
    Question. With changes being considered for physicians pay in order 
to recruit and retain these professionals to meet the health care needs 
of veterans, how does the dual compensation of many of these physicians 
by the VA and the universities affect the achievement of VA's health 
care mission? As you prepare a legislative proposal for physicians pay, 
are there any changes you are considering that might affect this 
relationship?
    Answer. The working relationship between the Department and our 
university affiliates is a close one, resulting in numerous benefits to 
VA and its veterans, as well as the universities. Among the advantages 
that VA derives are the exposure to and the availability of the latest 
developments and innovations in health care treatments, technology, 
medical research, and procedures. The compensation that physicians 
receive for their work as faculty appointments is fair compensation for 
their duties in resident education and supervision, and assists VA in 
offering competitive salaries, as well as a recruitment tool to attract 
those professionals with an interest in academic medicine and teaching.
    At the same time, VA is aware of the potential for divided 
loyalties, or at least the perception that VA's interests are not 
paramount. The affiliation relationship is indeed a matter for review 
and consideration in developing a legislative proposal. If physicians 
are not able to receive compensation from the universities, VA must be 
able to offer significantly higher salaries in order to recruit and 
retain high quality clinicians, teachers, and leaders in many 
locations.
                           homeland security
    Question. What preparedness initiatives are underway and how much 
do you expect VA to spend in fiscal year 2002 and 2003 for these 
initiatives? Do you expect to receive any funds from HHS or FEMA? How 
much money do you need to address adequately VA's homeland security 
needs?
    Answer. Based on recommendations contained in the Preparedness 
Review Working Group report, the Department is pursuing the following 
critical initiatives:
  --Pharmaceutical and medical supply caches
  --Personal Protective Equipment and training for VA medical centers
  --Education, training and exercises for staff to respond to WMD 
        attack
  --Upgrade and train VA security forces
  --Establish a centralized Incident Reporting Center
  --Upgrade and test back up systems of Veterans Benefits 
        Administration's three technical centers and upgrade 
        communications
  --Establish mirror ITSS server farm to maintain mission readiness
  --Establish an Office of Operations, Security and Preparedness to 
        coordinate Departmental emergency preparedness programs
  --Plan to replicate VBA IT infrastructure
  --Upgrade VA primary continuity of operations site
  --Develop web-based tracking system and establish 1-800 number for 
        information on location of military patients
  --Develop web site or toll free number for referral of severely 
        disabled service members to Vocational Rehab & Employment 
        Services
    VA will be spending $54.54 million in fiscal year 2002. We have 
projected funding requirements of $92 million for fiscal year 2003. 
VA's fiscal year 2003 Budget Request includes $55 million for Emergency 
Preparedness in Medical Care. VA has been meeting with officials at HHS 
and will meet with FEMA officials to brief them on VA emergency 
preparedness capabilities.
                      intellectual property rights
    Question. What is the status of the agreements being reached with 
medical schools? How many are there? Are they in compliance with the 
law (Bayh-Dole Act)? Will these be put into place with all schools?
    Answer. VA continues to seek Cooperative Technology Administration 
Agreements (CTAA) with its affiliated universities. These agreements 
permit co-ownership between VA and its affiliates for inventions 
resulting from research that used VA assets (appropriated dollars, 
including grants to investigators; salaries; and laboratory 
facilities). VA has established CTAAs with 36 universities since it 
began this initiative less than 2 years ago. These agreements are 
consistent with the requirements of the Bayh-Dole Act. Inventions 
developed through NIH and VA funded research can be assigned jointly to 
VA and the affiliated university.
    VA would prefer to establish CTAAs with all affiliated universities 
because these agreements facilitate local cooperation, strengthen long-
term affiliations, and recognize fairly the VA's role in research and 
innovation. However, these agreements on intellectual property are not 
a required component of the local VA and individual university 
affiliations. The Administration is considering legislation that would 
codify CTTAs between VA and its affiliate universities.
                                 ______
                                 

               Questions Submitted by Senator Tom Harkin

    Question. Mr. Secretary, in the past year all the veterans 
hospitals and clinics in Iowa have either stopped taking new patients 
or had delays of several months in scheduling new appointments. Can you 
tell me the current wait for appointments for new (non-emergent) 
patients at each of Iowa's facilities, the current plans for improving 
the situation, and how long you anticipate waits will be when those 
plans are implemented?
    Answer. To date, the Iowa City VAMC has allocated resources to 
activate plans developed to meet the unprecedented veteran care demand. 
Additional exam room space has been created, providers have been hired, 
and other numerous actions are currently taking place to enable the 
Iowa City VAMC and its associated CBOCs to see the veterans on the 
waiting list as soon as possible. Existing providers have been able to 
absorb additional patients into their current panels. A New Patient 
Clinic at the Iowa City VAMC started seeing patients on January 28, 
2002, where two providers continue to see 16 new patients per day. 
Three new providers have been hired, and recruitment is currently 
ongoing for a fourth provider for Iowa City and/or the CBOCs. 
Contracting options are also being considered at some of the smaller 
CBOCs. We expect all veterans on the waiting list to have an initial 
appointment by the end of September 2002.
    The VA Central Iowa Health Care System Primary Care Service Line 
continues to clinically review new enrollees for emergent and non-
emergent care at the Des Moines, Iowa division. Every effort is made to 
accommodate the veteran's choice for the primary site of care, i.e., a 
community based outpatient clinic (CBOC) or the VA medical facility in 
Des Moines or Knoxville, Iowa. The average wait time for non-emergent 
care at the Des Moines VAMC is 73 days; the Knoxville VAMC is 64 days; 
the Mason City CBOC is 67 days; and the Fort Dodge CBOC is 56 days. 
Primary care staff continues to manage unprecedented growth within 
appropriated funding by evaluating systematic approaches to reduce wait 
times using advanced clinic access' concepts to help predict and 
respond to daily demand for care and by maintaining adequate staffing 
levels through recruitment of employees as vacancies occur and the use 
of Locum Tenens staff when employee recruitment is not successful.
    Question. Can you also compare the waits for appointments for new 
non-emergent patients in each of the VISN's?
    Answer. The following information on new patients is provided for 
each VISN as of February 2002.

----------------------------------------------------------------------------------------------------------------
                                                                     COMBINED
                    VISN                     AUDIOLOGY  CARDIOLOGY  PRIM/CARE   EYE CARE  ORTHOPEDICS   UROLOGY
----------------------------------------------------------------------------------------------------------------
1..........................................       55.2        27.3       53.8       64.1        38.3        34
2..........................................       39.2        30         39.3       48.4        25          39.7
3..........................................       47.5        52.6       57.3       66.4        24.4        36.6
4..........................................       49.5        33.7       55.9      101.7        52          42.8
5..........................................       26.8        27.7       39         43.1        27.6        27.6
6..........................................       30.2        34.4       60.6       95.7        48          51.5
7..........................................       34.2        33.3       65.9       61.8        30.9        36.2
8..........................................      109.4        37.4       67.9       73.8        34.7        47.1
9..........................................       56.8        30.7       81.7       78.8        39.8        49
10.........................................       38.4        32.6       49.1       79.5        41.2        74
11.........................................       43.5        36.4       64.2       72.2        38.1        37
12.........................................       59.6        39.8       55        103.7        31.9        55.3
15.........................................       57.2        30.6       63.3       91.4        50.5        40.5
16.........................................       44          33.1       53.3       70.4        28.5        41
17.........................................       19          38.4       52.8       64.5        58.3        54.4
18.........................................       28.5        41.3       69.6       89.7        50.5        43.5
19.........................................       47          36.1       61.1       57.1        54.2        40.8
20.........................................       34.8        21.4       35         51.7        28.9        55.5
21.........................................       37.2        32.4       55.4       66.4        61.7        40.1
22.........................................       64.2        47.3       43.9       64.1        19.4        60.3
23.........................................       37.6        35         76.8      161.1        45.4        41
Nat'l......................................       53.4        35.7       58.7       77          38.6        45.5
----------------------------------------------------------------------------------------------------------------


    Question. A recent GAO report found that the VERA model is unfairly 
hurting several VISN's and examined the effects of including Priority 7 
patients, using more patient categories, and using more recent data to 
determine the distribution. A RAND study looked at other issues in the 
VERA model. Can you tell me what changes, if any, you plan to make to 
the VERA model in distributing fiscal year 2003 funds? Please also give 
me any analysis the VA has done on how changes to the VERA model would 
affect the distribution of health care funds.
    Answer. The VERA Patient Classification Workgroup is currently 
reviewing the following potential changes to VERA for fiscal year 2003 
that will address the issues raised in the recently completed (February 
2002) GAO evaluation of VERA. The workgroup is expected to finalize its 
recommendations for refinements to the VHA Policy Board by July 2002.
  --Inclusion of Priority 7c veterans in the Basic Vested Care 
        component of VERA
  --Use of multiple VERA pricing groups, i.e., increase from three to 
        10 pricing groups
  --Update the fiscal year 1995 allocation split between Basic and 
        Complex Care Price Groups to reflect changes in the 
        distribution of actual costs between the two groups
  --Change the basis for estimating VERA Basic and Complex Care 
        workload to a 1 year actual compared to the current 3 year for 
        Basic and 5 year forecast for Complex
  --Use of a re-insurance threshold in the VERA methodology for high 
        cost patients
  --Use of Diagnostic Cost Groups (DCGs) with a reinsurance threshold 
        and Complex Care flags
    In addition, the RAND Corporation's VERA study is in its second 
phase and is to be completed by September 2002. The Phase II VERA study 
is addressing a quantitative analysis of the VERA issues identified in 
its Phase I study to include: improved case-mix adjustment; geographic 
differences in prices paid for non-labor inputs and contract labor 
costs; the impact of teaching and research; and, the impact of the 
facilities' physical plants.
    Various VERA simulations for fiscal year 2003 are being estimated 
based on potential refinements. Definitive fiscal year 2003 VERA 
distributions will depend on the Medical Care appropriation passed by 
Congress and the VERA refinements approved by the VHA Policy Board.
    Question. I often hear reports that while the veterans' health 
facilities in Iowa and nearby States have severe shortfalls of funds, 
other areas have (and are keeping) large surpluses. Can you tell me 
what the shortfall or surplus was for each VISN in fiscal year 2001 and 
what is anticipated in fiscal year 2002?
    Answer. To determine whether a network has a shortfall or surplus, 
if any, VHA reviews each network's financial status in terms of 
projected revenues including VERA, 1st and 3rd party collections and 
reimbursements, relative to actual and projected workload and expenses. 
This analysis is what drives the VERA adjustment process. In fiscal 
year 2002, as a result of this process, the five networks received a 
VERA adjustment (supplemental): VISNs #1, #3, #12, #13 and #14 (VISN# 
13 and VISN #14 are now VISN #23).
    The ``Summary of the VERA Adjustments, fiscal year 1999-fiscal year 
2002'' table indicates Iowa's network (previously VISN #14; now VISN 
#23) received supplemental funding in each of the past 3 fiscal years.

   SUMMARY OF THE VERA ADJUSTMENTS, FISCAL YEAR 1999-FISCAL YEAR 2002
                          [Dollars in millions]
------------------------------------------------------------------------
                                                  Fiscal year
VISN               Name              -----------------------------------
                                        1999     2000     2001     2002
------------------------------------------------------------------------
   8 Bay Pines, FL                     $4.0  .......  .......  .......
   9 Nashville, TN                      5.0  .......  .......  .......
   3 Bronx, NY                      .......    $66.2    $73.8   $128.5
  13 Minneapolis, MN                .......     14.7     44.7     43.9
  14 Lincoln, NE                    .......      9.8     48.3     32.9
   1 Boston, MA                     .......  .......     53.2     41.3
  12 Chicago, IL                    .......  .......  .......     20.8
                                   -------------------------------------
           Total                        9.0     90.7    220.0    267.4
                                   =====================================
     Percent of Total System-Wide       0.1      0.5      1.2      1.5
      Allocation
------------------------------------------------------------------------


    The VERA methodology is workload driven and networks receive 
funding allocations commensurate with three workload components, i.e., 
Basic Vested Care, Basic Non-Vested Care, and Complex Care. A Network's 
total revenues include VERA distributions derived from the Medical Care 
appropriation, 1st and 3rd party health insurance collections, and 
other anticipated reimbursements. A network can retain all collections 
and reimbursements, and has the incentive to increase non-appropriated 
revenues each year. As shown in the fiscal year 1996-fiscal year 2002 
VERA Allocations with Adjustments and Estimated Receipts'' table, VISNs 
#13 and #14, now VISN #23, are rated at about the national average 
increase for the period fiscal year 1996-fiscal year 2002. The national 
average increase of VERA allocations with 

adjustments and estimated receipts for fiscal year 1996-fiscal year 
2002 is 32.89 percent; VISN 13 had a 32.78 percent increase and VISN 14 
had a 29.52 percent increase.

                                              TABLE 20: FISCAL YEAR 1996--FISCAL YEAR 2002 VERA ALLOCATIONS WITH AdJUSTMENTS AND ESTIMATED RECEIPTS
                                                                                      [Dollars in millions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Fiscal year   Fiscal    Fiscal    Fiscal    Fiscal    Fiscal    Fiscal                                 Percent Changes
                                                1996       year      year      year      year      year      year   ----------------------------------------------------------------------------
VISN                 Network                Allocations    1997      1998      1999      2000      2001      2002      Fiscal     Fiscal     Fiscal     Fiscal     Fiscal     Fiscal     Fiscal
                                                And      VERA and  VERA and  VERA and  VERA and  VERA and  VERA and  year 1996- year 1997- year 1998- year 1999- year 2000- year 2001- year 1996-
                                              Receipts   Receipts  Receipts  Receipts  Receipts  Receipts  Receipts     1997       1998       1999       2000       2001       2002       2002
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   1Boston                                     $856        $848      $854      $821      $853      $936      $965     -1.02       0.78      -3.89       3.91       9.72       3.09      12.68
   2Albany                                      438         435       441       431       478       516       527     -0.68       1.32      -2.12      10.81       7.94       2.18      20.38
   3Bronx                                     1,024       1,019     1,021       994     1,010     1,038     1,094     -0.48       0.16      -2.61       1.57       2.84       5.38       6.87
   4Pittsburgh                                  776         781       819       828       901       988     1,004      0.53       4.85       1.21       8.72       9.71       1.61      29.31
   5Baltimore                                   426         444       484       489       527       575       590      4.21       9.00       1.15       7.74       9.17       2.48      38.48
   6Durham                                      687         713       749       754       828       893       924      3.68       5.12       0.67       9.77       7.88       3.50      34.49
   7Atlanta                                     781         819       896       922       983     1,057     1,113      4.54       9.83       2.88       6.62       7.49       5.27      42.52
   8Bay Pines                                   962       1,021     1,113     1,161     1,339     1,427     1,535      6.06       9.03       4.34      15.34       6.56       7.59      59.54
   9Nashville                                   691         703       741       746       811       857       897      1.76       5.37       0.69       8.74       5.58       4.76      29.86
  10Cincinnati                                  513         533       558       574       639       682       717      3.86       4.78       2.95      11.32       6.66       5.14      39.87
  11Ann Arbor                                   656         659       665       687       726       794       805      0.39       0.97       3.36       5.58       9.38       1.43      22.72
  12Chicago                                     839         832       840       820       868       928       948     -0.78       0.91      -2.38       5.87       6.95       2.13      13.02
  13Minneapolis                                 420         428       443       455       474       536       557      1.96       3.43       2.69       4.17      13.28       3.91      32.78
  14Lincoln                                     293         290       294       301       324       374       380     -1.18       1.35       2.59       7.64      15.50       1.39      29.52
  15Kansas City                                 587         618       645       635       669       717       760      5.25       4.41      -1.56       5.36       7.23       6.00      29.54
  16Jackson                                   1,077       1,139     1,245     1,283     1,434     1,497     1,555      5.76       9.30       3.08      11.73       4.39       3.90      44.40
  17Dallas                                      592         630       688       687       774       831       883      6.32       9.17      -0.13      12.72       7.39       6.21      49.04
  18Phoenix                                     495         528       579       597       715       752       766      6.58       9.67       3.16      19.64       5.25       1.84      54.62
  19Denver                                      368         386       412       407       449       488       512      4.82       6.79      -1.27      10.28       8.70       4.95      39.05
  20Portland                                    589         626       681       704       789       834       870      6.38       8.64       3.51      11.95       5.73       4.36      47.77
  21San Francisco                               690         724       755       773       850       929       977      4.93       4.29       2.29      10.00       9.35       5.13      41.54
  22Long Beach                                  903         921       966       957     1,000     1,076     1,106      2.00       4.88      -0.95       4.51       7.60       2.84      22.54
                                         -------------------------------------------------------------------------------------------------------------------------------------------------------
          VHA Totals                         14,664      15,092    15,886    16,028    17,439    18,726    19,487      2.92       5.27       0.89       8.81       7.38       4.06      32.89
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Note: The fiscal year 1998 MCCF totals include fiscal year 1997 4th quarter collections. The fiscal year 2002 MCCF and Reimbursement figures represent projected collections. The numbers
      may not add due to rounding. Fiscal year 1999 includes VERA plus 20 million earmarked by the Congressional Appropriations Conference Committee for Network 3. Fiscal year 1999 includes
      VERA plus adjustments for newly decentralized programs for networks which exceed the 5 percent limitation. Fiscal year 1998, fiscal year 1999, fiscal year 2000 and fiscal year 2001
      include supplemental funding adjustments. Fiscal year 2000 figures have been adjusted to reflect the centralized funding of Prosthetics for fiscal year 2001. Fiscal year 2002 includes
      the VERA adjustments for 5 networks. Fiscal year 2001 figures have also been adjusted to reflect the rescission (43 million).


    Question. According to press reports last year, the VA health care 
system was short $400 million for fiscal year 2002. President Bush 
reportedly promised to make up some of that shortfall, but has not sent 
us a request for additional funds or reprogramming of funds. Can you 
tell me how large is the current estimated shortfall, whether you will 
be requesting additional funds for fiscal year 2002, how those funds 
will be distributed, and how else you will make up the shortfall?
    Answer. Based on the continuation of full enrollment, VHA 
determined there would be a shortage of over $400 million in fiscal 
year 2002, after available resources were subtracted from projected 
expenditures. By taking additional management actions that will lessen 
expenditures, it is estimated that the shortage will be reduced to $142 
million, which is the amount related to the decision to continue 
enrolling new Priority 7 veterans. To make up the difference between 
any shortfall and the anticipated supplemental, VHA anticipates savings 
from a multi-year effort to improve standardization and compliance in 
the procurement of equipment, pharmacy, and medical supplies. Other 
savings are expected from program efficiencies related to new criteria 
to assess community-based outpatient clinics and centrally managed 
programs.
    VA made a request to the Administration for supplemental funding of 
$142 million that was forwarded to Congress in on March 21, 2002. VA 
can provide health care to an estimated 143,039 Priority 7 new 
enrollees during fiscal year 2002 with $142 million in supplemental 
funding. This will ensure VA has health care funding consistent with 
the President's decision to keep VA veterans' enrollment open for all 
veteran health care. The $142 million will be distributed based on each 
VISN's updated Priority 7 Basic Vested workload.
    Question. Many of our veterans seek care at VA hospitals because of 
the excellent pharmacy benefits, sometimes even if they have another 
primary care physician. As you know, our elderly on Medicare do not 
have coverage for prescription drugs. Would it relieve some of the 
burden on the VA if Congress passed a real prescription drug benefit in 
Medicare?
    Answer. Providing a prescription drug benefit for Medicare 
beneficiaries would certainly have some impact on the VA, however exact 
impact is currently unknown. Veterans come to the VA for a number of 
reasons besides the fact that VA provides services that aren't covered 
by Medicare. VA health care integrates a full continuum of care for 
veterans of all ages, including mental health services and prescription 
drugs. VA also emphasizes preventive care and leads the nation in many 
measures of performance in this regard. VA also provides many services 
that are tailored to meet the needs of service-disabled veterans. So, 
in addition to the economic factors, we believe many patients come to 
VA because of the quality of care that we provide.
                                 ______
                                 

               Questions Submitted by Senator Ted Stevens

    Question. First, to qualify for the veterans home purchase rate 
reduction, a veteran must have left active duty military service prior 
to 1977. This provision cuts off many younger veterans who served in 
the Vietnam and Persian Gulf Wars and other conflicts such as Granada 
and Panama. In addition, I am told the provision will lapse in 2007 so 
that many veterans will no longer be eligible for the program after 
2007 unless they have been out of the service for more than 30 years. 
This 30-year limitation needs to be removed so that the five States 
currently participating in the program can serve more veterans and to 
end this discrimination against younger veterans. Can we get your 
support in trying to rectify this discriminatory treatment for younger 
veterans who need the one percent rate reduction allowed under the 
program to be able to afford homes?
    Answer. We are aware that the basic criteria for Alaska Housing 
Finance Corporation (AHFC) Veterans Mortgage Program (VMP) are that the 
veteran must have entered the service prior to 1977 and cannot have 
been discharged for more than 30 years. AHFC requires that when 
veterans apply to them for a loan, they submit a VA issued Certificate 
of Eligibility along with their DD214 so that it can be determined when 
they went into the military and what date they were discharged.
    However, this program is administered by AHFC, not VA. Therefore, 
we have no authority over the provisions of the program.
    Question. My next question deals more directly with Alaska. Alaska 
will soon reach the maximum amount it can bond for under the veterans 
rate reduction program based on both State and Federal law. We need the 
Federal cap lifted so that we can serve more veterans in our State. 
Alaska State officials tell me that the issue of the State's internal 
bonding limit will go before the voters of Alaska this fall as a bond 
vote to increase the State authorization level. However, we also need 
the overall Federal cap lifted. Alaska has the most veterans per capita 
of any State and we are competing with huge States like California and 
Texas for these limited dollars. Can we expect your support in trying 
to raise the amounts that can be bonded for under this program?
    Answer. VA has no knowledge of or authority with respect to a 
Federal cap that may exist on bond issues.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

    Question. There is growing concern in South Dakota about budget 
shortfalls in the VA for fiscal year 2002. While there have been 
attempts to address the budget shortfall through management 
efficiencies, it appears very unlikely these steps will be enough to 
address the budget deficit. With this in mind, will there be an 
Administration request for a VA health care supplemental for fiscal 
year 2002? If so, how much will the Administration request? Will this 
request cover the entire budget shortfall in States like South Dakota?
    Answer. When the President made the decision to continue open 
enrollment, it was understood that adequate funds would be made 
available to support his decision. Therefore, VA made a request to the 
Administration for supplemental funding of $142 million, which was 
forwarded to Congress in on March 21, 2002. VA can provide health care 
to an estimated 143,039 Priority 7 new enrollees during fiscal year 
2002 with $142 million in supplemental funding. This will ensure VA has 
health care funding consistent with the President's decision to keep VA 
veterans' enrollment open for all veteran health care. If received, the 
$142 million will be distributed based on each VISNs updated Priority 
7c Basic Vested workload.
    To make up the difference between any shortfall and the anticipated 
supplemental, VHA anticipates savings from a multi-year effort to 
improve standardization and compliance in the procurement of equipment, 
pharmacy, and medical supplies. Other savings are expected from program 
efficiencies related to new criteria to assess community-based 
outpatient clinics and centrally managed programs. In addition, on 
February 25, 2001, the Acting Under Secretary for Health approved the 
transfer of $162 million of centrally managed program funds for 
distribution to all VISNs. Of this amount, VISN #23 received $7.2 
million (of which old VISN #13 received $4.4 million and old VISN #14 
received $2.8 million in additional funds).
    Question. I am very concerned that efforts to address the budget 
shortfall within VISN 23 is starting to have a negative impact on 
patient care. For example, there are ongoing discussions regarding the 
surgical unit at the Hot Springs VA Medical Center. The Hot Springs 
surgical unit has had difficulty recruiting and retaining professional 
staff. One of the proposals under consideration is to close the Hot 
Springs surgical unit to all but minor, outpatient procedures and move 
the remaining surgeries to Ft. Meade VA Medical Center. Can you update 
me on the current situation with the Hot Springs VAMC surgical unit and 
can you offer solutions as to how we can keep the surgical unit fully 
operational?
    Answer. The surgical unit at the VA Black Hills Health Care System 
(BHHCS), Hot Springs division, is currently short two nurses; one 
operating room nurse and one nurse manager. The VA BHHCS has developed 
a very aggressive and creative plan to fill these positions. In 
addition to the typical markets where the VA Medical Center in Hot 
Springs normally recruits nurses, the facility has expanded its search 
for nurses to wide ranging markets such as Sioux Falls, South Dakota; 
Omaha, Nebraska; Denver, Colorado; and Minneapolis, Minnesota. In 
addition, the VA Black Hills HCS is offering a $5,000 sign-on bonus for 
the nurse manager and a $2,000 sign-on bonus for the OR nurses. VA 
Employees are being offered a $500 ``finders fee'' if they assist in 
the successful recruitment of operating room personnel at the VA Hot 
Springs medical facility. The community of Hot Springs has also been 
helpful in the search for VA staff. The Job Service office is engaged 
in local (Rapid City area) recruitment at no cost to VA. Every effort 
is being made to assure uninterrupted surgical service at the Hot 
Springs VAMC and VA officials are optimistic that the positions will be 
successfully recruited.
    Question. As you know, the Independent Budget for fiscal year 2003 
calls for approximately $1.7 billion more for VA health care needs than 
what is included in the President's request. Will the President's 
fiscal year 2003 request for VA health care be sufficient to fund all 
VA facilities and functions? If not, how much do you estimate the VA 
will be short for fiscal year 2003?
    Answer. There are many variables that impact health care in general 
(new diseases, new treatments, inflation changes, etc.) and that impact 
veterans use of VA health care (other health care alternatives, 
availability and accessibility of VA services, etc.)., it is very 
difficult to be certain that the fiscal year 2003 budget will be 
adequate to support the health care demand of all enrollees. However, 
this budget incorporates a ``Base Health Care Demand Adjustment'' 
initiative that identifies and requests the resources required to 
support an actuary estimate of the demand and case mix changes needed 
for all seven patient priorities in fiscal year 2003. Based on this 
initiative, this year's budget estimates should better account for the 
relationship of planned workload requirements and the full funding 
needed.
    Question. As you and I have discussed, there have been several 
attempts to cap enrollment at South Dakota CBOCs in the last few 
months. Can you assure me these clinics will stay open and available to 
all veterans who need service?
    Answer. Since 1995, VA has activated over 700 new CBOCs to bring 
health care closer to veterans' homes. Recent evaluations show CBOCs 
provide high quality heath care and are effective in improving access 
to VA services. Since their inception CBOCs have been very popular with 
veterans. The number of CBOCs in VISN 23 totals 35 and to meet the 
growing number of veterans seeking care at a CBOC, VISN 23 has steadily 
increased capacity. However the number of new veterans seeking VA care 
at CBOCs in VISN 23 has exceeded expectations, which has resulted in 
some CBOCs reaching capacity. Following is a status on CBOC capacity in 
South Dakota, which is managed by the VA Black Hills Health Care System 
(BHHCS). CBOCs in Pierre, Winner, Rosebud, and Eagle Butte are open to 
new enrollments and will continue to enroll veterans as long as there 
is capacity. The CBOC in Rapid City, which is staffed by VA with two 
physician and two mid-level providers has approximately 2,615 veterans 
enrolled. One physician provider is not able to see patients at this 
time and this has resulted in the clinic being at capacity for new 
patients. Veterans interested in enrolling for VA care at the Rapid 
City CBOC are being referred to the Fort Meade or Hot Springs VA 
Medical Centers. VA BHHCS is working on plans to resolve the physician 
issue at the Rapid City CBOC so that enrollment can be resumed.
    Question. What was the purpose of the merger between VISN 13 and 
VISN 14? What will be the impact on patient care? Will there be any 
budgetary savings? If so, how much?
    Answer. The merger of the two networks should be transparent to 
veterans. Each medical facility within the Veterans Integrated Service 
Network (VISN 23) fulfills important missions for VA and there are no 
plans to reduce or eliminate VA programs or services in any of the 
States served by the network. The new Network will continue to face a 
number of challenges including managing unprecedented growth within 
appropriated funding; exercising stewardship of all resources; 
increasing market share; continuously improving quality of care and 
veteran satisfaction with that care; fully integrating administrative 
and clinical programs and processes; investing in capital improvements 
and information technology; and effectively communicating with veteran 
groups, labor partners, educational affiliates and other stakeholders. 
And when you look at the challenges faced by the two relatively small 
networks, it makes good sense to form one integrated health care 
delivery structure in order to enhance service and improve access 
across the Midwest. Individually the two VISNs excel in many areas; 
both rank high in patient satisfaction; both maintain excellent Joint 
Commission for Accreditation of Health Care Organizations (JCAHO) 
scores; and both are proven strong performers in quality measures. 
Together they share many commonalities. The two VISNs are in close 
geographic proximity and encompass veterans' populations residing in 
largely rural areas. Significant financial challenges and small, 
declining veterans' populations create urgency for improving 
coordination of care and collaboration between health care providers. 
Following are some examples of what we can expect to gain from 
integrating the two Networks.
    Improved Coordination and Collaboration.--The new VISN brings 
together a richer mix of experience and greater flexibility in 
allocating resources. Individually, VISNs 13 and 14 excelled in 
practices which, when shared, will enhance the performance of both 
Networks. For example, VISN 14 excels in the coordination and 
completion of compensation and pension exams. By sharing exemplary 
practices across the Midwest, it is expected that compensation and 
pension exams will be completed in a more timely manner. In mental 
health, we are seeing the benefits of integration by the two mental 
health staffs working together to develop a proposal for establishing a 
Mental Illness Research and Education Center (MIRECC) in VISN 23. In 
prior years, proposals submitted by former VISNs 13 & 14 were not 
approved. The new network, VISN 23, offers the opportunity to study and 
treat a larger veteran population and has improved chances for the 
Network to be selected as a MIRECC. Other areas benefiting from 
combining experience and resources are cardiac services, telephone 
triage, pharmacy formulary and pharmaceutical purchasing, laboratory 
contracting, and the exploration of opportunities for successfully 
managing the large rate of growth in our community based outpatient 
clinics.
    Budget Flexibility.--Combining the budgets of former VISN 13 and 14 
will give VISN 23 greater flexibility in allocating the estimated one 
billion dollars on VA programs and services. There will be 
opportunities to implement management efficiencies and exemplary 
practices by integrating fiscal services, consolidating business 
offices, and materiel service functions, such as contracting, 
logistics, supply, and warehouse functions. An integrated senior 
leadership team will work cooperatively to prioritize and coordinate 
health care programs in order to assure equitable access to care across 
the Midwest. While the merger, in and of itself, will not bring 
financial stability to the Networks, the merger is expected to generate 
cost savings through economies of scales and reduced administrative 
overhead. The estimated $1-6 million saved, over a period of time, will 
be redirected into expanding access and enhancing services for veterans 
throughout the Midwest.
    Quality.--VISNs 13 & 14 are strong performers in quality measures. 
Both demonstrated excellent performance in fiscal year 2001 and ranked 
exceptional within the Veterans Health Administration (VHA) in the 
areas of clinical practice guidelines and 30-day mental health follow-
up scores. Overall inpatient and outpatient satisfaction scores for 
both Networks were among the best in VHA. Network leaders will build on 
these successes and seize opportunities for enhancing quality, 
expanding access, gaining efficiencies and improving veteran 
satisfaction in areas that are less than exceptional.
    Question. Veterans in my State are very concerned about the current 
eligibility standards for Priority 7 veterans. Priority 7 veterans are 
those who lack a disability related to their military service or whose 
income is higher than the current VA eligibility standards. The current 
income standard is $24,000 annually for a single, or $28,000 for a 
couple, and applies to 40 percent of the veterans in South Dakota. 
Assets, such as land, are included in the calculation of income. This 
is a concern for many farmers and ranchers in my State who may own land 
worth a considerable amount, but whose actual yearly income is well 
below the VA threshold. The Administration's proposal to impose a 
$1,500 co-pay on all Priority 7 veterans would be particularly onerous 
on these veterans. Do you support changing the law regarding 
eligibility standards for Priority 7 veterans to address this problem?
    Answer. We examined many options for implementing the deductible, 
including the cost impact on Priority 7 veterans. We believe the 
proposal in the President's Budget will ensure that VA will be able to 
provide high-quality care to our nation's veterans in the most cost-
effective manner.
                                 ______
                                 

            Questions Submitted by Senator Pete V. Domenici

                veterans department and dod coordination
    Question. According to the President's budget submission, the 
Veterans and Defense Departments historically has shown little 
cooperation between these departments. In the status report on selected 
programs for the Defense Department, DOD received an ``ineffective'' 
rating in coordination with the Veteran's Affairs Department.
    Veterans switch back and forth between VA and DOD Hospitals with 
Doctors not informed as to what care the patient received at the other 
hospital. The president's budget submission suggests that 
communications between the VA and DOD Hospitals would improve the 
quality of care veterans receive.
    In what areas, other than medical care, would the two departments 
benefit from sharing resources? In areas where the VA & DOD has been 
sharing resources, what have the results been in terms of savings to 
the budget?
    Answer. Medical Care.--Section 3(e) of the VA-DOD Health Resources 
Sharing Act (38 USC 8111) requires that ``any funds received through 
earnings in VA-DOD sharing agreements shall be credited to funds that 
have been allotted to the facility that provided the care or 
services.'' VA has followed this policy since the law was implemented. 
The law provides an incentive for VA facilities to enter into 
agreements with DOD and has benefited veterans by allowing facilities 
to provide services to veterans that would not otherwise have been 
available.
    While the primary focus of the law is to allow facilities to expand 
services for its beneficiaries, cost savings (cost avoidance) to the 
budget do occur, especially in the purchase of services. By spending 
less on goods and services facilities have more money available. 
However, VA purchases in facility-to-facility sharing are difficult to 
quantify and are quite small. For fiscal year 2001, VA purchased $20.4 
million from DOD in local sharing agreements.
    VA-DOD cost savings can be documented through joint procurement 
efforts, primarily in pharmaceuticals. As of the end of February 2002, 
there were 54 joint VA-DOD joint contracts for pharmaceuticals; 37 
additional joint contracts are pending award. Sixteen joint contracts 
were not awarded due to the lack of cost savings to the government 
through their award. The total estimated cost savings in fiscal year 
2001 for both Departments from these contracts were $98.3 million 
($80.1 million for VA and $18.2 million for DOD).
    Veterans Benefits Administration.--In an effort to explore 
opportunities and common areas of interest, the Acting Under Secretary 
for Benefits recently initiated dialogue with the Assistant Secretary 
of Defense for Force Management Policy to create a VA/DOD Joint 
Benefits Council. As planned, the council will foster a formal 
partnership between our respective departments and serve as a standing 
forum for expanding interagency collaboration to ultimately improve the 
delivery of benefit services to veterans and service members. 
Preliminarily, expanded data and information sharing, refinement of 
transition/separation procedures and protocols, and collaborative 
pursuit of improved access to military records have been identified as 
``top tier'' objectives.
    There are no data presently available to quantify any budget 
savings which may have been realized by VBA as a result of our expanded 
partnership with DOD. We believe it would be extremely difficult, if 
not impossible, to identify and track such savings. However, we can 
assure you that efficiencies resulting from continued and enhanced 
collaboration between VA and DOD would be applied to further improve 
the claims process.
    National Cemetery Administration.--The National Cemetery 
Administration (NCA) purchases headstones and markers to mark the 
graves of veterans, not only in VA national cemeteries, but also in all 
other Federal national cemeteries, State veterans cemeteries, and when 
requested, in private cemeteries. NCA has an automated, on-line system 
for ordering headstones and markers. The Department of the Army's 
Arlington National Cemetery also orders its headstones and markers 
through this on-line, automated system. This sharing of resources has 
resulted in increased efficiencies in the ordering process.
    Question. What steps would need to be taken, with respect to 
information technology, in order to break down the wall that exists 
between the two departments?
    Answer. There are three principle areas where effective data 
exchange between the Department of Defense (DOD) and the Department of 
Veterans Affairs (VA) would significantly improve service for our 
nation's military personnel and our veterans:
  --Military personnel information provided to VA by DOD;
  --Military eligibility and enrollment data provided to VA by DOD; 
        and,
  -- Exchange of medical information between VA and DOD.
    Efforts are underway between the two Departments to address these 
areas. Additionally, DOD and VA have established an Executive Steering 
Committee (ESC) co-chaired by the VA's Deputy Secretary and DOD's Under 
Secretary for Personnel and Readiness. This ESC is addressing not only 
those issues where information technology would help break down 
barriers, but also other areas where both Departments could achieve 
performance improvements, such as reduced cost for bulk purchasing of 
pharmaceuticals. With respect to the three areas where information 
technology could be an enabler, details of efforts that are underway 
are discussed below.
  --DOD is developing the Defense Integrated Military Human Resources 
        System (DIMHRS) as a future replacement for legacy military 
        personnel systems. The Veterans Benefits Administration (VBA) 
        and the Veterans Health Administration (VHA) have provided DOD 
        with functional requirements as part of the design phase of 
        DIMHRS. We will continue to follow up with DOD to ensure data 
        currently received by paper documents is received 
        electronically in the future.
  --As part of the fiscal year 2004 budget formulation process, VA will 
        sponsor a One-VA Eligibility and Enrollment initiative for 
        obtaining necessary data from the DOD Eligibility and 
        Enrollment system called DEERS/RAPIDS. An analysis of 
        alternatives (AOA) will be conducted as part of the budget 
        formulation process. Alternatives to be considered include 
        reusing the DEERS/RAPIDS system to meet VA's eligibility and 
        enrollment requirements, including VA requirements in the 
        DEERS/RAPIDS system so that VA can obtain required data 
        directly from DOD, implementing a Commercial Off the Shelf 
        (COTS) Customer Relations Management (CRM) software package 
        that would interface with DEERS/RAPIDS, as well as other 
        potential alternatives. The results of the AOA will produce a 
        recommended approach for the fiscal year 2004 budget.
  --VA and DOD have developed the Government Computer Patient Record 
        (GCPR) system that allows VA to have access to clinical data 
        from DOD hospitals. GCPR is in the final stages of testing and 
        we anticipate full fielding of GCPR within VA during the next 
        90 days. GCPR is a one-way interface from DOD to VA. VHA is 
        working with DOD's Health Affairs to determine how to expand 
        this capability for two-way data exchange. A key element of 
        determining the way ahead is in establishing common data 
        definitions between DOD and VA for health data. This work is in 
        process.
    Additionally, VA and DOD have formed a close collaborative 
partnership, under the titles of the Federal Health Information 
Exchange (FHIE) and HealthePeople (Federal), to exchange data and 
develop a common health information infrastructure and architecture 
comprised of standardized data, communications, security, and high 
performance health information systems.
    This two phase effort will exchange patient data and will result in 
computerized health record systems that ensure interoperability with 
DOD's CHCS II and VA's HealtheVet strategy for VistA (HealtheVet-
VistA). The first phase, FHIE, of this plan focuses on DOD providing 
information to VA clinicians and includes the Federal Health 
Information Exchange (FHIE, formerly Government Computer-Based Patient 
Record) effort, already in testing as of the end of calendar year 2001. 
The second phase, HealthePeople (Federal), is a joint VA and DOD effort 
to:
  --Improve sharing of health information,
  --Adopt common standards for architecture, data, communications, 
        security, technology and software,
  --Seek joint procurements and/or building of systems,
  --Seek opportunities for sharing existing systems & technology, and
  --Explore convergence of VA & DOD health information applications 
        consistent with mission requirements.
    Question. When veterans apply for benefits at the VA they must 
submit pages of information on paper, which in many cases are available 
on DOD computers, what steps should be taken so that this information 
would be available electronically to the VA?
    Veterans Health Administration.--When veterans apply for medical 
benefits from VHA, they only need to fill-out the Application for 
Health Benefits, VA Form 10-10EZ. An application can be completed at 
any VA health care facility, community based clinic or on-line at 
http://www.va.gov/. The electronic application has been very well 
received in the veteran community. While some of the information 
required, e.g., basic demographic data would be available from DOD, 
other information, e.g., income, eligibility status would not. In 
addition, VA is working with DOD to examine potential collaborative use 
of DEERS/RAPIDS for VA health, benefits, and other services.
    Veterans Benefits Administration.--Every effort should be made to 
fully leverage the data and technology capabilities of DOD to enhance 
delivery of services to veterans. The availability of accurate military 
service information is critical to accurate and timely VBA eligibility 
determinations and benefit decisions. Current data and information 
exchange processes between VBA and DOD are often fragmented. However, 
improvement efforts are underway. For example, to facilitate the 
automated collection of essential military information, VBA has entered 
into an interagency agreement with the Defense Manpower Data Center to 
establish an electronic exchange of demographic and military history 
data from the Defense Enrollment Eligibility Reporting System (DEERS). 
In addition, VA is working with DOD to examine potential collaborative 
use of DEERS/RAPIDS for VA health, benefits, and other services.
    Question. Of the 1.8 million persons in New Mexico's population, 
veterans make up nearly ten percent of all New Mexicans. We know that 
the average age of these veterans is rising sharply, and that despite 
the expansion program I initiated in 1999 for the use of flat markers 
at Santa Fe National Cemetery, given the current rate of interments, 
the Cemetery will run out of space by 2008.
    Could you provide an update on the planning study that my 
legislation directed the VA to undertake to determine the efficacy of 
establishing a National Cemetery for Veterans in Albuquerque?
    Answer. Section 613 of the Veterans Millennium Health Care and 
Benefits Act of 1999 (Public Law No. 106-117) required the Department 
of Veterans Affairs to contract for an independent demographic study to 
identify those areas of the country with the greatest number of 
veterans that will not have reasonable access to a burial option in a 
national or State veterans cemetery within 75 miles of their residence. 
The report will provide an assessment of the number of additional 
cemeteries needed to ensure that a national or State veterans cemetery 
is within 75 miles of the residence of 90 percent of veterans beginning 
in 2005 and projecting out to 2020.
    The study will address the concerns raised in the Conference Report 
accompanying the fiscal year 2002 appropriations bill for VA. The 
analysis will take into account the future burial needs of veterans 
throughout the United States, including the needs of veterans in the 
area of Albuquerque, as well as all of New Mexico's veterans. The 
Honorable Robin L. Higgins, Under Secretary for Memorial Affairs, has 
met with Congresswoman Heather Wilson regarding this study and will 
continue to work with members of Congress to ensure that the burial 
needs of veterans are met. We anticipate that the final report will be 
completed and delivered to Congress later this spring.
    Question. I have worked very hard to bring more VA clinics to New 
Mexico to meet the blooming health care needs of our veterans. Still, 
our veterans have many pressing health care concerns and they need 
better access to VA facilities. Indeed, the only VA hospital in the 
State is in Albuquerque, yet by land mass, New Mexico is the fifth 
largest State. Geographically, this makes it very difficult on veterans 
who need care.
    The reality is, we need more VA clinics in New Mexico, or a better 
delivery system for providing care to veterans. How will the VA 
approach this problem and enhance the ability of veterans who reside in 
rural areas to more easily access the care they need? Could you provide 
some suggestions specifically tailored to the needs of New Mexico 
veterans on this matter?
    Answer. VHA currently operates 13 Community Based Outpatient 
Clinics (CBOCs) in the State of New Mexico. Present locations include: 
Alamogordo, Artesia, Clovis, Espanola, Farmington, Gallup, Hobbs, Las 
Cruces, Las Vegas, Raton, Santa Fe, Silver City, and Truth or 
Consequences. In addition, two of these sites--Las Vegas and Espanola--
provide services at an additional 10 access points through a 
contractual arrangement. These additional locations include: Chama, 
Coyote, Embudo, La Loma, Penasco, Roy, San Miguel, Springer, Truchas, 
and Wagon Mound. Thus, a total of 23 sites provide veterans in New 
Mexico with convenient, local access to VA outpatient services 
throughout the State. Later this fiscal year, the New Mexico VA Health 
Care System (NMVAHCS) plans to open an additional CBOC in Durango, 
Colorado that will expand service to approximately 1,800 veterans 
residing in Northwestern New Mexico and Southwestern Colorado.
    During the past 5 years, the number of veterans treated in New 
Mexico CBOCs has risen by over 40 percent, from 11,700 unique patients 
in fiscal year 1997 to over 16,500 in fiscal year 2001. The largest 
annual increase (12.1 percent) occurred between fiscal year 2000 and 
fiscal year 2001 with the opening of the Alamogordo and Truth or 
Consequences CBOCs.
    Although there are no plans to open additional CBOCs in fiscal year 
2003, the NMVAHCS has made specific plans to increase the number of 
veterans served in the Silver City CBOC (expanding services to 
accommodate 2,000 patients up from 1,600), in Raton (expanding services 
to accommodate 1,800 patients up from 1,000), and in Gallup (expanding 
services to accommodate 1,800 patients up from 1,000).
    Furthermore, plans are underway to expand the scope of mental 
health services provided in New Mexico CBOCs. Additional resources will 
initially be targeted initially for CBOCs that have an enrollment of at 
least 1,000 veterans and a veteran mental health penetration level of 
less than 10 percent. Mental health services will be expanded at 
Espanola, Gallup, Hobbs, Raton and Silver City. Counseling and 
psychiatric services will be increased to an appropriate level and the 
use of telemedicine and fee basis will also be increased where 
feasible. These actions will enable the network to increase the number 
of days per week that counseling, psycho-social services, and 
psychiatric medication services will be available to New Mexico 
veterans.
    Question. I regularly meet with veterans groups from New Mexico who 
tell me that they are facing a critical direct care shortage. They 
simply cannot find enough nurses or certified nursing assistants to 
meet health care demands. What is your assessment of the root cause of 
this problem?
    Answer. The national nursing shortage stems from a variety of 
factors. In its report of August 2001, VA's Future Nursing Workforce 
Workgroup cited the following factors that contribute to the shortage:
  --A decline in enrollment in schools of nursing.
  --Aging of the nursing workforce (average age nationally, 45.2 years, 
        VA 46 years.).
  --Average age of a new graduate in nursing has climbed to 30.5 in 
        1995--2000 versus 24.3 in 1995 or earlier.
  --Poor image of nursing as a career choice and more career choices 
        for women.
  --Pay inequities.
  --Perceived negative work environments.
  --Inadequate numbers of qualified faculty to educate the numbers of 
        nurses needed.
  --Projected increase in aging veterans who will require more complex 
        care by increasingly greater-skilled nurses.
    While the New Mexico VA Health Care System did experience nursing 
shortages in 2000 and 2001, they currently have a nurse vacancy rate of 
4.4 percent, with only 11 positions unfilled (3 of which have been 
selected and are pending a start date). The health care system has been 
successful in recruiting and retaining enough nurses to adequately 
staff their operating beds and clinic operations in all areas except 
for the Spinal Cord Injury (SCI) Center.
    Question. Does the VA have a plan to address this shortage of 
nurses?
    Answer. Yes. To help recruit and retain nurses in general, the 
NMVAHCS has taken several actions:
  --On-site critical care courses are provided.
  --Reimbursement of past nursing education expenses is provided to 
        qualifying nurses.
  --Tuition reimbursement is provided to staff seeking to obtain 
        nursing degrees.
  --Participation in the Veterans Affairs Learning Opportunities 
        Residency Program (VALOR).
  --Monthly advertisements in local newspapers for new nurses.
  --Attendance at Health Career Fairs
  --Attendance at Career Fairs for new graduates.
  --Advertisement on the VA Intranet for nurse transfers to the 
        NMVAHCS.
    To help recruit nurses for the Spinal Cord Injury Center, the 
following additional actions have been taken:
  --Recruitment Bonuses are offered.
  --Through close collaboration with the University of New Mexico, a 
        SCI nursing course has been developed and was offered at the 
        University in November 2001. A second offering of the SCI 
        nursing course will occur in April 2002.
                                 ______
                                 

             Questions Submitted by Senator Larry E. Craig

    Question. Currently, your budget contemplates moving the VETS 
program from the Dept of Labor to VA. In my State there is some unrest 
about the potential ramifications to Veterans that may be harmed by 
such a move. The details I understand are still in process of being 
worked out; once the details are finalized I would appreciate your 
office coming over to brief my staff and I on the details of how this 
will impact the Veterans of Idaho.
    Answer. I will be happy to arrange for you and your staff to be 
fully briefed on the details of this initiative as soon as the 
Administration submits its bill to Congress.
    I want to share with you, however, two essential elements of the 
Administration's proposal that will be beneficial to all veterans. The 
new grant program will be competitive and performance-based. These are 
two essential components directly affecting grantee performance.
    First, VA intends to set clear, obtainable and easily measured 
outcome performance standards. Measures such as the number of veterans 
who obtain a job and duration of employment are examples of such 
outcome measures.
    Second, there must be something at risk for the grantees in order 
for VA's grant oversight to be effective. Simply stated--rewards for 
exceptionally high performance and a costs for failing to deliver 
agreed upon outcomes. Quite frankly, a new grant program that is not 
competitive in nature can only fare marginally better than the existing 
programs. This is not to suggest that the competition must be at the 
national level, competition within States can be just as effective.
    Question. Three years ago we lost one of our two doctors from our 
Pocatello facility. Initially VA informed me that they would be able to 
address the doctor deficit via nurse practioners. Over time it has 
become apparent that this is not sufficient. Over a year ago VA 
initiated a doctor search for the Pocatello facility. VA indicates to 
my staff that they can't find a willing doctor in the area, though 
there is a residency program in the vicinity with an ample supply of 
willing and able medical professionals. Currently, because of the 
doctor deficit there at Pocatello, we have some Veterans who commute 
from Salmon to Pocatello that now have to go to Salt Lake City which is 
a 5 hour drive in order to obtain treatment. When do you anticipate 
resolving the doctor deficit in Idaho?
    Answer. We have recently resolved this issue with the selection of 
Dr. Walaliyadda for the physician position. The selection of Dr. 
Walaliyadda is currently in the approval phase. Dr. Walaliyadda is 
expected to start in this position by July 1, 2002, or sooner if 
possible.
    Question. Your 2003 Budget proposes imposing a $1500 medical 
deductible for Priority 7 veterans. What other alternatives have you 
reviewed and dismissed before deciding on this approach?
    Answer. We also considered such alternatives as imposing an 
enrollment fee, a first-user fee, other deductible options, and 
limiting enrollment.
    Question. Could you provide me some details and background on the 
$1.5 billion in collections that you anticipate? How does this compare 
with what has been collected over the past 5 years? What do you 
anticipate collecting over the next 5 years, will it be collected at a 
comparable rate or will it increase or decrease?
    Answer. The projected fiscal year 2003 revenue collection is $1.488 
billion, which represents a 42 percent increase over the projected 
fiscal year 2002 revenue collection of $1.050 billion. The primary 
reasons for the increase in fiscal year 2003 to $1.488 billion are $260 
million projected as collections for the $1,500 deductible; a $364 
million full-year estimate for the $5 increase in medication co-payment 
(from $2 to $7); and $40 million representing a full-year estimate for 
the long-term care co-payment.

                   REVENUE COLLECTIONS BY FISCAL YEAR
                          [Dollars in Millions]
------------------------------------------------------------------------
                                                                Percent
                    Fiscal year                       Amount      Inc.
------------------------------------------------------------------------
Actuals:
    1997..........................................       $520  .........
    1998..........................................        560        7.7
    1999..........................................        574        2.5
    2000..........................................        573       -0.2
    2001..........................................        771       34.6
Projected:
    2002..........................................      1,050       36.2
    2003..........................................      1,488       41.7
    2004..........................................      1,627        9.3
    2005..........................................      1,739        6.9
    2006..........................................      1,881        8.2
    2007..........................................      1,981        5.3
    2008..........................................      2,039        2.9
------------------------------------------------------------------------


    Question. In the recently submitted President's Budget, one of your 
goals is to reduce the process time of processing claims from 165 days 
down to 100 days. Why did you choose 100 days vs. say, 90 or even 30 
days? What is the comparable amount of time it takes for industry to 
process a claim?
    Answer. The goal of 100 days on average to process rating-related 
claims was chosen for several reasons. VA is required by Federal 
regulation and the Veterans Claims Assistance Act (VCAA) to afford 
veterans every opportunity to notify us of any evidence they feel is 
relevant to their claims. VA is obligated to exhaust all efforts to 
obtain that evidence, whether the evidence comes from within VA, 
another Federal agency, or a private source.
    When attempting to obtain evidence from private sources, VA must 
allow 60 days for a response before performing any action on the claim. 
Private sources are under no obligation to submit evidence to VA in a 
timely manner. Additionally, a physical examination is required in most 
cases to ascertain the extent of a disability and determine the 
veteran's overall disability compensation rating. While it is in the 
best interest of the veteran and VA to process the claim as quickly as 
possible, the reality is that most claims require some type of 
evidentiary development that adds to the time it takes to process the 
claim.
    VA is required to establish that the claimed disability was 
incurred in, aggravated by, or otherwise determined to be a result of 
military service. In addition, VA must determine the percentage at 
which a veteran's disability detracts from his or her overall ability 
to function. Finally, VA must determine the amount of compensation 
based on a combined disability rating evaluation, as well as processing 
any ancillary benefits to which the veteran may be entitled.
    Given these realities, the goal of 100 days is thought to be a 
challenging yet attainable goal.
    It is difficult to compare the VA's claims processing function to 
private industry. The closest comparison would probably be disability 
determinations that take place in the insurance industry. However, most 
disability determinations by the insurance industry are made without 
the requirement to establish a link between the claimant's disability 
and the working environment. Evidentiary requirements are also much 
more exhaustive for VA.
    Question. When do you anticipate eliminating the backlog?
    Answer. VA's goal is to reduce the inventory to approximately 
250,000 rating-related claims by the end of fiscal year 2003. Our 
interim goal for the end of this fiscal year is to reduce the rating 
inventory to approximately 315,000 pending claims.
    Our efforts to achieve these goals are showing positive results. 
VBA significantly increased its production of rating decisions in the 
latter months of fiscal year 2001 and into this year, which is the key 
to reducing the claims backlog. From October 2001 through February 
2002, VBA decided over 294,000 cases for a 5 month average of 58,800. 
This represents a 47 percent increase over fiscal year 2001 production 
levels. We expect our production to continue to increase as many of our 
recently hired employees gain additional experience and we begin to 
implement the recommendations of the Claims Processing Task Force.
    Even with the increased production, our current pending inventory 
remains unacceptably high. This is due to a significant increase in the 
volume of incoming claims, attributed to the following factors:
  --The review of more than 98,000 cases under the Veterans Claims 
        Assistance Act (VCAA).
  --VA's expanded outreach efforts to separating service members 
        (Benefits Delivery at Discharge initiative).
  --Receipt of 66,000 Type 2 diabetes claims based on exposure to Agent 
        Orange.
  --The requirement to review 13,000 previously-adjudicated diabetes 
        claims under the Nehmer stipulation. (In the case of Nehmer v. 
        VA, plaintiffs' attorneys and VA agreed, in a 1991 Stipulation 
        and Order, on a process for applying an earlier than usual 
        effective date for certain claims for benefits based on Agent 
        Orange exposure. As a result of court decisions in the Nehmer 
        case, VA is required to re-adjudicate over 13,000 diabetes 
        claims.)
    All of the 98,000 VCAA claims have now been added to the inventory. 
Following the initial surge of Type 2 diabetes claims, the incoming 
volume of diabetes claims is expected to taper off. We have also 
completed a significant portion of the Nehmer reviews. We therefore 
believe our increased production levels and the Task Force initiatives 
will now enable us to make major inroads into the pending inventory.
    Question. Under the Veterans Benefits Administration, specifically 
the Housing program, you are currently in the process of completing an 
A-76 study for potentially contracting out the property management 
function. How significant is this activity as far as dollars and 
people, and what is the breakdown by State?
    Answer. At the inception of this A-76 cost comparison the Property 
Management Operation involved 276 FTE at 46 regional offices around the 
country. There are currently 185 FTE at those offices. A breakdown of 
the 276 FTE and the current 185 FTE is provided below along with pre A-
76 local program expenditures for management brokers, repair cost, and 
sales brokers. Unfortunately, final program modifications and savings 
cannot be determined until the A-76 award decision is rendered.

                                        VA PROPERTY MANAGEMENT ACTIVITIES
----------------------------------------------------------------------------------------------------------------
                                                                                                        Avg.
                    State                           VA Regional Office         1999 FTE    Jan-02   Expenditures
                                                                                                    Per Property
----------------------------------------------------------------------------------------------------------------
Alabama.....................................  Montgomery....................          4          5       $4,113
Alaska......................................  Anchorage.....................          1        0.5       11,020
Arizona.....................................  Phoenix.......................         10          8        8,258
Arkansas....................................  Little Rock...................          4          1        5,831
California..................................  Los Angeles...................         24          8        8,222
California..................................  Oakland.......................         13          7       12,364
California..................................  San Diego.....................         14        3.5       11,477
Colorado....................................  Denver........................          3          4        8,967
Florida.....................................  St. Petersburg................         13         12        9,822
Georgia.....................................  Atlanta.......................         16         14       10,960
Hawaii......................................  Honolulu......................          1          0        6,308
Idaho.......................................  Boise.........................          1          2       11,151
Illinois....................................  Chicago.......................         11          4        7,854
Indiana.....................................  Indianapolis..................          2          2        9,402
Iowa........................................  Des Moines....................          2          2        5,703
Kansas......................................  Wichita.......................          3          2       12,146
Kentucky....................................  Louisville....................          2          1        6,271
Louisiana...................................  New Orleans...................          6          4        6,788
Maryland....................................  Baltimore.....................          4          3       17,474
Michigan....................................  Detroit.......................         11        7.5        8,967
Minnesota...................................  St. Paul......................          6          5        8,807
Mississippi.................................  Jackson.......................          3          2        6,560
Missouri....................................  St. Louis.....................          7          3        7,334
Nebraska....................................  Lincoln.......................          1          1       10,205
New Hampshire...............................  Manchester....................          4        4.5       16,663
New Jersey..................................  Newark........................          3          5       10,816
New Mexico..................................  Albuquerque...................          1          3       10,337
New York....................................  Buffalo.......................          1          1        5,913
New York....................................  New York......................          3          5        5,477
North Carolina..............................  Winston-Salem.................         11       4.38       10,495
Ohio........................................  Cleveland.....................          4          5        6,269
Oklahoma....................................  Muskogee......................          5          1        4,034
Oregon......................................  Portland......................          1          2        8,000
Pennsylvania................................  Philadelphia..................          3          4        7,697
Pennsylvania................................  Pittsburgh....................          2          2        8,109
Puerto Rico.................................  San Juan......................          1          0        5,667
South Carolina..............................  Columbia......................          7          1        6,263
Tennessee...................................  Nashville.....................          5       1.25        5,522
Texas.......................................  Houston.......................         17       13.1       12,852
Texas.......................................  Waco..........................         13          4       12,133
Utah........................................  Salt Lake City................          0          1       11,910
Virginia....................................  Roanoke.......................         14         14        7,922
Washington..................................  Seattle.......................          7          5       13,579
Wisconsin...................................  Milwaukee.....................          3          0       10,865
                                              Washington DC.................          9          7       14,037
                                             -------------------------------------------------------------------
      National Total........................  ..............................        276     184.73  ............
----------------------------------------------------------------------------------------------------------------
Note: Some stations have jurisdiction over other States.

                          SUBCOMMITTEE RECESS

    Senator Mikulski. The subcommittee stands in recess until 
next week when we will take the testimony of Housing and Urban 
Development.
    Secretary Principi. Thank you.
    Senator Mikulski. Thank you.
    [Whereupon, at 11:22 a.m., Wednesday, March 6, and the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]















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

                              ----------                              


                       WEDNESDAY, MARCH 13, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:35 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Barbara A. Mikulski (chairman) 
presiding.
    Present: Senators Mikulski, Bond, and Craig.

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

STATEMENT OF HON. MEL MARTINEZ, SECRETARY OF HOUSING 
            AND URBAN DEVELOPMENT

            OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

    Senator Mikulski. Good morning, everybody, to HUD; The 
subcommittee will come together.
    This morning we are taking the testimony from our 
Secretary, Mel Martinez. We look forward to hearing the 
Secretary present the administration's appropriations request 
and the priorities of the administration for the Department of 
Housing and Urban Development.
    I apologize for the Committee starting late. It took me an 
hour and 45 minutes to get here from Baltimore today. So we are 
going to move on quickly.
    Mr. Secretary, let me start by once again thanking you for 
the collegiality in which you have worked with the 
Subcommittee. I believe both Senator Bond and I feel that we 
have excellent response from you and your staff and that our 
conversations have been candid and focused on empowering people 
in neighborhoods. So we thank you for that and look forward to 
that.
    Secretary Martinez. Thank you.
    Senator Mikulski. Mr. Secretary, I have three goals this 
morning. I want to make sure that HUD continues to stay focused 
on its core program, housing programs. And it also that it has 
enough resources for them. I want to hear your views on how we 
can also help communities that are under stress.
    In terms of those communities that are under stress, it is 
those that have also been stressed both by age, demographic 
change, and the changing HUD programs. The stressed communities 
I am talking about are particularly in cities where parts of 
cities are what we call the ``middle ring'' of a city, that are 
often are like little suburbs within a city. They were not the 
inner core. They were not the neighborhoods under siege. But 
right now they are feeling older. Predatory practices are 
beginning to come, blight begins to come. But most of all, 
using FHA programs, we are concerned that people buying homes, 
cannot keep them up and keep them going.
    The other part is in the suburbs where public housing was 
not built. And there was the great thinking of using Section 8 
so that people would have choice and mobility. But they went 
into apartment buildings that then became public housing by 
proxy. You and I visited some of those in Prince George's 
County just a couple of weeks ago. By ``public housing by 
proxy,'' I mean a privately held complex that rented to the 
poor. That was a good idea. Then they abandoned their complex 
while renting to the poor. They either abdicated their mortgage 
requirements and certainly abdicated the service and 
maintenance requirements.
    And therefore, FHA subsidized, Section 8 subsidized by 
tenants, all have become public housing by proxy with none of 
the social services, none of the empowerment and, most of all, 
these apartments have become incubators for the distressed 
communities around them.
    HOPE VI is expiring, and we are very interested in your 
thoughts on HOPE VI and those issues, as well as issues related 
to management and oversight. Without good HUD oversight, we see 
HUD at its worst. Instead of helping poor and hard-working 
families to get to a better life, HUD ends up lining the 
pockets of scums so that they can have a better life.
    So, we want to really look at these neighborhoods. We are 
here to make sure that the poor have a way to a better life, 
not the scums having a better life. So, I think we are all in 
agreement on the priorities; and we look forward to working 
towards them.
    Some of the issues we are talking about are the $1 million 
for home-owner counseling. We are committed to the American 
dream. But often, people who are not prepared for home-
ownership nor have the resources to sustain home-ownership end 
up not being able to fulfill their responsibilities. And it 
does not work. We really need pre-purchase counseling. I want 
to hear more about that.
    I am also concerned about what has happened in some 
community development corporations. The vast majority of CDC's 
are great engines of redevelopment in our communities. But some 
CDC's have now been created as almost faux corporations. Again, 
skimming off the bucks and then leaving very little to show 
results.
    A recent article in The Washington Post about some 
occurrences in the District of Columbia shows an example of 
this. And this is not finger-pointing at the District of 
Columbia or CDC's; I am a big believer in them. There was a guy 
who was the chief executive of the Anacostia Economic 
Development Corporation. He took $25,000 from the group and 
invested in raw gold in Mali, nothing to do with investing in 
the District of Columbia.
    And another has taken nearly $40 million in public and 
private funds and has yet completed 12 of its 37 projects in 10 
years. So, we need to look at how we can work with those CDC's 
and yet prevent waste, fraud, and abuse, so that the good ones 
can really be what we call those public/private partnerships.

                           PREPARED STATEMENT

    There is much more to be said in detail, as we go through 
the hearings, the capital management programs, the details, the 
budget, but those are my large area policy goals. And I am 
going to now conclude my remarks and ask unanimous consent that 
my full statement be in the record.
    [The statement follows:]
           Prepared Statement of Senator Barbara A. Mikulski
    I would like to welcome Secretary Martinez to his second budget 
hearing before this Subcommittee.
    I have three goals for the hearing today. The first is to make sure 
that HUD is committed to its core housing programs and has enough 
resources for them. Second, we want to hear the Secretary's views on 
how we can help communities that are under stress. I'd like to hear 
from the Secretary about how the HOPE VI program can best serve these 
communities, how we can help people who are ``aging in place'' stay in 
their neighborhoods, and, how we can prevent concentrations of poverty 
from destabilizing communities. Lastly, I'd like to address problems 
that I see in the oversight of HUD programs. We want HUD to be a good 
steward of the tax payer dollar and a good neighbor in our communities. 
This subcommittee wants to help HUD achieve these goals.
    The Administration's budget fully funds Section 8 renewals and 
requests modest increases to HOME and CDBG block grant programs. 
Unfortunately, the Administration proposes to cut the Public Housing 
Capital Fund by $400 million, even though public housing units have a 
$22 billion backlog in capital repairs.
    HUD programs are seeing an increase in demand, but they don't get 
increased resources in this budget. This is true for Elderly and 
Disabled Housing programs and for permanent housing for the homeless.
    And, there are still serious problems in the Section 8 program. 
Working families moving from welfare to work depend on this program, 
but some vouchers aren't being used, despite this high demand. Vouchers 
can't solve all of our problems. Senator Bond and I believe that we 
need to do more housing production; we'd like to hear your views on 
housing production.
    HOPE VI expires this year. In June HUD will submit a report to 
Congress on lessons learned in the HOPE VI program. In the meantime, we 
want to hear your thoughts on what the program has achieved. What 
works? And what doesn't? I know in Baltimore they're gearing up to 
start a new HOPE VI development, so they'd welcome guidance from the 
Department. It's also time to take inventory. We want to know if we've 
met the need out there for severely distressed housing. If we have, is 
it time to sunset HOPE VI?
    We have neighborhoods that are under stress. Oftentimes this is 
because government walked away, or the landlords walked away. We have a 
real problem of predatory lending in communities across the Nation. The 
poor are being gouged, the taxpayers are paying for it, and scam 
artists are profiting. And predatory lending has resulted in 
neighborhoods that were once stable turning into neighborhoods under 
stress.
    Secretary Martinez and I have formed the Prince George's County to 
combat the problems that we saw when we visited the inner beltway 
communities of the County. There, we saw the effects of absenteeism. We 
need to work together to build neighborhoods where people live, work, 
shop, worship and raise their families.
    Also of great concern to me are the needs of our aging population. 
Our senior citizens, particularly our frail elderly, have special 
needs. The housing stock for our elderly is out of date with today's 
needs; the elderly need services and affordable housing in communities, 
not just buildings.
    In order to have a strong HUD, we need to have a well-managed HUD. 
HUD must have good information technology systems, thorough oversight 
of programs, and tough enforcement. Without good oversight we see HUD 
at its worst: instead of helping poor and hardworking Americans to get 
a better life, HUD is lines the pockets of scum so that they can have a 
better life. HUD needs to turn this equation around.
    The GAO has found serious deficiencies in the IT systems at HUD's 
four Homeownership Centers. These deficiencies affect HUD's ability to 
target high risk lenders and to investigate cases of fraud. These 
deficiencies hurt the work we're doing on predatory lending with HUD.
    Around the country communities are being hurt by these schemes. 
Unscrupulous investors buy up foreclosed properties. They flip the 
properties to unsuspecting homebuyers. They inflate the costs of the 
houses, they hide fees and balloon payments. They gouge the poor, they 
rip off tax payers, and they destroy communities. I'm pleased that the 
budget includes $35 million for homeowner counseling.
    Clearly, better oversight of programs could have prevented the 
scandals being uncovered here in D.C. with Community Development 
Corporations. We know that the vast majority of CDCs are great engines 
of redevelopment in poor communities. But, these CDCs managed to scam 
the government, and hurt neighborhoods.
    We know that some of this money came from HUD programs. One of the 
groups profiled was the Asset Control Area receiver for the City. This 
is what the editorial board of the Washington Post has to say on 
February 28:
    ``The articles . . . show how CDCs, charged with bringing stability 
and development to scarred communities, have instead left a trail of 
sick business districts, boarded-up apartment buildings and weed-filled 
lots across the city . . . Albert R. ``Butch'' Hopkins Jr., chief 
executive of the Anacostia Economic Development Corp. in Southeast 
Washington, invested $25,000 from one of the group's for-profit 
subsidiaries to buy . . . raw gold in Mali . . .  Robert Moore's 
Development Corp. of Columbia Heights in Northwest Washington has taken 
in nearly $40 million in public and private funds, holds a large 
portfolio of properties--some of which it received free from the city 
and yet has completed only 12 of its 37 major construction projects in 
the past decade.''
    We know that Secretary Martinez shares these concerns with us. We 
look forward to working with Secretary Martinez to help HUD fulfill its 
mission and be a real partner to communities.
    We'll look forward to your testimony.

    Senator Mikulski. And I will turn to my colleague, Senator 
Bond.

                STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Thank you very much, Madam Chair. And I join 
with you in welcoming Secretary Martinez to testify on the 
budget request for 2003. Last year was the Secretary's first 
opportunity to testify before this subcommittee. And I found 
the Secretary's testimony frank and refreshing. But I look 
forward to the second year of testimony now that he has a full 
year of what I would call the ``HUD experience'' under his 
belt.
    About a quarter of a century ago, I lost a reelection race 
I was supposed to win. And one of the most consoling things 
that a friend of mine said was ``experience is what you get 
when you expected to get something else.''
    Senator Bond. And I have a feeling that Secretary Martinez 
has been having a lot of experience. I had a little experience 
yesterday, I just started to mention. There was a bill that, in 
flush times with big budgets, might have been very nice. There 
was the Murkowski-Daschle bill to create $100 million grant 
program for a rural access to electric infrastructure, $100 
million for a rural recovery community block grant program, $20 
million in a grant program from community electrification 
grants, all coming out of HUD.
    I put a hold on it, and it was passed yesterday afternoon 
by unanimous consent; and this is--it is just $220 million that 
we do not have in the budget. So, Mr. Secretary, we need to 
work with you on perhaps visiting that effort.
    But let us get on to the things that are before us. We have 
to do some tough battles in this subcommittee, balancing the 
affordable housing and economic development needs against 
priorities for veterans, environmental protection, continuing 
investment in science, technology, the expanding, greatly 
expanding, requirements of FEMA, particularly related to 
homeland defense.
    But there are special challenges in HUD. As we have said, 
HUD has been troubled and dysfunctional for a long time. Its 
primary program missions have some real questions about them, 
as the Chair has already mentioned. I know you have taken some 
steps to reform staffing requirements. You are following 
through on contracts for the development of new computer and IT 
systems. These are really not sexy, front-page stories. But I 
think it is only through basic reforms like this that you will 
be able to get a handle on the billions of dollars going 
through the department.
    I have a number of concerns with the budget. I understand 
the department has requested almost $2 billion to cover all 
renewing, expiring Section 8 contracts. But Section 8 is 
probably one of the most troubling programs. Every year the 
administration, be it Democrat or Republican, glosses over the 
way many Section 8 programs are administered, while the costs 
to the taxpayers continue to escalate.
    The programs lose over $1 billion annually due to fraud, 
neglect, and abuse. I think it is time to fix it so we ensure 
Section 8 assistance really goes to the low income families to 
find and obtain affordable housing. I am tired of the myth that 
Section 8 vouchers mean freedom to rent where you want to live. 
In too many parts of the country, that is a hollow promise. 
There are not available rental properties. And to give out 
vouchers in St. Louis County, for example, is a wasted effort.
    Yet instead of addressing the shortage of affordable 
housing, we continue to get OMB recommendations to convert 
project-based Section 8 assistance to tenant-based Section 8 
assistance, leaving low-income families without affordable 
housing in many areas with a shrinking stock of housing. I am 
especially concerned about the lack of affordable housing for 
the elderly and for persons with disabilities. But we need some 
support from OMB.
    And in addition, OMB is pushing to cut, again, the funding 
for public housing capital by over $400 million despite a 
backlog of some $22 billion in needed repairs. The OMB suggests 
capital resources can be made up through the borrowing of 
private capital, which would then be supported by Section 8 
project-based assistance. What HUD does not advertise is that 
the proposal is designed to convert this project-based 
assistance into vouchers and privatize the public housing 
units. That means that the highest quality public housing units 
will be lost to low-income use, without any guarantee that 
needed affordable housing units will be preserved for low-
income families in tight rental markets.
    In addition, the cost of this public housing proposal would 
be carried by the Housing Certificate Fund, which already has 
costs of some $20 billion per year. I think it is a shell game 
especially shifting the costs from public housing capital to 
the Housing Certificate Fund. And I really--I have a long way 
to go before I can be sold on that turkey.
    There are a number of other issues that I think we need for 
HUD to address. I would like to thank OMB for proposing, once 
again, to eliminate the Rural Housing and Economic Development 
Program that I fought so hard to get established a few years 
ago. It may be because I have said bad things about OMB in the 
past. And I intend to continue.
    We also need the Administration's help in re-authorizing 
the HOPE VI program. It is slated for termination at the end of 
the year. I think we need a comprehensive review and 
reformulation of the program. But it is working. We want to 
make sure that we improve it and make it continue.
    Finally, real concerns about renewing expiring contracts 
under Shelter-Plus Care, Section 811 housing. I do not think 
the budgets for either are adequate. Shelter-Plus Care includes 
no funding for the cost of expiring contracts and that is not 
right.
    Well, having said that, Mr. Secretary, we have a lot of 
work to do. And I look forward to your testimony.
    And I thank the Chair.
    Senator Mikulski. Senator Craig, would you like to say 
something now?

                  STATEMENT OF SENATOR LARRY E. CRAIG

    Senator Craig. Thank you.
    Mr. Secretary, it is obvious that we all share passion as 
it relates to your agency. And I think you do, too. And we 
appreciate you being here this morning.
    Madam Chairman, I am sorry about your struggle to get here 
this morning. What has happened is that Marylanders have seen 
rain for the first time in, I guess, months. And it was such a 
surprising occurrence, they all stopped to look at it.
    Senator Mikulski. That is exactly right, instead of looking 
at the road.
    Senator Craig. Exactly. Now, you know what we who live in 
desert States experience when the rain comes; we all rejoice. 
And I think that is what folks in this area were doing this 
morning.
    Mr. Secretary, I share some of the same passions with some 
different focuses than do my colleagues, in part because I do 
not have some of the inner-city concerns that are expressed by 
the Chairman or by the ranking member. They have those, and I 
support their concerns. But let me thank you for the work you 
have done with the U.S. Department of Justice to restore HUD to 
what I think are some original goals and missions.
    I was more than a bit incensed by the former practice of 
reprogramming housing dollars for gun buy-back programs, funds 
that were originally dedicated for house construction and 
mortgage assistance programs. It was a detrimental and, I 
think, reckless public policy, especially to the poor and the 
under-served. It was a political statement made on the part of 
a former Secretary of HUD and Administration. I believe it 
served little value.
    I think it is also important that HUD no longer serves as a 
litigious tool against the manufacturers of firearms. Your 
dissolution of HUD's role as a police agency to attack the 
Second Amendment, I think, was a responsible, Constitutionally 
tenable policy decision, not to mention a victory for taxpayers 
who were wrongfully forced to unjustifiably subsidize an inter-
governmental political agenda that I have mentioned.
    Next, I wholeheartedly acknowledge the necessity for access 
to affordable housing for the disabled, the infirm, and the 
elderly. HUD's effort to crack down on egregious violators and 
those who callously disregard the rules should be applauded, 
and I do it. And I know you are concerned about it.
    However, despite HUD's programs to educate developers and 
construction workers about the vague regulations and the 
ambiguous guidelines under the Federal Fair Housing 
Accessibility Standards, there are still incidents in my State 
of Idaho where scrupulous, honest home builders and developers 
are pursued in a manner that resembles bounty hunting. Now I 
know you have changed that. You have changed the incentive 
there. And that is the way it ought to be.
    We need to be in the business of educating. And we need to 
be in the business of searching for and evaluating compliance 
directives and doing that in a way that is responsible, both 
for those who would be subject to the directives and those for 
whom access is a problem, because they are disabled or elderly 
or infirm. We do not need to drive away responsible builders 
who want to provide that kind of housing and want to comply, 
only to find out that someone is going through their 
facilities, whispering under their breath: If we search long 
enough, we will find and file a violation.
    That has happened too many times. I know you are working to 
correct it; I appreciate it. HUD needs--has a responsibility 
and a mission that I think you have it headed toward. It has a 
lot of fine, responsible employees who want to do the right 
thing. And it can be done without a visible, high-profile 
political agenda.
    With that, I thank you for being here. There are a variety 
of questions that, if I stay long enough, we will visit about, 
or I will submit them for the record.
    Madam Chairman, let us proceed. Thank you.
    Senator Mikulski. Thank you. Excellent points, Senator.
    Yes, Mr. Martinez. Please go ahead.

                     STATEMENT OF HON. MEL MARTINEZ

    Secretary Martinez. Thank you, Madam Chair and Ranking 
Member Bond and Senator Craig. It is a pleasure to be back with 
you today. And I think, as Senator Bond said, we are all a year 
older and a year wiser, to be sure, Senator. But it has been an 
exciting opportunity to serve in a Department where I think we 
are at a very close heartbeat of what is the American dream for 
so many families.
    And so, Senator, I enjoyed our opportunity to visit in your 
State, to see some of the problems that you are dealing with. 
Amazingly enough, those very problems you are speaking of are 
what were the middle-class suburbs of the 1950's and 1960's 
that are now becoming areas under stress. It is something that 
I am very familiar with from my home community.
    But on to our budget, the 2003 budget, for the Department 
of Housing and Urban Development. It is a $31.5 billion budget, 
which represents a funding level increase of 7 percent over the 
fiscal year 2002. At a time when dollars are especially 
precious and the cost of homeland security is consuming many 
Federal resources, this shows the President's commitment to 
improving housing and communities.
    By helping Americans to become home owners, ensuring 
affordable housing opportunities for those who rent, and 
renewing communities, and preserving a safety net for the most 
vulnerable, this budget will enable HUD to make a tremendous 
difference in the lives of millions of Americans.
    The housing market in 2001 was extremely vigorous. And we 
enter a new year with home ownership rates at a record high. 
Because we know that home ownership gives families a stake in 
their communities and creates wealth, the HUD budget makes 
owning a home a viable option for even more Americans. 
President Bush and I are committed to expanding home ownership, 
especially among minority families.
    As a first step, our budget quadruples the American Dream 
Downpayment Fund to $200 million. This Presidential initiative 
will help an estimated 40,000 first-time home buyers with a 
high down payment and closing costs that are often a 
significant obstacle to home ownership.
    A tax credit for developers for single family affordable 
housing will promote home ownership opportunities among low-
income households by supporting the rehabilitation or new 
construction of homes in low-income urban and rural 
neighborhoods.
    Our budget proposes tripling funding for the Self-Help 
Home-ownership Opportunity Program, the SHOP program, to $65 
million, as committed by the President last spring. That will 
make possible the construction of an additional 3,800 homes for 
many disadvantaged Americans. SHOP is an excellent example of 
Government maximizing its resources, working with the private 
sector partners and community organizations like ``Habitat for 
Humanity.''
    Another exciting home ownership initiative targeted at low-
income families will allow them to put a year's worth of their 
Section 8 rental vouchers toward a home down payment. And 
because we consider it to be a invaluable tool for prospective 
home buyers and renters, the HUD Budget process proposes also 
making housing counseling a separate program. The increase in 
sub-prime lending has made financial literacy more important 
than ever; armed with the facts, a consumer is far less likely 
to be victimized by predatory lending. We are funding the 
Housing Counseling Program at $35 million, a $15 million 
increase over the previous fiscal year.
    While we consider home ownership to be an important goal, 
we recognize that it is not an option for everyone. Therefore, 
our Budget preserves HUD's commitment to expanding the 
availability of affordable housing for many of Americans who 
rent their homes. The Section 8 Tenant-Based Program, today, 
assists 2,000,000 families. Our Budget provides an additional 
34,000 housing vouchers. The Budget also dedicates $16.9 
billion to protect current residents by renewing all expiring 
Section 8 contracts.
    To encourage the production of moderate-income rental 
housing in under-served areas, the HUD Budget would reduce the 
mortgage insurance premium for the Federal Housing 
Administration multi family insurance. Three times over the 
last 8 years, HUD has been forced to shut down our multifamily 
mortgage insurance program because of a lack of credit subsidy.
    We made a commitment to a comprehensive review of the 
credit subsidy program. Through our review, we were able to 
lower premiums, create a self-sustaining program, provide the 
industry with stable financing at a much lower cost, and 
provide thousands of new opportunities for rental housing 
across the country.
    Today I am happy to report that our FHA business is strong, 
both for single family and multi family housing. In fact, 
business is so strong that if our insurance commitments 
continue at the current rate for the rest of the year, we will 
exceed our statutory limits for both MMI Fund and the GI Fund. 
If that continues, I will have to come back here and ask the 
Congress to raise the statutory ceilings enacted last October.
    I am particularly pleased with our multi family business 
this year. Through the first 5 months of the fiscal year, FHA 
has issued insurance commitments totaling close to $1.4 
billion, compared to $900 million for the same period a year 
ago; that is up 50 percent. Many in the industry and some in 
Congress were worried that raising the insurance premium would 
damage the multi family industry. Clearly, that has not 
happened.

                   FISCAL YEAR 2003 BUDGET HIGHLIGHTS

    The 2003 Budget gives HUD new resources to further our 
mission of supporting the Nation's most vulnerable. This 
includes low-income families, homeless men and women, the 
elderly, individuals with HIV/AIDS, victims of predatory 
lending practices, and families living in housing contaminated 
with lead-based paint. Let me highlight some of those 
proposals.
    To better coordinate the work of the many Federal agencies 
that reach out and provide continuum of care to homeless men, 
women, and families, the Budget calls for doubling HUD funding 
for the newly reactivated Interagency Council on the Homeless. 
Additionally, converting three competitive homeless assistance 
programs into one consolidated grant will eliminate the 
workload and expense of administering three separate programs. 
More importantly, it will give local jurisdictions new 
discretion in how dollars are spent.
    In addition to that, and something I really love, is that 
it will take from 18 months, the grant process, and compress 
that to 3 months before the money gets out the door.
    HUD's Lead Hazard Program is a central element of the 
President's effort to eradicate childhood lead poisoning in 10 
years or less. The HUD Budget will fund the program at $126 
million, a substantial increase over the previous year.
    The HUD budget also proposes spending $251 million under 
HUD's Section 811 program to improve access to affordable 
housing for persons with disabilities. Many of the additional 
34,000 Section 8 vouchers will be to assist non-elderly, 
disabled individuals.
    Initiatives, such as the HOME Investment Partnership 
Program and the CDBG program, address the Nation's critical 
housing needs and stimulate economic development and job 
growth. Combined, these two programs will distribute an 
additional $200 million formula dollars to State and local 
governments.
    We have increased the CDBG formula grants next year by $95 
million to $4.4 billion. In addition, we have proposed changing 
the distribution of CDBG formula funds by reducing the size of 
grants going to some of our wealthiest communities. This will 
help bring dollars into those areas where they can do the most 
good and where they are needed the most.
    I am also excited about our brand, new concept to address 
the large backlog of repair and modernization projects in 
public housing. The Public Housing Reinvestment Initiative 
represents a new way of leveraging the value of public housing 
by allowing Public Housing Authorities to borrow funds to make 
needed capital improvements. This will unlock the value of 
public housing assets by allowing PHA's to convert public 
housing units to project-based vouchers.
    Innovative thinking like this represents a departure from 
the way things were done so often in the past. But being 
effective does not mean spending more money, necessarily. 
Government works best by being a good steward and facilitator 
and looking for results.
    I am pleased that the President's budget reflects our 
commitment to efficiency, accountability, and the principles of 
excellence expressed through the President's management score 
card. When Government spends efficiently, the funds go much 
further; and we reach many more citizens.
    I am happy to tell you that, while virtually all agencies 
of the Federal Government were given a red listing on the 
President's score card, HUD already has moved out of the all 
red. And we already enjoy a number of yellows and even some 
greens. And so that is, Senator Bond, making us even more 
popular at OMB. So we are very excited with that.
    But let me just thank the committee for your cooperation 
and your help and your support through this past year. I find 
our interaction to be very positive in the bipartisan spirit in 
which it is done. And I look forward to your continued guidance 
as we go through this budget process.
    I would like to take a moment to introduce several people 
that are here with me today, because they might be important in 
answering some questions. I just want to tell you that I am 
extremely proud of the team we have assembled at HUD. In fact, 
we have a team that I think is the best that HUD has ever had.
    And I am proud to say we also have some additional members 
of our team that are awaiting Senate confirmation, including 
the very important Inspector General, which has, for several 
months, been awaiting Senate final action. And I would urge the 
Senators, if it is within your purview, to encourage the Senate 
to move forward on all of HUD's pending nominees; most 
specifically and most urgently the Inspector General.
    But let me say that these folks are doing a terrific job 
for the people of America. John Weicher, who is our Federal 
Housing Commissioner; Mayor Roy Bernardi, who is in Community 
Planning and Development; Michael Liu in Public and Indian 
housing; and, of course, Melody Fennel in Congressional 
Affairs, whom you know well.
    And not to diminish the folks to the right, but we will 
leave it at that. Anyway, these are the Assistant Secretaries, 
I should say. And, of course, Rob Woodson, who is my new Chief 
of Staff, and I am very proud to have him.
    So with that, I would be pleased to attempt to answer your 
questions.
    Senator Mikulski. Well, thank you very much, Mr. Secretary.
    [The statement follows:]

                   Prepared Statement of Mel Martinez

    Chairwoman Mikulski, Ranking Member Bond, Distinguished Members of 
the Committee:
    Thank you for the opportunity to join you this morning to outline 
the proposed fiscal year 2003 Budget for the Department of Housing and 
Urban Development (HUD).
    The $31.5 billion HUD budget represents a funding level increase of 
7 percent over fiscal year 2002. At a time when dollars are especially 
precious, and the cost of homeland security is consuming many Federal 
resources, this shows the President's commitment to improving housing 
and communities.
    By helping Americans become homeowners, ensuring affordable housing 
opportunities for those who rent, renewing communities, and preserving 
a safety net for the most vulnerable, this budget will enable HUD to 
make a tremendous difference in the lives of millions of Americans.
    The housing market in 2001 was extremely vigorous, and we entered 
the new year with homeownership at a record high. Because we know that 
homeownership gives families a stake in their communities and creates 
wealth, the HUD budget makes owning a home a viable option for even 
more Americans. President Bush and I are committed to expanding 
homeownership--especially among minorities.
    As a first step, our budget quadruples the American Dream 
Downpayment Fund, to $200 million. This Presidential initiative will 
help an estimated 40,000 first-time homebuyers a year overcome the high 
down payment and closing costs that are significant obstacles to 
homeownership.
    A new tax credit for developers of single-family affordable housing 
will promote homeownership opportunities among low-income households by 
supporting the rehabilitation or new construction of thousands of 
moderately priced homes in low-income urban and rural neighborhoods. 
This credit of $1.75 per capita matches in size the existing Low-Income 
Housing Tax Credit and like the existing Credit would be administered 
by the States. As these new homes are occupied by people who were 
previously renting, their old apartments will become available for 
others to rent, thereby effectively increasing the supply of affordable 
rental apartments in many locations.
    Our budget proposes tripling funding for the Self-Help 
Homeownership Opportunity Program (SHOP) to $65 million, as committed 
to by the President last spring. That will make possible the 
construction of an additional 3,800 homes for disadvantaged Americans. 
SHOP is an excellent example of government maximizing its resources by 
working with private-sector partners like Habitat for Humanity.
    Another exciting homeownership initiative targeted at low-income 
families will allow them to put up to a year's worth of their Section 8 
rental vouchers toward a home down payment. Because we consider housing 
counseling a valuable tool for prospective homebuyers and renters, we 
propose funding the program at $35 million--a $15 million increase over 
the previous fiscal year. The increase in sub-prime lending has made 
financial literacy more important than ever; armed with the facts, a 
consumer is far less likely to be victimized by predatory lending.
    While we consider homeownership to be an important goal, we 
recognize that it is not an option for everyone; therefore, our budget 
preserves HUD's commitment to expanding the availability of affordable 
housing for the millions of Americans who rent their homes.
    The Section 8 tenant-based program today assists nearly two million 
families. Our budget provides an additional 34,000 housing vouchers, an 
increase of one and one-half percent. The budget also dedicates $16.9 
billion to protect current residents by renewing all expiring Section 8 
contracts.
    To encourage the production of moderate-income rental housing in 
underserved areas, the HUD budget would reduce the mortgage insurance 
premium for Federal Housing Administration (FHA) multifamily insurance.
    Three times over the last 8 years, HUD has been forced to shut down 
our multifamily mortgage insurance programs because of lack of credit 
subsidy.
    We made a commitment to a comprehensive review of the credit 
subsidy program. Through our review, we were able to lower premiums, 
create a self-sustaining program, provide the industry with stable 
financing at a much lower cost, and provide thousands of new 
opportunities for rental housing across the country.
    Today, I am happy to report that our FHA business is strong, both 
for single family and multifamily housing. In fact, business is so 
strong that if our insurance commitments continue at the current rate 
for the rest of the year, we may exceed the currently appropriated 
limitations for both the MMI Fund and the GI Fund.
    If that continues, I will have to come back here and ask Congress 
to raise the statutory ceilings enacted last October.
    I am particularly pleased with our multifamily business this year. 
Through the first 5 months of the fiscal year, FHA has issued insurance 
commitments totaling close to $1.4 billion--compared to $900 million 
for the same period a year ago. That is up 50 percent.
    Many in the industry and some in Congress were worried that raising 
the insurance premium would damage the multifamily industry. Clearly, 
that has not happened.
    The 2003 budget gives HUD new resources to further our mission of 
supporting the Nation's most vulnerable. This includes low-income 
families, homeless men and women, the elderly, individuals with HIV/
AIDS, victims of predatory lending practices, and families living in 
housing contaminated by lead-based paint.
    Let me highlight just a few of our proposals.
    To better coordinate the work of the many Federal agencies that 
reach out and provide a continuum of care to homeless men, women, and 
families, the budget calls for doubling HUD funding for the newly 
reactivated Interagency Council on the Homeless. Additionally, 
converting three competitive homeless assistance programs into a 
consolidated grant will eliminate the workload and expense of 
administering three separate programs. More importantly, it will give 
local jurisdictions new discretion in how those dollars are spent.
    HUD's Lead Hazard Control program is the central element of the 
President's effort to eradicate childhood lead poisoning in 10 years or 
less. The HUD budget will fund the program at $126 million, a 
substantial increase over the previous year.
    The budget also proposes spending $251 million under HUD's Section 
811 program to improve access to affordable housing for persons with 
disabilities. And many of the additional 34,000 Section 8 housing 
vouchers will aid non-elderly, disabled individuals.
    Initiatives such as the HOME Investment Partnerships Program and 
the Community Development Block Grant (CDBG) address the Nation's 
critical housing needs and stimulate economic development and job 
growth. Combined, these two programs will distribute an additional $200 
million in formula funding to State and local governments.
    We have increased CDBG formula grants next year by $95 million, to 
$4.4 billion. In addition, we have proposed changing the distribution 
of CDBG formula funds by reducing the size of grants going to the 
wealthiest communities. This will help bring dollars into those areas 
where they can do the most good.
    I am excited about a brand-new concept to address the large backlog 
of repair and modernization projects in public housing. The Public 
Housing Reinvestment Initiative represents a new way to leverage the 
value of public housing by allowing public housing authorities (PHAs) 
to borrow funds to make needed capital improvements. This will unlock 
the value of public housing assets by allowing PHAs to convert public 
housing units to project-based vouchers. The PHAs can obtain loans by 
borrowing against individual properties--similar to private-sector real 
estate financing.
    Innovative thinking like this represents a departure from the way 
things were done so often in the past--but being effective does not 
have to mean spending more money. Government works best when government 
serves as steward and facilitator, and measures success through 
results. By facilitating the involvement of new local partners, the 
Public Housing Reinvestment Initiative will breathe new life into 
public housing communities.
    I am proud of the HUD budget and the way it reflects the 
Administration's commitment to efficiency, accountability, and the 
principles of excellence expressed through the President's management 
scorecard. When government spends efficiently, the funds go much 
further. We reach more citizens. We help to change more lives.
    The people of HUD know that the American Dream is not some 
unattainable goal, because we see it achieved every day, so often by 
families who never imagined owning their own home or reaching economic 
self-sufficiency. Through our budget--and the continued commitment of 
President Bush--citizens will have tools and opportunities they can put 
to work improving both their lives and their communities . . . as they 
travel the road to achieving their own American Dream.
    I would like to thank each of you for your support of my efforts. 
The Subcommittee's guidance throughout the appropriations process last 
year was invaluable. I look forward to working with you in moving the 
fiscal year 2003 HUD budget forward, and I welcome your continued 
counsel as we work together on behalf of the American people.
    Thank you.

                           CORE HUD PROGRAMS

    Senator Mikulski. I know my colleague, Senator Bond, will 
ask in great detail the Section 8 questions. It is an issue in 
which we share identical concerns. And I know both of us are 
concerned with what is happening to the renewals, the whole 
issue of a database, and, most of all, the issues around 
production.
    Let me go to the core HUD programs. First of all, we know 
that there is a modest increase in CDBG, which we appreciate. 
But let me talk about the concerns I have in elderly, disabled, 
and Shelter-Plus. I note that in the administration's request, 
they did not fund Shelter-Plus Care. Estimates say that this is 
a need for about a $100 million program. This is viewed as one 
of the real effective programs to serve the homeless. Could you 
tell us the rationale behind it not being funded? And what then 
would be other alternatives to shelter-plus care?
    We were blessed this year with a mild winter. But still, if 
you are outside, no winter is mild.
    Secretary Martinez. No, I understand.
    Senator Mikulski. This was so much more comprehensive 
because it was service empowerment connected, as well as the 
temporary shelter one. Could you give us the thinking on that?
    Secretary Martinez. Well, Senator, first of all, let me say 
that I am, you know, very passionate about the homeless issue. 
And I have, since this summer, been saying that we should 
attempt to eradicate chronic homelessness in the next 10 years. 
And I think this is a dual goal, if we look at chronic 
homelessness as something that has much to do with problems 
that are ancillary to an issue of shelter, but more are really 
dealing with a person's mental state, or addiction issues, or 
other problems which is going to take this combined effort of 
the interagency council that we have put together to begin to 
bring to bear all of the resources of the Federal Government on 
this issue, so that we can make a difference and advance the 
issue forward.
    On the funding issue that you mentioned, though, what we 
have is a proposal that consolidates funding for cities, 
county, and State governments and would be based on a 
streamlined approach. No unit of government would be 
automatically entitled to these funds. Instead, eligible 
recipients would have to prove that their performance in 
expending funds met strong performance standards before a grant 
recipient is allowed to continue to receive the funds.
    But in terms of shelter care, the funding issue that you 
mentioned is that it was double-funded. And the Administration 
has had a policy of not forward funding. So the 2003 is funded 
through the appropriations in the year 2002. And we are now 
seeking to continue in that vein. But then, 2004 will present a 
new challenge, and we will deal with that at that time. So our 
goal is not to fund that, but simply to utilize the funding 
that was provided in prior appropriations and that should take 
care of 2003 expenditures.

                              HOMELESSNESS

    Senator Mikulski. Well, Mr. Secretary, advocates for the 
homeless would dispute the OMB analysis. First of all, I think 
we are all agreed in a national goal. If we could work together 
to really have a foundation for eliminating chronic homeless in 
a decade, that would be a stunning achievement, because we have 
at so many of these programs for so many years, even going back 
to when----
    Secretary Martinez. Sure.
    Senator Mikulski [continuing]. Mr. McKinney slept on a 
grate, Congressman McKinney. So, I think we want to do that.
    The advocates for the homeless would dispute the whole 
issue of the double-funding, and then they would analyze it, et 
cetera. So why do we not just have our staffs get together----
    Secretary Martinez. Yes. We would do that.
    Senator Mikulski [continuing]. And talk about this----
    Secretary Martinez. I think we can walk through----
    Senator Mikulski [continuing]. So that we can assure that, 
number one, we work towards this national goal, that a core 
program in which there is experience and seasoning work. We 
know these are competitive grants. They are not micro-
entitlements, which means it keeps everybody on their toes with 
fresh thinking and, yet, accountability.
    Secretary Martinez. If I might just assure you that the 
intent is the same. It is an issue of the mechanics of funding, 
but that there is no desire or intent to not continue to fund a 
Shelter Plus Care program.

                            ELDERLY HOUSING

    Senator Mikulski. Well, let us then go to the housing for 
the elderly. As we understand it, the elderly housing request 
is $783 million, the same as last year. And I believe that was 
pretty much the same as the year before. I am concerned about 
the whole issue of renewals and the increase in renewals.
    My staff says the renewals this year will cost $15 million, 
and that the renewal demand is growing. By their analysis of 
what the renewal cost will be the renewal costs are more than 
they were last year, which means----
    Secretary Martinez. Which program are we----
    Senator Mikulski. We are talking about elderly.
    Secretary Martinez. A voucher--elderly--I am sorry, I am 
not with you on this.
    Senator Mikulski. We are talking about the elderly 
vouchers; excuse me.
    Secretary Martinez. Okay. I am sorry. Okay. I wanted to 
make sure we are on the same page.
    We are fully funding, although it is a flat funding level, 
but it is fully funded from what it was in the prior year.
    Senator Mikulski. You think you are going to have enough 
money to meet the renewals and to also--they are nodding their 
heads. Why?
    Secretary Martinez. I believe--yes. We feel comfortable 
with what we are requesting, that we will be able to fund all 
renewals.
    Senator Mikulski. Well, again, the sole renewal of 
contracts, that is another area of concern that, I think, 
requires further conversation.
    Secretary Martinez. We should obviously----
    Senator Mikulski. And the way we say further conversation 
is that Senator Bond and I both have a very big amendment on 
the floor this year, this minute.

                                HOPE VI

    Let me get off the renewals and go to HOPE VI. HOPE VI is 
scheduled to be re-authorized. Some people call it a big 
success. Some people call it too costly. Some people say that 
the poor have been displaced, not to be able to come back to 
the very community that was helped or rebuilt. And also, HOPE 
VI has now been here for a while. So the question is: Where are 
we on the future of the HOPE VI? My question will be: What is 
the Administration planning to do for analysis and 
recommendation for the re-authorization? Senator Sarbanes and 
I, Senator Bond, and I know Senator Graham want to work very 
closely on this.
    And then, is it really time to think totally different 
than--have we been? HOPE VI was created to deal with severely 
distressed public housing. It came out of a housing report more 
than a decade ago. Could you give us a navigational chart for 
where you want to go with getting us ready for re-
authorization?
    Secretary Martinez. Well, first of all, we think----
    Senator Mikulski. And should we re-authorize it at all? 
Should it be sun seted?
    Secretary Martinez. No. First of all, we think it should be 
re-authorized. We think it is a very positive program and one 
that has done a lot of good across the country. We believe that 
there are some things that we should do, as we go forward with 
the program, and some improvements that we think would make it 
even better. I think that we need to be very cautious about the 
dislocation issue and the way in which we administer that, to 
ensure that people are treated with the best amount of not only 
good intentions, but also good outcomes in terms of their 
relocations.
    We need to also be aware of the number of units that are 
devoted to the people who are living in public housing. And it 
can be done. We have a project here in the District where 100 
percent of the residents of public housing are going to be 
coming back to the new project in a new, reconfigured 
development. And I think that is very positive.
    We believe that we need to even out the playing field, 
because I think that in the past there has been a great 
accumulation of HOPE VI grants in certain communities who have 
not the capacity to put out the projects because so much money 
has come to them. And we need to make sure that we are allowing 
other communities to participate in the HOPE VI program. In 
other words, I think it was focused on some of the most 
egregious mistakes of public housing. I think now we need to 
make that more available to more places around the country.
    Senator Mikulski. Well, are you doing an internal analysis?
    Secretary Martinez. Yes, we absolutely are. And we will be 
coming to you with recommendations. We believe a number of 
these things can be done within the existing statutory 
framework. But we want to have that discussion and present to 
you what our recommendations will be.
    Senator Mikulski. So you have an internal analysis going 
on? And then you are also, I presume, working with the Urban 
Institute, who has been conducting an almost ongoing 
longitudinal study of lessons learned from HOPE VI? Because 
what we wanted was not a real estate program. We did not want 
to do real estate development. We wanted to do community 
building----
    Secretary Martinez. Right.
    Senator Mikulski [continuing]. Both in terms of a fiscal 
infrastructure, but also a social infrastructure that took the 
people not only away from distressed public housing, but 
through empowerment, job training, stakes in the community, et 
cetera.
    Secretary Martinez. There are some terrific examples out 
there. And we are going to be working with the Institute. In 
fact, I can recall being in Jacksonville, Florida, where they 
have done not only a redevelopment of HOPE VI, but they have 
also incorporated in it Habitat for Humanity housing within the 
property of what was previously a public housing community.
    And so, the public housing residents can then progress into 
home ownership right there, in the same area as people who 
built the house and then move on to a nicer house. So they have 
a nice cycle of progression going on in the project in 
Jacksonville, which I think is noteworthy. But yes, we are 
definitely pursuing that and working with the Institute.
    Senator Mikulski. Well, I am going to turn to my colleague, 
Senator Bond. When do you think your analysis will be 
completed?
    Secretary Martinez. Well, I am told the Urban Institute 
draft is now complete. So we should have a report--the Congress 
had asked by June 15.
    Senator Mikulski. That is fine. Thank you.
    Secretary Martinez. I think that would be the target date 
that we should use.
    Senator Mikulski. Thank you very much.
    Senator Bond?
    Senator Bond. Thank you very much, Madam Chair.
    And thank you, Mr. Secretary, about your kind words about 
HOPE VI. As one of the fathers of the program----
    Secretary Martinez. Yes, sir.
    Senator Bond [continuing]. I am glad you did not trash it 
totally out of the----
    Secretary Martinez. You should be----
    Senator Bond. And we are very proud. Murphy Park in St. 
Louis, which really was the prototype, shows great promise. And 
we are working on Darts-Webby and some of the others. But 
having said that, we know that the costs are too great in many 
areas. And the Federal Government winds up with significant 
soft costs.
    So we are, while we think the program is going in the right 
direction, we really would like to reform it and make sure we 
get our money's worth out of it. Because it has the potential, 
it meets a great need, we want to make sure it does it in a 
responsible manner.

                   CONFIRMATION OF INSPECTOR GENERAL

    Turning now to your comment. I want to build on your 
comment about the need to get an inspector general confirmed. 
And I am very distressed with what is being held up. Because 
with the Department going through the kinds of changes that you 
are, you need a new broom to sweep clean. And I am very much 
concerned that a couple of my colleagues--and I say this for 
the record. And I will be more specific when I go to the 
floor--several of my colleagues are holding up the nomination 
of the HUD IG because HUD has refused to provide preferential 
treatment and funding for HUD projects in Pittsburgh and 
Indianapolis.
    I have very strong concerns about the proposed resolution 
of the issue, because it would hold a community group harmless 
upon default of a HUD debt on a project it owns and for which 
it has promised to maintain as low-income housing for some 30 
to 50 years. I understand these projects are in poor shape and 
may not be appropriate for where they are located. But I would 
really hate to see HUD end up rewarding the community group 
with future project funding arising from this very same 
transaction, despite the failure of the group to meet its legal 
obligations.
    I do not believe it is appropriate that HUD provide 
incentives for any number of owners to walk away from HUD 
projects when it suits their convenience. And I intend to 
provide support for HUD so it is not pushed into that position.
    Would you care to comment?
    Secretary Martinez. Well, Senator, I appreciate your 
comments. I believe that having a confirmed Inspector General 
is very, very important to HUD's work at a time when we are in 
the midst of serious investigations dealing with Anti-
Deficiency Act violations by an agency under HUD tutelage, 
which has been of great concern. It is an issue where that 
Department, that agency, that entity needs the leadership of an 
Inspector General and has been languishing for months.
    The fact is that we have tried to be as flexible as we 
could to provide assistance to communities by working with 
them. And we have bent as far as we can bend in good 
conscience. We will not go beyond good conscience. And at some 
point the Senate, in its wisdom, will have to determine what 
happens to the nominees of HUD.
    The fact is that we are doing the best we can with the 
people we have there. It would be great to have the nominees, 
but at some point we have to do what we think is right for all 
the American people. And then others will have to search their 
conscience to do what they think is right.
    Senator Bond. Stay with it, Mr. Secretary. I hope Senate 
wisdom is not an oxymoron.

                            STAFFING ISSUES

    Turning to HUD staffing, over the last few years, the 
Department depended on community builders to administer most of 
the functions of the Department, without regard to program 
needs or staff expertise. You now issued a new realignment and 
redevelopment plan. I think it is extremely important. This is 
one of those non-sexy issues that is critical for the 
successful management of your Department.
    What is the status of it? Do you expect to have to hire 
additional staff? And what will the impact on HUD's Salaries 
and Expense account be?
    Secretary Martinez. Well, first of all, let me say that 
every function at HUD should be tied to a programmatic area. 
And so therefore, we took about 800-and-some-odd community 
builder positions and have redeployed them back within the HUD 
system. What we have done is we have done this with no layoffs 
and no firings. We have done it also with only a very minimal 
number of upper management changes in terms of locations. So it 
has been very, very little disruption to the work force, while 
at the same time bringing people into focus to a specific 
program area where they should be deployed. This is already 
well under way, pretty well taking place. And as a result of 
it, I think we will have some period of time to just see how it 
all shakes out in terms of the number of FTE's that we have.
    We had--last year, at the beginning of our budget process, 
we had about--a number of vacancies.
    How many vacancies? Several hundred?
    So, we believe that we do not need new positions at this 
point, because we are going to try to fill in those extra 
several hundred vacancies that we had. And as we do that, 
obviously in natural attrition taking place, we could not 
really handle bringing in more people than that anyway, not 
doing it prudently and judiciously.
    Something else we are doing, Senator, is we are retraining 
folks as we do this redeployment so that I do not hear the 
stories I heard when I first visited in some communities. And a 
HUD employee would tell me: I used to be in housing. Now I am 
in public housing. I do not know anything about public housing. 
So I do not know what to do on my job. Because there were no 
dollars for training. So we are making sure that work force is 
trained for the job to which they are assigned.
    Senator Bond. Sounds reasonable.
    If you would permit me, Madam Chair, I want to follow up--
--
    Senator Mikulski. Senator, I know that you are the lead 
sponsor with Carl Levin on this amendment. And I will be 
joining you at that 11 o'clock meeting.
    Senator Bond. Okay.
    Senator Mikulski. But why do you not take your time, so you 
do not have to worry about a second round? And then I will do 
the wrap-up. Does that sound good?
    Senator Bond. I tell you what, let me just ask the public 
housing questions. I need to see a constituent outside. And I 
will come back and take one more, maybe take one more round.
    Senator Mikulski. Okay.

                      PUBLIC HOUSING CAPITAL FUNDS

    Senator Bond. But let me focus, Mr. Secretary, on the 
Public Housing Capital funds. A proposed $400 million reduction 
in Public Housing Capital Funds, I think that is very 
excessive. I would ask you how OMB justifies the reduction from 
public housing.
    Secretary Martinez. Well, first of all, Senator, I think we 
made some very substantial changes in the way that Capital Fund 
is utilized last year. And I think that the Congress ought to 
be commended for that. I think it will be very, very positive 
in the way that it assists the utilization of the dollars. 
But--and better management of them as well.
    I think the concept there was to try to initiate a new way 
in which we could allow project funding to obtain financing to 
redo these projects and allow them to be modernized by using 
private financing. To the extent that may be successful, and we 
think it can be successful, we believe it can advance the 
opportunity for projects within a public housing unit to be 
improved and modernized.
    If that were not to work, I did not intend, in any of our 
discussions with OMB, that there should be a penalty associated 
with a capital fund for public housing. So I would be prepared 
to come back to you and request additional funds, if, in fact, 
the private financing options did not work and did not prove to 
be successful.
    Senator Bond. Well, Mr. Secretary, I think you got my drift 
in my opening comments. What I see this as is a back door way--
and there have been some in past administrations, apparently 
this administration, that want to voucher out public housing. 
So once you get private funding in, I see this as the camel's 
nose under the tent, that you take the best projects, you get 
private funding for them, then you just support them on 
vouchers. And you really change the nature. And you put the 
burden--you move the burden to the Section 8 program to keep 
these going, rather than funding them as public housing.
    I think you either see your costs go up with Section 8 and 
pay a lot more in Section 8 or, if you do not keep it filled 
with Section 8 people, you are going to lose some of the best 
quality public housing to market rate or to others.
    So, I see this as a proposal shifting the cost of public 
housing from the Public Housing Operating in Capital Funds to 
the Certificate Fund. And I see the best units in public 
housing converted to private housing with the inventory of 
affordable housing in many market places shrinking. Why am I 
wrong in that assumption?
    Secretary Martinez. I am sorry, Senator. I am----
    Senator Bond. What is wrong with my assumption? Can you 
allay my fears and suspicions?
    Secretary Martinez. Secretary Liu and I were just 
discussing it, because I wanted to have a chance to have the 
benefit of his thinking in how I should respond to your 
question. I think that----
    Senator Mikulski. His questions really express my 
sentiments completely. We are like twins on this.
    Secretary Martinez. I am going to ask Secretary Liu if he 
could touch on this a little bit.
    Mr. Liu. Senators, the proposal was by no means from HUD's 
view, a back door way, nor intended to be a way to voucher out 
the program. We clearly see this as another tool, similar to 
what we have developed under moving to work, where housing 
authorities have been very aggressive in utilizing that 
mechanism to go into the bond markets to get very sizeable 
investments from the private sector, as well as doing debt 
financing.
    But a key barrier that they have found is that our subsidy 
methodology, whereby we give capital funds in the aggregate, 
makes it much more difficult for them to target specific 
project sites in which they can then bring in at a much more 
reasonable time frame; i.e., in our lifetimes; the dollars to 
deal with the needed backlog, which was mentioned by the 
members in their opening comments.
    We also see, in fact, that this is a methodology that could 
possibly deal with the need to develop more affordable housing. 
By project-basing a building, initially, say if you have 100 
units, that does not mean that those 100 units need to be 
locked into that physical setting for all time. It allows--it 
gives the option. And again, this whole program is optional. 
This is not something that we would be mandating any housing 
authority to move into. It would allow a particular housing 
authority to move a segment of units, or the value of those 
units, to other properties that they might either acquire or 
want to develop to create even more affordable housing.
    So, we view this as another tool among many; not a panacea, 
but another tool to give housing authorities greater 
flexibility in which to attract their needed financing to deal 
with their major rehab or potentially new development needs. We 
have tremendous interest by a number of housing authorities. I 
was out in Fairfax just 2 weeks ago. They would love to be able 
to use this tool.
    We have had calls from ``Moving-to-Work'' cities that right 
now looked at the concept and felt that, boy, perhaps they 
could do it under ``Moving-to-Work'' right now. So, we have had 
very strong interest from housing authorities themselves, and 
from resident groups.
    Senator Bond. Well, obviously your objectives are similar 
to our objectives. But, boy, we really have some questions 
about that road. We really look forward to having further 
discussions.
    And, Madam Chair, I am going to turn the questions back to 
you. Thank you.
    Senator Mikulski. Well, thank you.

                         MILLENNIUM COMMISSION

    Of course, the whole issue of affordable housing and the 
best ways to do it, you know, are really also being addressed 
by the Millennium Commission.
    Secretary Martinez. Yes.
    Senator Mikulski. And while we are pondering this year's 
appropriation, from what I have heard from participants I know 
on the commission, they are really working very hard, can meet 
their deadlines. And it is this committee's intention to hold 
some type of either hearing or round-table with them for these 
discussions, because we know they are intractable.
    But let me come back to----
    Secretary Martinez. May I comment on that, Madam Chair----
    Senator Mikulski. Yes. Please go ahead, sir.
    Secretary Martinez [continuing]. Just to be sure you know 
that we have been very closely monitoring their work.
    Senator Mikulski. Yes.
    Secretary Martinez. Chairman Ravich and I have met on a 
number of occasions, and also Vice-Chair Molineri, or co-chair.
    Senator Mikulski. Yes.
    Secretary Martinez. And so we have been very much keeping 
up with her work. And we would look forward to that kind of a 
dialogue when it comes.
    Senator Mikulski. That is why I say we really look forward 
to that.
    Secretary Martinez. Fine.

              MANAGEMENT INFRASTRUCTURE AT PUBLIC HOUSING

    Senator Mikulski. One of the things we talk about, though, 
the issues of the Capital Fund, the shrinking Capital Fund is 
troubling to me, the same as Senator Bond. What also, though, 
is troubling to me is management infrastructure at public 
housing. So whatever programs we do--and they go to the mayors 
or the county executives, as our able secretary once was and 
still thinks like one.
    Secretary Martinez. Right.
    Senator Mikulski. You know, from reports that I have 
gotten, there are 237 out of close to 2,000 public housing 
authorities that have been scored as ``troubled.'' I do not 
know what ``troubled'' means. But I am troubled, because so 
many of the public housing authorities do not seem to be able 
to keep track of their Section 8s. They do not seem to know 
what to recommend in terms of their backlogs. And I could go 
on.
    Could you tell us what, number one, HUD means when they say 
a public housing authority is ``troubled''; what is its 
criteria? And what is its plans to turn them around? Because so 
much money ultimately comes to them. And if they do not know 
what to do with the money, it certainly is not going to help 
the poor, the communities, et cetera.
    Secretary Martinez. Let me answer your question first in a 
large, global sense. And then I am going to ask Secretary Liu 
to answer in the more specific sense.
    One of the things that I find most distressing in my job is 
to get my morning clips and have my daily review of who has 
been indicted and who went to jail and who was fired because 
they were using HUD funds in the public housing arena.
    Unfortunately, that happens all too often. And I find it to 
be a number of issues with it that, I think, I should comment 
on. First of all, I believe that there has been sort of a 
``boys will be boys''--or ``girls will be girls,'' but a sort 
of an understanding that--that is just part of what happens in 
public housing, that it just often times ends up that way, and 
so be it.
    This Administration has taken an attitude that this is not 
acceptable and that we have got to do better than that. 
Because, you know, at any time, as you very well mentioned, 
that a dollar is misused by a public housing agency and it is 
going to some person whom it does not belong to, that is being 
taken away from a single mother like we met that day at that 
new house that she was so proud to be the owner of, trying to 
raise a couple of young children. And it is about the way that 
people live in America in ways that they should not live.
    We recently have taken administrative action to completely 
manage--or completely take over the management of the New 
Orleans Housing Authority, a troubled housing authority for 
many, many years. I believe that, along with whatever we can 
tell you specifically as to what it means to be ``troubled'' 
and how we bring a housing agency back into better management, 
that there is a tremendous amount of responsibility that rests 
with the Nation's mayors and city councils and governing boards 
of communities that ultimately have the responsibility for 
their public housing.
    And I want to make sure that we, as we go forward and do 
whatever we can from the Federal level, that we do not forget 
to put the responsibility where it certainly lies, which is 
with the Nation's mayors, who appoint the people to the boards 
of public housing, who in turn appoint their executive 
directors.
    So I think it has to be a shared responsibility, part of it 
Federal, but a huge part of it has to be an understanding that 
we will not put up with it and that the locals have got to do 
better.
    Now let me have Secretary Liu on the specifics.

                       PUBLIC HOUSING AUTHORITIES

    Mr. Liu. Madam Chair, there are two evaluations that we 
use, one specifically focused in on the management of the 
Section 8 program and another which looks at larger issues 
regarding performance for the public housing authorities. If 
they score below certain levels, they then are considered 
``troubled.''
    Now even----
    Senator Mikulski. What are the top three criteria, Mr. Liu?
    Mr. Liu. Under Section 8, we have utilization rates, we 
have reporting requirements to report in a timely fashion. Are 
the vouchers that are issued actually issued in a timely 
fashioned? Are people actually placed?
    So, the main thrust of the measurement is the 
Administration getting the vouchers out. And then second, are 
they actually used? Those are the major items which we are 
focusing on. And to put into context, 237 is not insignificant, 
but there are close to 3,500 public housing authorities.
    We have allocated approximately $10 million for the 
provision of technical assistance to address those agencies 
which are troubled, technical assistance in most cases in the 
form of providing contractor help to the housing authority for 
the specific problems that they might have.
    Then within the categories of troubled agencies, there are, 
of course, varying levels. There are some which are border 
line, which might need just a little assistance. Perhaps they 
are just not good in reporting back to us in a timely fashion 
of what is going on. And then, of course, there are the more 
egregious situations, where they need a tremendous amount of 
assistance in providing counseling and providing education to 
home owners, et cetera, apartment owners, et cetera, who are 
involved in the program.
    So that, in a nutshell, is our approach to dealing with 
that and our plan to deal with that.
    Senator Mikulski. Well, first of all, I appreciate that. 
And I want to acknowledge what the Secretary said. Where there 
is fraud, that is totally unacceptable. And I believe that HUD, 
its Inspector General--and I believe we need one approved 
expeditiously. We have to really prosecute. And I mean it in 
the metaphorical sense, through the proper authorities.
    In addition to the overt fraud, there are the concerns that 
I have over incompetency. And then just complacency and being a 
laggard. First, I am going to salute any public housing 
authority that is doing a good job. It is really hard to work 
with the poor, in poor neighborhoods, with crack cocaine 
continuing to be an insidious virus in our communities.
    So for those who are doing a good job, God bless you. But 
for these others, there is this culture that you are talking 
about that is corrosive. And it goes at every staff level. So I 
believe that yes, the mayors or county execs, the local 
governing body, have to take initiatives. But I would hope that 
really what HUD does--and we need to look at this--is set 
national standards and then training of these housing 
authorities where they can also learn from their peers.
    Secretary Martinez. Absolutely.

                        UTILIZATION OF VOUCHERS

    Senator Mikulski. Because ``been there, kind of done 
that,'' knowing what the struggles and challenges are. And that 
is the training aspect.
    I am going to go to the criteria, though. It deals with the 
utilization of vouchers. That is one of the core aspects on 
which they should be judged. But our concern is, are they just 
dumping the vouchers? In other words, if they are measured by 
just getting them out, are they just dumping the vouchers?
    Number two, what are they dumping the vouchers on? A lot of 
the places that I have seen that get Section 8 are really 
dysfunctional housing units. Then we saw what the housing 
Section 8 does by taking over an apartment building and, where 
the poor have a voucher, and they think it means something, but 
it means nothing else than what they had lived in.
    And therefore, what is the criteria for the housing? I know 
landlords do not always want to take the poor. There have to be 
incentives. This is a really big issue about how public housing 
authorities, what is our criteria? What should our criteria be? 
And then also, it comes back to production.
    Now, Senator Bond and I have a big amendment on the floor. 
And we are going to be wrapping up in about 10 minutes. You see 
how all this is linked? I am troubled about us not being able 
to seem to get anywhere with this----
    Secretary Martinez. Well, Senator----
    Senator Mikulski [continuing]. Acknowledging your goodwill 
and your administrative talents. So----
    Secretary Martinez. Well, and let me say that we are 
focused on the issues. And you raise some very good points. I 
think, number one, we should give kudos to those good housing 
authorities. And I know that sometimes the people in the 
industry feel that I am always beating up on them because I 
talk about these problems. We have to talk about the--you know, 
unfortunately, it is the troubled ones that usually get our 
attention. There are many, many hundreds and thousands of them 
that are doing a great job.
    But as to those that are troubled, we have got to pay 
attention to them. You are absolutely right. We have dollars 
that go to training. We have dollars that go to training of the 
executives and the commissioners, as well. And we understand 
the need for us not only to deal with what might be fraud, what 
might be illegality, but also what might be just plain 
management problems. And I think those are important issues to 
focus on.
    In terms of the Section 8 dumping, can you address that?
    Mr. Liu. Madam Chair, as I mentioned, that is a concern, if 
that is going on. But we link not only the issuing of the 
vouchers, we also link the actual placement of people to get 
the right picture, hopefully, across the board.
    Senator Mikulski. I do not know what placement of people 
means, Mr. Liu.
    Mr. Liu. I mean, that once they get the voucher, they can 
actually get into an apartment, that they are actually----
    Senator Mikulski. A safe, sound apartment?
    Mr. Liu. Yes. But then, of course, they have to also follow 
inspection protocols. And they have to report to us on those 
inspection protocols.
    Senator Mikulski. I do not believe a lot of them do it.
    Mr. Liu. Well, we----
    Senator Mikulski. I do not believe they do it.
    Mr. Liu. We hope that we catch them within the numbers that 
you mentioned. And we will be taking the actions necessary, 
remedial in those cases where they are open to that and where 
that can happen, and, of course, prosecutorial, if in fact it 
is required. You are absolutely right.
    Senator Mikulski. Senator Bond. We could talk all day about 
this.
    Senator Bond. Thank you, Madam Chair.
    Let me just add--I'll try to make these questions quick. 
And I hope that the extensions can be for the record.

                            MARKET-TO-MARKET

    Market-to-Market is obviously something we have worked on 
for a long time, providing a mechanism to reduce the cost of 
over-subsidized, expiring Section 8 contracts while preserving 
the housing. I would like for you to supply for the record how 
much Section 8 funding has actually been saved by the program, 
how many projects have been preserved with Section 8, how many 
projects have been removed from Section 8 inventories, who 
opted out of their Section 8 project-based contracts.
    And I would just ask if you can comment generally on the 
program?
    Secretary Martinez. Sir, we will provide you with the 
information that you seek.
    Senator Bond. Thank you.
    Secretary Martinez. I think that we have--after a slow 
start, that program, I think, has been hitting its mark, if you 
will. And I think it is doing a good job of preserving the 
Section 8 contracts. So, we feel good about where it is today. 
We think it took a long time ramping up, but we do feel like it 
is beginning to bear some fruit. And we will get you some 
details.

             OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT

    Senator Bond. Okay. Something this Committee has been 
working on for years is OFHEO. It took almost 10 years for the 
Office of Federal Housing Enterprise Oversight to issue risk-
based capital standards for Fannie Mae and Freddie Mac, despite 
a requirement that they be issued within 18 months of the 
appointment of the director. I am very much concerned about a 
proposal that would remove funding for this office from the 
jurisdiction of the Appropriations Committee.
    We see no good reason provided for the recommendation. 
Frankly, it is because we have been on their case because they 
have failed to do their job. We ought to kick them and stomp 
them and make them do their job. And now somebody thinks that 
they would be better if they did not have our kind in general 
oversight.
    A number of groups that do business with the GSE's and who 
will be impacted by the regulation express concern that there 
will be little accountability of OFHEO for possible decisions 
that could damage financial markets. Do you have any views on 
where OFHEO ought to be and what is the best way to ensure its 
accountability?
    Secretary Martinez. I believe that it should be under your 
continued, gentle guidance. And I think that anything we can do 
to strengthen OFHEO, to improve its ability to do its 
regulatory work by having an OFHEO that is enhanced in its 
ability to do what it does, staffing and otherwise, I think it 
is to the good. I think that GSE oversight is a very, very 
important thing to our markets and to our economy. And I 
believe that the best place to do this is within the current 
OFHEO frame work but with a strong, viable OFHEO.

                  INTERAGENCY COUNCIL ON THE HOMELESS

    Senator Bond. And finally, a couple years ago, the 
Subcommittee reactivated the Interagency Council on the 
Homeless, because we were very much concerned that we needed 
much better coordination in the programs and activities to 
prevent and end the tragedy of homelessness. We made a number 
of important changes in the operation to ensure that it was not 
a HUD-driven process and that the council receives the support 
it needs from The White House.
    We are thrilled that Philip Mangano has been selected to 
head the Council. But I want to make sure the Administration is 
complying with the letter and intent of the legislation to 
ensure that we have full participation from the various 
agencies, and it is not solely a HUD-driven exercise.
    Would you care to comment on that?
    Secretary Martinez. Yes, sir. And let me assure you that is 
the case. It is intended to be a White House-driven initiative. 
Mr. Mangano was hired through The White House. He is going to 
be housed at HUD physically, but it is going--that inter-agency 
council, which had not convened since 1997, we are now bringing 
it into full activity. We are doubling the budget for it. And, 
in fact, the other departments that are asked to be 
participants in that are going to be asked to participate.
    Secretary Thompson and I have met on the issue of 
homelessness before. We both sent together our people to work 
together to try to come up with the kinds of interaction and 
conversation that would lead to better outcomes and not just 
bureaucratic turf protection. But I assure you that my intent 
is not to dominate this debate but to share that opportunity 
with my colleagues in the Cabinet.
    Senator Bond. Thank you very much, Mr. Secretary. I will 
have questions for the record on Section 8 fraud and abuse by 
non-profits in D.C. and some more on the homeless issues. There 
are so many things. Unfortunately, I have to leave. But I 
appreciate it, Madam Chair.
    Secretary Martinez. Thank you, Senator.
    Senator Bond. Thank you very much.
    Senator Mikulski. Senator Bond and I, along with Senators 
Allen, Stabenow, and others, have an amendment on the CAFE 
standards. And for us, it is a big job issue. And it is a 
pretty intense day.

                           PREDATORY LENDING

    Mr. Secretary, as we wrap up, I want to thank you for the 
ongoing engagement of HUD and your able staff on the predatory 
lending issues, both using Baltimore as the laboratory, and 
also--continuing to address these on a national level. I also 
note in the audience is Laurie Maggiano from HUD, and we want 
to thank her for her ongoing involvement. We really appreciate 
her professionalism and pragmatism in dealing with these 
issues. So, we want to thank you for that, as well as we get 
ready issues to work on the Prince George's issue.

               NATURALLY OCCURRING RETIREMENT COMMUNITIES

    I was so pleased to hear you say that you are having 
ongoing conversations with Secretary Thompson, because another 
issue I know the Committee shares is what they call the NORC's, 
the Naturally Occurring Retirement Communities, that cannot be 
solved with housing and cannot be solved with social services 
by themselves.
    And I know HHS is embarking on some demonstration projects 
to look at how to deal with this. And I would ask your staff to 
liaison very assertively with those. Because I think this is a 
significant issue that is emerging. And with common sense and 
creativity, I think we can really be doing some very good 
things.

                   COMMUNITY DEVELOPMENT CORPORATIONS

    And the last issue is, and it comes back to what we 
discussed with public housing authorities, capacity building. 
We need to be looking at building housing and promoting home 
ownership. But the people issues, I think, are--not only the 
poor people, but those who administer programs. I would really 
encourage you to look at this for our public housing 
authorities but, also, how HUD can work with Neighborhood 
Reinvestment or some of the other groups can work to think 
about how we can think about capacity building for our CDC's.
    One of the things that is emerging in my own home town are 
even certificates and programs now for non-profit management. 
The non-profit sector is such a robust sector, as you know. And 
we are public/private partnership----
    Secretary Martinez. Sure.
    Senator Mikulski [continuing]. We are a public/private 
partnership group here. But CDC's are so uneven in terms of the 
executives' abilities, background, and training. Again, this is 
no fault.
    Secretary Martinez. Right.
    Senator Mikulski. And also, even their boards. You know, if 
you are in a private sector, you have board scrutiny and 
transparency and all those things; we are held accountable. But 
non-profit boards, very often it is volunteer work.
    Secretary Martinez. Right.
    Senator Mikulski. And some of the board members, a lot of 
the board membership are community-based people who have not 
had experiences with accountability. They want to do these 
things.
    And I think that this whole issue of capacity building is 
something that we need to think about. I am not looking to put 
a line-item in the bill; I am not looking to do this. But 
Neighborhood Reinvestment has done a lot of this thinking. And 
I would like HUD to think about it, too.
    I think we need to go over after the CDC types that really 
skim the system or game the system. I think they are few. So, 
should we have a CDC certification program, if you will? But I 
am interested in those CDC's where the executive director is 
either a bachelor of arts, maybe like in my own field of social 
work, that did not have business training, or it could be a 
community leader, who is charismatic, who is compelling, who 
knows how to save a neighborhood, but wants to operate it like 
out of a cigar box herself or himself and has not had that 
background.
    And things do not work out. And we want to be sure that 
they do work out. And I know this has to be solved at the local 
level. But I am looking, then, for creative ideas, because I 
truly believe the Community Development Corporation could have 
the same impact on communities as our small to mid-sized 
business. It is where the new ideas are. It is closest to the 
people. It should be governed in a way that reflects those 
local needs and so on.
    But I am really looking at ideas on how we can facilitate 
empowerment and training initiatives at the local level. And it 
might----
    Secretary Martinez. I was just going to say, Senator, I 
share your passion for that, because I think that is an engine 
of ingenuity and----
    Senator Mikulski. That is a great phrase.
    Secretary Martinez. But I think in addition to that, that 
HUD does a disservice to these organizations when we waive 
rules and facilitate them getting in over their heads. And 
clearly, that is what happened in the District of Columbia 
example that we have been talking about today. I think when HUD 
works best is when HUD forces the system to operate within the 
guidelines that have been well laid out by the Congress and by 
regulations, to ensure that the organizations receiving the 
funding or receiving the housing opportunities are 
organizations that have the capacity. And if they do not, we 
can work with them to build them to that level.
    But when we weigh the rules and pretend that is all going 
to work out okay for some more immediate purpose, frankly, that 
sometimes just does not work. And there was a tragic example 
here in the D.C.; example, where a number of rules were waived 
and they should not have been.
    Senator Mikulski. Well, I think that is a very good point. 
But again, along with that, because I think there is the 
criteria of getting rid of the fraud and focusing on those 
issues. But I really would hope you would also look within HUD, 
the non-profit sector that I know you have an excellent 
relationship with, and perhaps even--like Neighborhood 
Reinvestment. That is only a suggestion.

                     ADDITIONAL COMMITTEE QUESTIONS

    And it is this committee's intention to have a longer 
conversation with you on some of these priorities. And I really 
want to thank the President and your leadership. Because the 
stresses of homeland security are indeed there, both from a 
physical as well as a psychological standpoint in our 
communities. And the fact that we could stay the course is very 
good. And so we are going to look at how we can make even wiser 
use of the money, empower the poor, build neighborhoods, and 
build capacity.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

           Questions Submitted by Senator Barbara A. Mikulski

                          incremental vouchers
    Question. The fiscal year 2003 budget request includes 34,000 new 
incremental vouchers. All of the vouchers requested are targeted to 
specific populations. What is the justification for targeting versus 
providing some of the vouchers on a fair share basis?
    The Administration's budget proposes to make $40 million for people 
with disabilities available from the request of $204 million for 
incremental vouchers. This would allow for funding of approximately 
7,900 vouchers for non-elderly people with disabilities that have lost 
(or are expected to lose) access to public and assisted housing as a 
result of projects being designated as ``elderly only.'' If Congress 
accepts this recommendation, it would bring the 7-year total for this 
effort to address the impact of ``elderly only'' designation to nearly 
$300 million. Can you update the Committee on HUD's efforts to 
implement and monitor this program?
    Answer. The proposed budget legislation indicates that of the $204 
million proposed for these vouchers, up to $40 million would be used 
for non-elderly disabled; up to $6 million would be used for 
initiatives related to the Olmstead decision, that allows the use of 
vouchers for persons currently living in institutions to live 
independently; and up to 500 units will be dedicated to homeless 
veterans pursuant to the Homeless Veterans Comprehensive Assistance Act 
of 2001. The rest would be split among the other uses including fair 
share with particular emphasis on downpayment assistance.
    Out of the $204 million designated for incremental vouchers, the 
Department proposes to make $40 million available for non-elderly 
persons with disabilities living in public housing units or other 
subsidized housing units that are now being designated for occupancy by 
``elderly only''. This $40 million will support approximately 6,700 
vouchers.
    From fiscal years 1997 through 2001, approximately $210 million has 
been appropriated for non-elderly disabled vouchers under the Housing 
Certificate Fund. Of the total $210 million, approximately $150 million 
was used in connection with ``elderly only conversions'' based on the 
applications received by HUD for such funding. The remaining $60 
million was transferred to the mainstream program because HUD did not 
receive sufficient applications from Public Housing Agencies (PHA) for 
elderly only conversions to make full use of these funds. In fiscal 
year 2002, another $40 million was enacted that are expected to support 
additional 7,900 vouchers.
    Question. Specifically, can you provide additional information 
regarding: a) whether housing authorities receiving these vouchers are 
making them available exclusively to people with disabilities after 
their initial 1-year term,
    Answer. PHAs are advised in the Notice of Funding Availability 
(NOFA) that PHAs are required to initially make these vouchers 
available only to non-elderly disabled households even if it takes more 
than 1 year to initially issue these vouchers for this purpose. 
Furthermore, the NOFA also directs PHAs that if any of these vouchers 
are returned within the first year term of the annual contributions 
contract, the turnover voucher must be made available to another non-
elderly disabled household. In the case of vouchers funded from Section 
811 appropriations these vouchers may only be used for elderly 
households with a disabled person, including the use of any turnover or 
renewals.
    HUD is in the process of developing the ability to track the actual 
number of vouchers used by households having a person with disabilities 
for which funding was specifically provided from the funds available 
for ``elderly only conversions.'' This is in the initial phases of 
development, and will be implemented within 1 year.
    The most recent data shows that 39 percent of the households that 
receive voucher assistance have at least one person with disabilities; 
more than half (22 percent of the total households receiving voucher 
assistance) are non-elderly households with a person with a disability.
    Question. Are housing authorities using turnover generated from 
these vouchers to serve non-disabled families?
    Answer. After the first year is up, these vouchers are renewed and 
the non-elderly disabled households under a lease continue to receive 
the benefit of the voucher assistance. However, after the first year, 
it is up to the PHA to continue the use of any turnover of these 
vouchers for non-elderly disabled households based on local housing 
needs. It is worth noting that once a disabled family uses its voucher 
to lease a unit, the turnover of such units is very low.
    Question. Is HUD providing protection from recapture of these 
disabilities vouchers similar to the protection provided to ``welfare-
to-work'' vouchers?
    Answer. In appropriating funds for families affected by ``elderly 
only conversions'', the objective was to protect persons living in the 
projects, or on the owner's or PHA's waiting list, from any injury that 
would result in their loss of housing assistance as a result of the 
``elderly only conversions.'' Once this initial protection was 
provided, any other household with a disabled person may apply and be 
placed on the waiting list for vouchers or public housing. Many PHAs 
give preference for admission to households having a person with 
disabilities.
    Question. Are housing authorities that have had ``Allocation 
Plans'' approved contingent on seeking vouchers under this program have 
actually followed up and applied for them?
    Answer. Welfare-to-Work (WtW) vouchers are afforded a longer 
``protection'' in order for HUD to comply with the law. Specifically, 
the law authorizing the WtW program requires that HUD conduct research 
and evaluation concerning the effectiveness of this demonstration. In 
order to have sufficient vouchers on which to base its evaluation, HUD 
had to extend the protection given to households participating in the 
WtW program,
    HUD does not have this information at this time. We will conduct an 
analysis of plans approved to date to identify those with approvals 
contingent upon the receipt of designated housing vouchers. We will 
also determine whether these agencies have applied for and received 
designated housing vouchers through NOFAs.
                   community development block grants
    Question. The fiscal year 2003 budget makes a change in the CDBG 
formula in order to fund the $16 million Colonias Gateway initiative. 
How did the Department come up with the new CDBG formula? Was this a 
thorough review of the formula? Please detail the staff and outside 
groups consulted as well as the process the department undertook in 
recalculating the formula.
    Answer. The Department's proposed budget for fiscal year 2003 
requests $4.436 billion in budget authority for the formula CDBG 
program to address locally identified community and economic 
development needs. Although the CDBG program allocates funds by formula 
in a way that targets most funds to our neediest communities, the 
current formula distribution of these funds also provides grants to 
higher-income communities. Because of the great disparity in per capita 
income among our grantees, the budget proposal seeks to re-evaluate the 
method of allocating the limited resources of the CDBG program.
    A legislative change has been proposed for fiscal year 2003 to 
reduce, by 50 percent, the amount of the grant to communities with per 
capita income equal to, or greater than, two times the national 
average. It must be noted that this proposed legislative change is 
intended to further target limited CDBG funds to the neediest 
communities. If this proposal is enacted, the Department will use data 
on per capita income from the 2000 Census to identify the communities 
whose funding would be reduced.
    The funds captured by the 50 percent reduction would become 
available to other entitlement communities with lower per capita 
incomes and would not directly fund the Colonias Gateway Initiative. 
However, the savings achieved by this movement of funds to more needy 
communities would create room in the budget to provide resources for 
the Colonias Gateway Initiative, which is designed to serve some of the 
poorest communities in the Nation.
    The Department does not consider this a new formula for CDBG. The 
data from the 2000 census needed to do a professional and comprehensive 
analysis of the CDBG formula should be available this fall. We expect 
to do a study and present it to Congress for their consideration next 
spring so that consideration could be made for the 2004 allocation of 
funds. Rather than wait for the process and a full examination of the 
formula, we chose to propose this adjustment to move a limited amount 
of funds from very wealthy communities. The Administration did not do a 
formal consultation on this issue.
                           shelter plus care
    Question. The fiscal year 2003 HUD budget does not request funding 
for Shelter Plus Care renewals, but the Department has given assurances 
that these grants will be funded. Is the Department providing a 
guarantee to SPC providers that their grants will be renewed?
    Answer. Funding of renewals will be of the highest priority but 
remain dependant on adequate Appropriation. Grantees must meet certain 
capacity and threshold requirements in order to be eligible to have 
these grants renewed. Funds were provided for contracts that expire in 
fiscal year 2003 in the fiscal year 2002 Appropriations Act and were 
given a top priority. Therefore, the fiscal year 2003 Budget request 
did not include funds for contracts that will expire in fiscal year 
2003. The Department intends to fund contracts that expire in fiscal 
year 2004 from fiscal year 2004 Appropriations, reflecting both the 
expected streamlining of the Homeless Assistance Grants program and to 
be consistent with how renewals are handled in other HUD programs.
    Question. Will the Shelter Plus Care grantees still be required to 
compete and participate in the Continuum of Care?
    Answer. SPC grantees have always been required to participate in 
the Continuum of Care and must be included on the Continuum's project 
priority list. We anticipate that they will be listed at the bottom of 
the list, as they have in the past several competitions, and would be 
funded non-competitively.
    Question. If so, please provide an explanation of how the SNAPs 
office will award and administer the renewals in advance of knowing 
whether they've been funded.
    Answer. The Special Needs Assistance Programs office could not 
award renewals in advance of knowing whether they are funded. If funds 
are appropriated in fiscal year 2004, they should be available for 
award by the time the fiscal year 2003 competition is completed, which 
we anticipate will be in the first quarter of fiscal year 2004.
    Question. Why does HUD consider the SPC renewals to be ``forward 
funded'' by the fiscal year 2002 VA-HUD appropriations act, but does 
not consider the other expiring grants in the SHP program to be forward 
funded?
    Answer. Shelter Plus Care renewal grants have been funded over the 
last several years on a non-competitive basis for 1 year only. 
Supportive Housing Program (SHP) grants, on the other hand, are funded 
competitively, are awarded conditionally, require additional 
information before the grants may be executed, and may be multi-year 
awards. Due to the competitive nature of the process and the length of 
time it takes for a grant to be executed from the time the awards are 
announced, it is necessary to award the SHP grants with funds from the 
fiscal year prior to grant expiration.
    Question. Does the fiscal year 2002 bill also fund SHP grants that 
expire in fiscal year 2003?
    Answer. Yes, the fiscal year 2002 bill funds Supportive Housing 
Program grants that expire in fiscal year 2003.
                empowerment zones/enterprise communities
    Question. The fiscal year 2003 budget eliminates funding for Round 
II empowerment zones, and justifies this cut by saying that ``current 
available balances as well as CDBG and HOME formula funds are 
sufficient to cover needs.'' What are the unexpended balances in the EZ 
accounts?
    Answer. Fiscal year 2002 awards of $3 million per EZ were just 
recently made. Based on funds awarded between fiscal years 1999 and 
2001, unexpended balances are:

----------------------------------------------------------------------------------------------------------------
                                                Total Dollars                                           Percent
State               Grantee Name               Awarded--Fiscal    Total Disbursed       Unexpended       Drawn
                                               years 1999-2001      (Drawn Down)         Balance          Down
----------------------------------------------------------------------------------------------------------------
   MA Boston                                      $18,972,866      $1,550,249.00     $17,422,617.00       8.17
   OH Cincinnati                                   18,972,866       2,707,801.90      16,265,064.10      14.27
   SC Columbia                                     18,972,866       3,863,989.72      15,108,876.28      20.37
   OH Columbus                                     18,972,867       4,238,148.01      14,734,718.99      22.34
   NJ Cumberland                                   18,972,867       6,444,368.78      12,528,498.22      33.97
   TX El Paso                                      18,972,867       3,871,913.23      15,100,953.77      20.41
   IN Gary/Hammond/E. Chicago                      18,972,867       3,213,353.91      15,759,513.09      16.94
WV/OH Huntington/Ironton                           18,972,867       9,073,969.86       9,898,897.14      47.83
   TN Knoxville                                    18,972,867       3,413,759.00      15,559,108.00      17.99
   FL Miami/Dade                                   18,972,867       2,431,148.00      16,541,719.00      12.81
   MN Minneapolis                                  18,972,866       3,975,735.53      14,997,130.47      20.95
   CT New Haven                                    18,972,867       2,982,801.67      15,990,065.33      15.72
   VA Norfolk/Portsmouth                           18,972,866       9,088,428.00       9,884,438.00      47.90
   CA Santa Ana                                    18,972,867       6,283,208.00      12,689,659.00      33.12
MO/IL St. Louis/East St. Louis                     18,972,866       2,755,961.00      16,216,905.00      14.53
                                           ---------------------------------------------------------------------
            Total                                 284,592,999      65,894,835.61     218,698,163.39      23.15
----------------------------------------------------------------------------------------------------------------

    Question. Have any of the EZ's failed to spend funds in the 
allowable time frames?
    Answer. There is no statutory or regulatory timeframe for spend 
out. Thus, none of the grantees have strictly failed to spend money in 
the allowable time frame but both Congress and the Department have 
expressed concern with the pace of expenditures in the program. While 
it is only one of many factors, the efficient use of resources is an 
important one in evaluating a community's revitalization efforts. As 
part of its efforts to improve oversight, HUD is considering a 
timeliness policy for the Round II EZ grant modeled after other HUD 
programs. HUD has learned from over 25 years administering CDBG that 
timeliness of spend out is a risk factor in community and economic 
development programs and has proactively shared this experience with 
EZ/ECs in lieu of issuing a punitive policy. HUD is currently modifying 
its performance measurement system to track grant obligations and 
timely spend out so that the progress of the grantees can be better 
monitored.
                          asset control areas
    Question. The fiscal year 2001 VA-HUD Conference Report expressed 
the Committee's concerns over HUD's implementation of the ACA program. 
The report asked HUD to report on the disposition program by May 15, 
2001. Where is this report?
    Answer. This report was submitted to the Committees on May 31, 
2001. A copy of the report is attached for you convenience.

                      Letter From Sean G. Cassidy

                                                      May 31, 2001.
Hon. Alan B. Molloban,
Ranking Minority Member, Subcommittee on Veterans, HUD, and Independent 
        Agencies, Committee on Appropriations, U.S. House of 
        Representatives, Washington, DC 20515-6022.
    Dear Representative Mollohan: I am pleased to enclose a report on 
the implementation of the Single Family property disposition reforms 
enacted in Title VI of the Departments of Veterans Affairs and Housing 
and Urban Development, and Independent Agencies Appropriations Act, 
1999. The report is submitted in accordance with the requirements of 
Conference Report 106-988 accompanying the Departments of Veterans 
Affairs and Housing and Urban Development, and Independent Agencies 
Appropriations Act, 2001. The report describes actions taken by the 
Department to develop new Single Family claims payment and asset 
disposition procedures and to develop a reformed process for the 
disposition of Single Family HUD-owned properties in revitalization 
areas.
    If you need additional information, please let me know.
            Sincerely,
                                           Sean G. Cassidy,
    General Deputy Assistant Secretary for Housing, Deputy Federal 
                                              Housing Commissioner.
  Report on Implementation of FHA Single Family Property Disposition 
                                Program
Background
    Title VI of the Departments of Veterans Affairs and Housing and 
Urban Development, and Independent Agencies Appropriations Act, 1999 
(the Act) made significant changes to the Federal Housing 
Administration (FHA). single family insurance program.
    Section 601 of the Act contained amendments to reform and make more 
effective the methods for paying insurance claims and, disposing of 
single family acquired notes, and properties: The section:
  --reorganized and updated existing statutory authority to eliminate 
        obsolete or redundant provisions;
  --authorized a new claims payment procedure under which HUD would be 
        authorized to pay a claim upon assignment of the mortgage 
        rather than upon conveyance of the property;
  --authorized HUD to take assignment of notes and transfer them to 
        private parties for servicing, foreclosure avoidance, 
        foreclosure, property management and asset disposition; and
  --authorized HUD to be an equity participant with private entities in 
        asset disposition.
    The changes to the claims and asset management and disposition 
procedures were intended to occur in the overall context of HUD's 
existing procedures for encouraging lenders to perform loss mitigation 
and for contracting to private entities the maintenance and management 
of the HUD owned single family property inventory. Section 601 also 
established certain enforcement mechanisms to ensure loss mitigation 
would continue to be performed so that as many families as possible 
would keep their homes.
    Section 602 of the Act established special procedures for FHA 
single family property disposition. These procedures were designed to 
ensure that the FHA single family property disposition program, in 
addition to providing returns to the insurance funds on an efficient 
basis, could assist the Department in identifying and improving local 
revitalization areas and in providing homeownership opportunities in 
these areas. To do this, section 602:
  --required the establishment of revitalization areas based on low 
        income, a high number of troubled assets, and a relatively low 
        rate of homeownership compared to the surrounding jurisdiction;
  --distinguished between preferred purchasers (local governments and 
        non-profit organizations) and regular purchasers of assets 
        within revitalization areas and established a preference for 
        sale of properties to preferred purchasers;
  --established discounts for preferred purchasers designed, among 
        other things, to facilitate upgrading or rehabilitating the 
        housing; and
  --authorized the establishment of asset control areas (ACAs) within 
        which preferred purchasers, with a plan for revitalizing and 
        increasing homeownership in the area, would become responsible 
        for purchasing all eligible assets.
                           report requirement
    The Conference Report (Report 106-988) accompanying the Departments 
of Veterans Affairs and Housing and Urban Development; and Independent 
Agencies Appropriation Bill, 2001, directs HUD to report to the 
Committee on the implementation of the single family property 
disposition program, enacted as part of the VA/HUD fiscal year 1999 
appropriations bill, including the status of the program and an 
analysis of all savings achieved to date and anticipated to be achieved 
over the first 5 years.
                status of implementation of section 601
    Implementation of claims reform and asset disposition alternatives 
is overseen by HUD's FHA Comptroller with assistance from the Office of 
Single Family Asset Management. HUD secured expert help in structuring 
this alternative disposition program, which is being called the 
Accelerated Claims Disposition (ACD) Program.
Delivery and Presentation on ACD Program Design--Completed
    In January 2000, HUD's program advisor, Federal Asset Advisory 
Corporation (FAAC) delivered the final Program Design which was 
subsequently reviewed and accepted by senior management. In May 2000, 
FAAC finalized the Internal Control and Accounting Report portion of 
the Program Design, which was subsequently reviewed and accepted.
Development of Proposed Regulations--Ongoing
    In October 2000, HUD began developing regulations based on the ACD 
Program design. HUD anticipates that proposed regulations will be 
published by the end of September, 2001. The regulations will describe 
and seek comments on the procedures for determining the disposition 
alternative for individual high risk defaulted loans, and the 
eligibility requirements and other matters relating to the program 
framework. The disposition of individual loans will be determined in 
large part by the probability or improbability that loss mitigation 
will succeed. The disposition alternatives will include: (a) transfer 
to a joint venture, which may proceed to foreclosure but will have 
additional loss mitigation options to explore--such as partial write-
off, recasting and securitization, (b) transfer to a servicer 
specializing in loss mitigation servicing, or (c) assignment of the 
note to HUD in order to use the Department's non judicial foreclosure 
authority.
Engagement of Transaction Advisor--Ongoing
    In January 2001, HUD began the procurement process to hire a 
Transaction Advisor to assist in implementing the ACD Program. HUD 
anticipates having a Contractor engaged by June 30, 2001.
ACD Program Demonstration Project--Imminent
    Before implementing the ACD Program, HUD will conduct a 
Demonstration Project. The Demonstration Project will be limited to the 
mortgage loans within the jurisdiction of the Philadelphia 
Homeownership Center and will initially target 5,000 assets to be 
transferred to a joint venture ``JV'' partnership. HUD's Transaction 
Advisor will assist in assessing the defaulted loan portfolio; 
developing procedures, guidance and quality assurance plans for the 
program; marketing to potential JV partners; evaluating JV bids; and 
assessing project results. HUD anticipates partnering in a joint 
venture by March 31, 2002.
                status of implementation of section 602
Revitalization Areas
    Under section 602 of the Act, revitalization areas are low and 
moderate income communities that are targeted by HUD, local 
governments, and non profits for special assistance through the 
property disposition program to effect stability in the community and 
provide homeownership opportunities for the residents. The law expanded 
the criteria for designation of a revitalization area, which required a 
reassessment of the current guidelines and a consultation process with 
stakeholders.
Undertake Consultation Process--Completed
    The Office of Housing consulted with program participants, 
Homeownership Center Directors, HUD REO Specialists, and others to 
determine the guidelines which should be used in implementing the new 
criteria to make the ACA desigations. Stakeholders, including non-
profits and local governments, worked, with HUD with the objective of 
developing clear guidelines that provide uniformity without being 
overly rigid.
Develop Field Guidance on Revitalization Areas--Completed
    HUD developed and, on August 18, 2000, issued to the Field Housing 
Notice H-00-16 with criteria for reviewing, selecting, and designating 
revitalization areas. As of May 1, 2001, over 800 zip codes have been 
designated as revitalization areas. Within these areas, HUD will work 
with local governments and non-profit community partners to designate 
asset control areas, as described below.
              asset control area (aca) partnership program
Overview
    The ACA Partnership Program assists in the revitalization of 
designated neighborhoods by creating homeownership opportunities for 
the residents through the sale of HUD-owned single family homes. In an 
ACA Partnership, HUD sells 100 percent of its single family homes 
located in designated revitalization zones directly to either local 
governments or HUD-approved nonprofit organizations at discounts of as 
much as 50 percent of appraised value.
    The Local ACA partner selects an ACA territory and presents a 
revitalization plan to HUD for the proposed territory. The ACA Plan 
must demonstrate the local partner's ability to purchase, rehabilitate 
and resell all of the vacant HUD homes in the designated area. The Plan 
also must contain performance goals, rehabilitation standards, and 
supporting services such as homeownership counseling and mortgage loan 
financing. Once the ACA plan is approved, HUD and the local partner 
enter into a formal contract that outlines the terms and conditions for 
partnership.
    Through discounted direct sales, the Partner receives instant 
equity which is used to assist in the capitalization of the ACA. This 
equity can be used to rehabilitate homes and implement homeownership 
counseling programs that prepare potential purchasers for 
homeownership. Additionally, HUD offers 90-day interest free financing 
to the Partner on all of the homes purchased through an ACA Program. 
Once rehabilitated, the Partner resells the home to a qualified 
purchaser. All proceeds from the sale must be reinvested into the ACA 
program. The ACA program empowers the Partners as a driving force in 
the rehabilitation of their neighborhoods.
                     specific implementation steps
    HUD developed a comprehensive five-step process designed to 
implement pilot ACA Partnerships. The pilot partnerships create a 
fertile environment where procedures are developed and tested, 
operational processes are refined, lessons are learned, and best 
practices are implemented consistently throughout the country. The five 
steps are summarized below:
Hire & Deploy REO Specialists--Completed
    HUD, identified REO Specialists to serve as the key coordinators 
for the program. The REO Specialists are deployed in strategic cities 
throughout the country and are assigned various territories. In this 
capacity, these specialists identify areas that qualify for the program 
and market the program to the potential partners. They assist the 
partners in developing their proposals and working through the issues 
of the contract. The specialists also present and gain approval of the 
ACA Partnership proposals and coordinate all aspects of implementing 
the partnerships with HUD's Homeownership Centers.
Create Model ACA Contracts--Completed
    HUD created a model ACA contract for use in the program.
Market the Program--Ongoing
    The REO Specialists performed a detailed analysis of HUD-owned 
single family properties and compared this with the revitalization 
criteria contained in the legislation. From this analysis, they 
identified and assigned priorities to targeted areas for pilot 
programs. The specialists built demand for the program by describing 
the economic benefits to potential partners at various forums such as 
neighborhood workshops and town meetings. Finally, potential partners 
are added after they contact HUD directly and express the desire to 
participate in the program.
Negotiate & Execute ACA Contracts--Ongoing
    The REO Specialists serve as HUD's agents and negotiate all aspects 
of the agreements. They coordinate closely with the appropriate 
executive, legal and operational officials in Headquarters as well as 
the Directors and REO Division Directors of the Homeownership Centers.
Monitor Implementation of ACA Partnership--Ongoing
    Working together, HUD Headquarters, the REO Specialists and the 
Homeownership Centers monitor the implementation of the ACA contracts. 
The ongoing challenges and issues are shared and resolved through 
appropriate workshops and forums.
    Based upon the results of the steps outlined above, HUD implemented 
the ACA Partnership Program, through Administrative means, in October, 
1999. This is to be followed by rule making; which is in process and is 
expected to be completed by November, 2001.
                                results
    The three schedules below illustrate the Department's 
implementation of the ACA Partnership program. To date, HUD has 
implemented fourteen partnership agreements in major revitalization 
zones, vs. five a year ago (Schedule 1). We also have nine partnership 
agreements scheduled to begin within the next 150 days (Schedule 2). 
Finally, seventeen other potential partners have expressed interest in 
participating in this program (Schedule 3).

                                  SCHEDULE 1.--CURRENT ACA AGREEMENTS IN PLACE
----------------------------------------------------------------------------------------------------------------
                                                                              NBR of
                                                                              Prop.        NBR of     Number of
            Place (ACA Partner)                   Date of Agreement        Exected Per    Awaiting    Properties
                                                                               Year       Closing        Sold
----------------------------------------------------------------------------------------------------------------
San Bernardino, CA (County)...............  October 1999.................          450          130          352
Miami-Dade, FL (County Housing Agency)....  December 1999................           60            6           53
Rochester, NY (City)......................  April 2000...................          300          256          154
Chicago, IL, (Hispanic Housing Develop./    May 2000.....................          200           35           78
 Neighborhood Housing).
Fort Lauderdale, FL (City Housing           May 2000.....................           30            2           14
 Authority).
Cleveland, OH (Cleveland Housing Network..  July 2000....................           75           35           82
Reading, PA (City)........................  September 2000...............           75           24           20
Washington, DC (Church Association of       October 2000.................          200           75            0
 Community Services).
Burlington, VT (non-profit)...............  October 2000.................            5            1            1
Denver, CO (City).........................  October 2000.................          100            9            1
Los Angeles, CA (County)..................  December 2000................          500            6            0
Rhode Island (State Housing Authority)....  April 2001...................           12            0            0
Hartford & Manchester, CT (Corp. for        April 2001...................           50            0            0
 Independent Living).
Bridgeport, CT (City).....................  April 2001...................           75            0            0
                                                                          --------------------------------------
      Total...............................  .............................        2,132          579          755
----------------------------------------------------------------------------------------------------------------


              SCHEDULE 2.--ACA AGREEMENTS UNDER NEGOTIATION
------------------------------------------------------------------------
                                                             Expected
                                      Date of Proposed       Number of
               City                      Agreement        Properties Per
                                                               Year
------------------------------------------------------------------------
Prince Georges County, MD........  May 2001.............              60
Lancaster, PA....................  June 2001............              20
St Paul, MN......................  June 2001............              30
Montgomery County, MD............  July 2001............              30
Norfolk, VA......................  July 2001............              30
Allentown, PA....................  July 2001............              40
Bakersfield, CA..................  August 2001..........              35
Ontario, CA......................  August 2001..........              30
Springfield, MA..................  August, 2001.........              50
------------------------------------------------------------------------

                  Schedule 3.--Expressions of Interest
Phoenix, AZ

Compton, CA

Fontana, CA

Rialto, CA

Riverside, CA

Sacramento, CA

Orlando, FL

Palm Beach, FL

Dekalb, County A

Harvey, IL

Yale/New Haven, MA

Baltimore, MD

Baltimore County, MD

Hartford County, MD

Detroit, MI

Coatesville, PA

York, PA

Status of Savings
    HUD's Budget Request for fiscal year 1999 contained legislation for 
claims and asset disposition reform. The budget justification indicated 
that the proposal would allow FHA to maximize returns to the insurance 
funds as well as have benefits to homeowners. The Department also 
indicated that although the legislation was proposed for enactment in 
1999, the program would not take full effect until fiscal year 2002 and 
then phase in through fiscal year 2003. The time lag was to allow for 
full development of complicated financial and other procedures, changes 
in systems, and training both lenders and HUD staff. Savings were not 
anticipated to be available under the program until fiscal year 2002. 
At the time legislation was enacted, the present value of discretionary 
savings attributable to the reforms was scored at $400 million: This is 
included in HUD's baseline budget.

    Question. When will HUD issue the pending rule on the pricing 
structure of the ACA program?
    Answer. On April 5, 2002, the Department announced that it would be 
conducting a full review of the program, and that during the review 
period, existing Asset Control Areas (ACA) agreements would be allowed 
to expire. An important part of this review will be to accelerate 
program rulemaking during the next 4 to 6 months.
    Question. What are the Department's plans for this program?
    Answer. As described above, on April 5, 2002, the Department 
announced that it would be conducting a full review of the program, and 
that during the review period, existing ACA agreements would be allowed 
to expire.
                       accelerated claims process
    Question. The Department's fiscal year 2003 Budget Summary notes 
state that: ``In 2003 FHA will begin to move out of the single family 
property management business and accelerate the claims process by 
taking mortgage notes rather than requiring lenders to foreclose and 
transfer single-family properties to FHA. FHA will sell defaulted notes 
to the private sector for servicing and or disposition, thereby 
eliminating most of the real property that HUD currently acquires'' (p. 
3). Already HUD has proposed a new ``Accelerated Claim Disposition 
Demonstration'' program (Federal Register, Tuesday, February 5, 2002) 
to implement this policy. How will HUD ensure that these distressed 
communities do not again become land banks for speculators who prey on 
low-income families?
    Answer. The ``Accelerated Claim Disposition Demonstration'' program 
implements Section 601 of the fiscal year 1999 Appropriations Act as 
authorized by Congress. The best way to ensure that these distressed 
communities do not become land banks for speculators who prey on low-
income families is to maintain/retain the existing tenure of the 
homeowner and financial investment/asset of the existing families. To 
address its objective of increasing recoveries on the sale of assets, 
the Accelerated Claims Disposition Demonstration will move more quickly 
to address the homeowner issues of default and exhaust all 
opportunities to reinstate the financial viability of the mortgage 
instrument and the homeownership tenure. The simple fact that a period 
of vacancy will be avoided in more cases than under the current process 
and that occupancy will be sustained in more cases will work to help 
fortify already distressed communities.
    Maintaining the initial homeownership tenure and the mortgage 
instrument most effectively thwarts any opportunity for speculators who 
prey on low-income families and preserves the financial investment of 
the asset of that community.
    If foreclosure is unavoidable, the Department plans to include in 
its Joint Venture Partnership Agreement a requirement to use servicing 
and lending best practices that mitigate the risks of predatory lending 
or unscrupulous speculation at the expense of low-income families.
    Even in the few worst cases when foreclosure does occur by the 
Joint Venture partner, it is anticipated that the results of Joint 
Venture decision making will be to invest prior to resale in the 
property making it more likely and suitable to be acquired directly by 
a homeowner rather than an investor.
    Question. What will happen to the ACA program if the Department 
implements the proposed Accelerated Claims Disposition Demo?
    Answer. The areas involved in the existing Asset Control Areas will 
be excluded from the Accelerated Claims Disposition Demonstration in 
2002.
                                hope vi
    Question. How does HUD define ``severely distressed public 
housing?''
    Answer. HUD uses the definition set forth at section 24 (j)(2) of 
the U.S. Housing Act of 1937 (42 U.S.C. 1437v(j)(2)) to define 
``severely distressed public housing.'' The Department has 
operationalized this definition by requiring PHA's who apply for HOPE 
VI to certify through a independent third party architect that the 
criteria identified in the statue have been met and that the subject 
development is indeed severely distressed.
    Question. How many units of severely distressed housing currently 
exist?
    Answer. The Department has over the past decade identified public 
housing units that meet various standards of severe distress and 
obsolescence through the implementation of Section 18, Section 202 
Mandatory Conversion and the HOPE VI program. As a result of this 
combined effort, public housing authorities and HUD have identified as 
of May 1, 2002, 142,392 units that meet the basic criteria for 
demolition. As of May 1, PHAs have demolished or disposed of 80,945 
units. Thus, 61,447 units have been approved for demolition and 
disposition that remain in inventory. In addition, the Department 
received 66 HOPE VI Revitalization applications in fiscal year 2001. 
Together, these applications certified the severe physical distress of 
approximately 18,000 public housing units. (Note that some of these 
18,000 units already received demolition approval and thus are included 
in the 61,447-unit figure.)
                      elderly and disabled housing
    Question. The Administration is requesting $251 million for the 
Section 811 program for people with disabilities for fiscal year 2003. 
This represents a $10 million increase over the fiscal year 2002 
funding. However, according to estimates included in the budget 
request, renewal of all expiring 811 ``mainstream'' tenant-based rent 
subsidies will cost $32 million in fiscal year 2003--consuming more 
than the entire proposed increase for the program--both tenant-based 
and capital advance/project-based. Similarly, the budget requests $783 
million for the elderly housing program, the same amount funded in 
fiscal year 2002, but a greater percentage is designated for renewal 
contracts. What are the estimated costs of renewing contracts in the 
elderly and disabled programs for the next 5 fiscal years?
    Answer. See tables below:

                                       OUTYEAR PRAC/PAC RENEWAL ESTIMATES
----------------------------------------------------------------------------------------------------------------
                                                       Unit                        Avg Per Unit    1-yr Renewal
                   Fiscal year                      Expirations    Unit Renewals       Cost          BA Costs
----------------------------------------------------------------------------------------------------------------
2003............................................           4,037           6,360          $3,403     $21,641,140
2004............................................           3,570           9,930           3,455      34,307,905
2005............................................           4,429          14,359           3,512      50,435,756
2006............................................           2,977          17,336           3,569      61,873,929
2007............................................           2,236          19,572           3,704      71,122,000
----------------------------------------------------------------------------------------------------------------


                                  RENEWALS OF MAINSTREAM VOUCHERS (SECTION 811)
----------------------------------------------------------------------------------------------------------------
                                    First Time                    Total Units to   Avg Cost per       1-yr BA
           Fiscal year              Expirations    Unit Renewals       Renew           Unit        Renewal Cost
----------------------------------------------------------------------------------------------------------------
2003............................           1,845           3,510           5,355          $6,005     $32,156,775
2004............................           1,455           5,355           6,810           6,131      41,752,110
2005............................           2,383           6,810           9,193           6,260      57,548,180
2006............................           2,383           9,193          11,576           6,391      73,982,216
2007............................           1,993          11,576          13,569           6,525      88,537,725
----------------------------------------------------------------------------------------------------------------

    Question. How is the Department planning for growing renewal needs?
    Answer. The full cost of renewing current rental assistance 
contracts are included in the Department's out-year budget estimates 
that are projected for 5 years beyond the budget year and are a part of 
our budget baseline.
                           housing counseling
    Question. I am pleased that the fiscal 2003 HUD budget includes 
increased funding for housing counseling assistance. The budget 
justification includes an estimate that 150,000 additional clients will 
be served by the increased funds. How many people will receive pre-
homeownership counseling? How many will receive post-homeownership 
counseling? How many of the people assisted receive other?
    Answer. Although we cannot say definitively how many clients will 
request any specific type of counseling, recent past experience has 
shown us that a little over a third of counseling clients seek out pre-
purchase counseling and a little under a third seek post-purchase 
counseling (the other third seek rental, homeless, HECM, and ``other'' 
counseling assistance). However, we based our 2003 estimate on the 
assumption that counseling agencies will see an increased volume of 
customers seeking default/post-purchase counseling. The significant 
number of layoffs that resulted from the events of September 11 and 
some slowing of the economy over the past year suggest that more 
families will be seeking assistance with managing their household 
finances to prevent foreclosure. Even in the last few months, anecdotal 
evidence suggests this shift in counseling needs is already occurring. 
Therefore, we expect that the numbers of clients seeking pre-purchase 
counseling will be approximately 50,000 to 55,000 and the number 
seeking post-purchase counseling will be approximately 65,000 to 
75,000. The remaining 20,000 to 35,000 clients would be seeking 
``other'' types of counseling.
                 home downpayment assistance initiative
    Question. If the HOME down payment assistance initiative is funded, 
will prospective homeowners assisted by this program be required to 
undergo homeownership counseling?
    Answer. Consistent with the block grant nature of the HOME Program, 
the decision as to whether prospective homeowners will be required to 
undergo homeownership counseling resides with the local agencies 
administering the program, and many communities do in fact require pre- 
and post-purchase counseling. Consequently, while counseling will not 
be required, homebuyers receiving assistance through the American Dream 
Downpayment Initiative will have the same opportunities to receive 
housing counseling as provided for those who currently receive 
downpayment assistance through the use of regular HOME funds. Should 
the local HOME program managers decide that a family being assisted to 
purchase a home requires or would benefit from pre- or post-purchase 
counseling, they may use some of their regular HOME allocation to pay 
for it or fund this counseling from other resources, including the 
separate assistance provided by HUD specifically for this purpose.
                 departmental grants management system
    Question. As you know, Congress has long had concerns over HUD's 
management information systems, specifically, its inability to assess 
program expenditures, outputs and outcomes. The Department recently 
cancelled its plans to implement the Departmental Grants Management 
System. What are your plans for implementing a department-wide grants 
management system? When can we expect to see such a system, and what do 
you estimate the cost of development will be?
    Answer. The Department of Health and Human Services has the lead 
for developing a common system to be used by all Federal agencies under 
the President's e-grants initiative. Under the e-grants effort, HUD has 
been working closely with the 26 other Federal grant making agencies to 
develop a system that would allow the public to find, apply for funding 
opportunities and then report progress in the implementation of its 
programs. The timetable for deployment of this system as agreed to by 
all the Federal agencies is October 2003.
    HUD has proposed that many of the elements developed for the 
Department's Grants Management System can be implemented as part of 
this larger governmentwide system and has been actively discussing this 
with HHS and other agencies. Under the e-grants, initiative every 
Federal agency would contribute to the effort. The full cost estimates 
for the e-grants system have not been determined at this time.
                                 ______
                                 

                Questions Submitted by Senator Herb Kohl

                     downpayment assistance program
    Question. I am concerned that the set-aside for down payment 
assistance within the HOME program is not the best use of HOME funds. 
HOME currently gives States the flexibility to address the housing 
needs that are most pressing in their communities. I am always 
reluctant to endorse a one-size fits all approach because I usually 
find that Wisconsin loses out. Now, the goal of helping families own 
their own homes is laudable and the State of Wisconsin is already using 
about one-third of the funds it receives through the HOME program for 
homebuyers assistance, leveraging the Federal funds with State, local 
and private funds to get families into homes.
    While I realize this program has yet to be authorized, does the 
Administration propose that the set-aside for downpayment assistance be 
limited to communities with 20 percent poverty levels? I ask because I 
am concerned that this program could direct HOME funding away from 
those who may need it but are not clustered in poor communities. While 
Wisconsin has some significant numbers at the poverty level, our low 
income families are spread out across the State and are not in 
identifiable clusters or pockets in most cases.
    Answer. The concept of ``20 percent poverty communities'' is not 
one that is used in the HOME Program even though, as one might expect, 
a significant number of HOME Participating Jurisdictions (PJs) would 
meet this standard. Consequently, American Dream Downpayment (ADD) 
Initiative funds will not be limited to such communities.
    American Dream Downpayment Initiative funds would be allocated by a 
formula that considers both community need (i.e., the current HOME 
formula) and the past efforts of PJs in providing downpayment 
assistance through their regular HOME program funds. In addition, in 
order to maximize the number of PJs participating in the American Dream 
Initiative, no PJ would receive more than 2 percent of the ADD 
appropriation. Funds made available through use of this 2 percent cap 
would be reallocated to all uncapped PJs. In addition, since PJs that 
have not done homebuyer projects in the past 10 years would be unlikely 
to start now if their share of ADD funds is any less than $25,000, the 
final step of the allocation determination process is to zero out 
allocations for PJs where: (1) the adjusted formula allocation amount 
is less than $25,000; and (2) they have not undertaken any homebuyer 
activities using regular HOME funds during the life of their program.
    Implementing this allocation process for the $50 million fiscal 
year 2002 ADD appropriation will result in Wisconsin PJs receiving 
approximately 2.18 percent of the ADD funds available, while they 
receive about 1.88 percent of the regular 2002 HOME appropriation. The 
allocation process used under ADD actually works to Wisconsin's 
benefit.
    Question. How will the downpayment assistance program address the 
needs of these families?
    Answer. Obtaining the resources to meet upfront downpayment and 
closing costs is the most significant obstacle to homeownership among 
lower income groups. By providing a dedicated stream of funding for 
homebuyer assistance, the American Dream Downpayment Initiative would 
eliminate this obstacle for tens of thousands of additional families 
each year while enabling jurisdictions to increase homeownership rates, 
broaden their tax base, and stabilize neighborhoods.
    In a 2000 research report by the Local Initiatives Support 
Corporation (LISC) entitled Mind the Gap: Issues in Overcoming the 
Information, Income, Wealth, and Supply Gaps facing Potential Buyers of 
Affordable Homes, it was determined that 30 percent of low-income 
buyers cannot afford to buy a modestly priced home because they lack 
sufficient funds for the downpayment while under 3 percent could not do 
so because they could not afford the monthly payment. Since the average 
amount of cash needed for downpayment on a modestly priced home in 1999 
was approximately $3,500 according to the report, the American Dream 
Fund would be providing just the amount necessary at just the right 
point in the homebuying process to accomplish its goals. Like the 
successful Self-Help Homeownership Opportunities Program (SHOP) that 
targets assistance at the main obstacle to ``Habitat for Humanity'' 
type development--land acquisition--by targeting assistance 
specifically at overcoming the downpayment hurdle, the American Dream 
Fund would complement the use of regular HOME funds and would result in 
a significant increase in the number of low-income homeowners.
    In regard to those who do need assistance with their monthly 
payment, ADD funds can be used as well to buy down the current interest 
rate available to the homebuyer or the principal loan balance, thus 
saving a considerable amount in interest costs over the life of the 
loan.
    Question. The downpayment assistance program you are proposing 
would direct $200 million from the HOME program to 40,000 families. 
That works out to $5,000 per family. While this is not an insignificant 
amount, given the cost of home ownership these days can this make a 
difference for most families? Even assuming that these families could 
get a 7 percent/30-year mortgage, $5,000 will only lower monthly 
payments $33/month. How is this an improvement as compared to what we 
are doing already under the HOME program?
    Answer. Again, citing the 2000 research report by the Local 
Initiatives Support Corporation (LISC) entitled Mind the Gap: Issues in 
Overcoming the Information, Income, Wealth, and Supply Gaps facing 
Potential Buyers of Affordable Homes, it was determined that 30 percent 
of low-income buyers cannot afford to buy a modestly priced home 
because they lack sufficient funds for the downpayment while under 3 
percent could not do so because they could not afford the monthly 
payment. Since the average amount of cash needed for downpayment on a 
modestly priced home in 1999 was approximately $3,500 according to the 
report, the American Dream Fund would be providing just the amount 
necessary at just the right point in the homebuying process to 
accomplish its goals.
                  elimination of chronic homelessness
    Question. According to a study released in December by the U.S. 
Conference of Mayors, 37 percent of requests from homeless people for 
emergency shelter went unmet in 2001. On average, people remained 
homeless for 6 months in the cities surveyed, an increase for 54 
percent of the cities surveyed. These numbers are disturbing. I 
understand that the Administration has made a commitment to end chronic 
homelessness in the next decade. This is an admirable goal, but there 
are some who work closely with the homeless who have questioned whether 
the modest increases in homeless programs are sufficient to meet this 
goal.
    If chronic homelessness is to be eliminated in the next 10 years, 
do you intend to devote significantly more funding for homeless 
programs in future years budgets?
    Answer. The Department is working with a variety of other Federal 
agencies to end chronic homelessness in the United States. In 
particular, we have undertaken several major initiatives with the 
Department of Health and Human Services (HHS) to not only coordinate 
activities but, most importantly, to open up the enormous resources 
tied to the HHS mainstream supportive service programs for use in 
meeting the critical supportive service needs of homeless persons. We 
are similarly working with the Department of Veterans Affairs (VA), 
which has joined the HUD/HHS Interagency Task Force, to better utilize 
the resources of that agency in eliminating chronic homelessness. 
Similar inter-Departmental coordination has been achieved in the 
development of Policy Academies jointly being sponsored by HHS, HUD and 
VA in which State governments are actively engaged in identifying and 
eliminating barriers that currently prevent homeless persons from 
accessing supportive service funding.
    In addition, HUD's efforts to coordinate access to Federal funds to 
end chronic homelessness are now being assisted by the Interagency 
Council for the Homeless (ICH). The Agency, with the new leadership of 
Executive Director Philip Mangano, is responsible for planning and 
coordinating the Federal Government's actions and programs to assist 
homeless people, and making or recommending policy changes to improve 
such assistance. ICH has committed to actively working with all its 
member agencies to aggressively promote the goal of ending chronic 
homelessness across the Nation.
    HUD believes that, with effective coordination of all relevant 
Federal and State Government agencies, improved targeting of all 
resources available for addressing homelessness, and the expanded 
active involvement of non-profit provider agencies so critical to this 
effort, the Nation can achieve the goal set out by Secretary Martinez 
last July.
    In addition, the HUD program that most directly works toward ending 
chronic homelessness is the Shelter Plus Care Program. This program 
provides rental assistance for permanent supportive housing for 
disabled homeless persons. HUD has committed to request additional 
funding above the current funding level to ensure that all otherwise 
eligible Shelter Plus Care renewal projects can be renewed. Although it 
is difficult to project exact renewal needs due to the flexible nature 
of the 5-year grants, based upon already approved 1-year renewals and 
projected renewals of 5-year grants, it is estimated that the renewal 
demand for Shelter Plus Care will be approximately $200 million in 
fiscal year 2004. The Department will carefully scrutinize the total 
amount of homeless substitute funds needed in our initial request to 
OMB and this request will certainly take into full consideration both 
renewals and regular program costs.
    HUD has moved aggressively to encourage our applicants to seek 
needed funding for supportive services from the mainstream supportive 
service programs of HHS, VA, the Social Security Administration, the 
Department of Agriculture and other agencies. As the transition to 
other sources continues, a growing percentage of HUD's funding is being 
freed up for use in developing housing. As a result, large additional 
increases in HUD's homeless appropriations, beyond the Shelter Plus 
Care renewal costs noted above, are not anticipated.
    Question. Also, are you leaving out those who might not be deemed 
chronically homeless but whose needs are also going unmet?
    Answer. HUD's initiative to end chronic homelessness will in no way 
ignore the needs of persons who are homeless but not chronically so. A 
large majority of the McKinney-Vento Act resources administered by HUD 
have traditionally addressed persons who are not chronically homeless. 
Under HUD's Continuum of Care process, these decisions are made by the 
community itself, not HUD. However, HUD's initiative to end chronic 
homelessness encourages communities to consider making additional 
efforts to especially address the needs of those homeless persons that 
are disabled and have been homeless for long periods of time. As a 
result, it is anticipated that a greater percentage of available 
resources will be used to fight chronic homelessness but the bulk of 
those resources will continue to be used to address the approximately 
80 per cent of homeless persons who are not considered chronic 
homeless.
                                 ______
                                 

           Questions Submitted by Senator Christopher S. Bond

            public housing reinvestment and financial reform
    Question. HUD is proposing over $400 million less in Public Housing 
Capital funding for fiscal year 2003 than fiscal year 2002. In 
addition, the fiscal year 2002 funding is some $150 million less than 
the fiscal year 2001 level. These reductions seem excessive especially 
since public housing throughout the country has a capitalization 
backlog of some $22 billion. How does HUD justify this reduction from 
public housing?
    Answer. The proposed amount in the President's Budget is sufficient 
to cover the accrual of new Capital needs for fiscal year 2003. In 
addition, as of December 31, 2001, there were approximately $5.5 
billion in unexpended Capital grant funds that were provided to PHAs. 
Included within this amount there were approximately $3.2 billion in 
Capital grant funds that remained unobligated by the PHAs. These 
balances are significant. The Department will closely monitor 
obligations and expenditures and make appropriate budget proposals.
    Question.  In addition, the VA/HUD fiscal year 2002 Appropriations 
Act included requirements to ensure the timely use of these funds last 
year, including a reallocation of the capital funds where a PHA does 
not obligate its capital funds within a reasonable period of time. This 
change in the law was the result of HUD representing that a number of 
PHAs were not obligating their capital funds quickly enough and that 
these funds were sitting unused. I have no problem in requiring PHAs to 
address their capital needs to ensure that residents live in the best 
housing possible. However, in retrospect, how big a problem are 
unobligated Public Housing capital funds? Can you put a dollar number 
on this problem?
    Answer. HUD Initially identified 163 grants with approximately 
$212,608,002 in fiscal year 1998 and 1999 Capital Fund grants in PHAs 
that failed to obligate 90 percent (the Quality Housing and Work 
Responsibility Act of 1998 (QHWRA) standard) or more of their grant 
award by the 24-month obligation deadline in the QHWRA. We later 
subtracted 49 grants from the 163 grants that were found to be 
legitimate obligations, as described in the footnote \1\ As a result of 
this analysis, the Office of Public Housing identified a total of 117 
grants with $126,821,817 of unobligated Capital Funds for the 2 years 
in question.
---------------------------------------------------------------------------
    \1\ Forty-four of those 49 grants, were obligated by September 30, 
2001, but for a variety of reasons the PHA did not put the correct 
numbers in Line of Credit Control System (LOCCS). Four of the 49 grants 
were Moving to Work grantees (MTW) that totaled approximately $46 
million. One of the 49 grants originally identified was a $6 million 
grant for the Virgin Islands Housing Authority (VIHA). It was later 
determined that the $6 million was composed of an emergency loan/grant. 
Consequently, this grant was excluded from the analysis of recaptures 
because the 24-month obligation deadline in the statute applies to 
regular formula grants and not grants for disasters and emergencies. 
The total for the 49 grants that were excluded is $82,387,814. Finally, 
four PHAs misreported the amount of unobligated funds. This required a 
$3 million adjustment in the amount of unobligated funds. The 
department intends to carefully review the four misreported situations 
and will take corrective actions/sanctions against those PHAs if 
appropriate.
---------------------------------------------------------------------------
    For the 117 grants, the HUD Field Offices were asked to provide a 
justification and supporting documentation for each PHA that failed to 
obligate in a timely manner. The Department carefully reviewed each 
case and the justification proposed for compliance with the section 
9(j)(2)(A) of the 1937 Act, including cases where the Field Offices had 
given the PHA an original obligation deadline beyond September 30, 
2001, or the PHA had an extension granted by the field office or a 
self-granted extension.
    HUD identified a group of 24 grants that had unobligated balances 
as of September 30, 2001, that did not have either: (a) a PHA self-
extension, or (b) a HUD Field Office approved time-extension in 
accordance with the Comprehensive Grant Guidebook, 7485.3 G, issued 
October 1996. PIH determined that these grants should be recaptured. 
PIH has recently directed the HUD Field Offices to recapture these 
funds.
    HUD identified a second group composed of two parts: (a) 53 grants 
that were 100 percent obligated as of March 22, 2002, and (b) 19 grants 
that had time extensions or an original obligation deadline dates after 
September 30, 2001, but were not known- to be 100 percent obligated by 
March 22, 2002. On March 22, 2002, the Department sent a letter to PHAs 
\2\ that managed 72 grants and requested that, within 5 days, they 
certify the amount of grant funds unobligated as of the date of the 
letter. Responses to HUD's March 22, 2002 letters, from the PHAs (Table 
2) were received and then tallied. As of April 3, 2002, the total funds 
unobligated from the 72 grants in Table 2 is $647,499 from 6 PHAs. (A 
copy of the table is attached.) The remainder of the PHAs obligated 90 
percent of their grant funds by March 22, 2002.
---------------------------------------------------------------------------
    \2\ There were a total of 67 PHAs that managed the 72 grants. Five 
of the PHAs had a grant from fiscal year 1998 as well as fiscal year 
1999.
---------------------------------------------------------------------------
    The combined total of funds unobligated as of March 22, 2002, is 
approximately $6.2 million, which the Department plans to recapture.
    The Department recognized that there have been differing 
interpretations as to the effect of QHWRA as they relate to previous 
HUD guidance given to PHAs regarding the obligation of fiscal years 
1998 and 1999 funds. However, the Department must still implement the 
law. In fairness to PHAs that have previously requested and received 
extensions that are not now valid under QHWRA, HUD decided to only 
recapture those funds that remain unobligated as of March 22, 2002, 
when the PHAs were directed to immediately cease obligating fiscal 
years 1998 and 1999 funds. On April 5, 2002, the Department sent 
letters to the 6 PHAs in the second group that had unobligated funds as 
of March 22, 2002, informing them that the funds will be recaptured. On 
April 11, 2002, HUD Field Offices were directed to take the appropriate 
steps to initiate the recapture of funds by amending the Annual 
Contributions Contract.
    Twenty-one of the 117 grants were found to have justifications for 
extensions that met the requirements of Section 9(j)(2)(A) of the Act, 
and have been recommended to the Deputy Secretary for time extensions. 
We anticipate publishing a Notice in the Federal Register shortly, 
which will identify grants by PHA where unobligated funds will be 
recaptured, as well as the 21 grants that have been recommended to the 
Deputy Secretary for time extensions. This action by the Deputy 
Secretary is pending. (The exact date of publication of the Federal 
Register Notice is not known at this time.)
    PIH plans to take strong measures to implement additional 
procedures to closely monitor obligations and expenditures. 
Specifically, PIH plans to require a new monthly obligation and 
expenditure report, which will replace the current quarterly reporting 
system. Implementing a monthly reporting system will enable the 
Department to implement section 9(j)(3) of the Act, Penalty for Slow 
Expenditure of Capital Funds, a 1/12-month penalty for failure to 
obligate Capital Funds within 24 months. We anticipate that the monthly 
reporting system will be implemented in LOCCS October 1, 2002 in time 
to address the fiscal year 2003 Capital Fund Formula Grant 
distribution.
    It is important to note that the question only related to the 
deadline for unobligated Capital Funds. The law provides for two 
deadlines, obligations and expenditures. Consequently, when looking at 
a PHA's capacity to obligate funds, the Department must take into 
account a PHA's unexpended funds that have already been obligated. The 
Department must closely monitor compliance with both deadlines. For 
example, as of December 30, 2001, there were approximately $5.5 billion 
in unexpended Capital Funds. Large unexpended balances may directly 
impact a PHA's ability to obligate current year funds.

 GRANTS 90 PERCENT-100 PERCENT OBLIGATED AS OF MARCH 22, 2002 AND GRANTS WITH TIME EXTENSIONS BUT NOT OBLIGATED
                                                BY MARCH 22, 2002
----------------------------------------------------------------------------------------------------------------
                                                                      Fiscal         Grant          Authorized
           Field office name               Housing authority name      year       unobligated         amount
----------------------------------------------------------------------------------------------------------------
ALBUQUERQUE PROGRAM CENTER.............  CHAMA HOUSING AUTHORITY,        1999        $75,217.00       $75,217.00
                                          NM.
ALBUQUERQUE PROGRAM CENTER.............  SUNLAND PARK HA, NM......       1999         90,964.00        67,264.00
ATLANTA HUB OFFICE.....................  BRUNSWICK HA, GA.........       1999        924,936.00       576,780.00
ATLANTA HUB OFFICE.....................  GRIFFIN, GA..............       1998        430,342.00       251,899.00
ATLANTA HUB OFFICE.....................  CORDELE HA, GA...........       1999        702,335.00       347,913.00
ATLANTA HUB OFFICE.....................  QUITMAN, GA..............       1998      1,781,022.00     1,272,957.00
ATLANTA HUB OFFICE.....................  TIFTON HOUSING AUTHORITY,       1999        525,836.00       172,726.00
                                          GA.
ATLANTA HUB OFFICE.....................  LAFAYETTE HA, GA.........       1999        305,392.00       248,664.00
BALTIMORE HUB OFFICE...................  ANNAPOLIS HOUSING               1999      1,838,764.00       581,973.00
                                          AUTHORITY, MD.
BIRMINGHAM HUB OFFICE..................  BIRMINGHAM, AL...........       1998     10,932,880.00     1,270,836.00
BIRMINGHAM HUB OFFICE..................  TALLASSEE, AL............       1998        150,000.00        45,649.00
BIRMINGHAM HUB OFFICE..................  TALLASSEE HA, AL.........       1999        190,772.00       190,772.00
BOSTON HUB OFFICE......................  PLYMOUTH HA, MA..........       1999        149,480.00       125,210.00
BOSTON HUB OFFICE......................  WEBSTER HA, MA...........       1998        492,500.00       286,330.00
BOSTON HUB OFFICE......................  WEBSTER HA, MA...........       1999         81,413.00        71,413.00
BUFFALO HUB OFFICE.....................  WATERTOWN HA, NY.........       1999        977,389.00       173,848.00
BUFFALO HUB OFFICE.....................  TROY HA, NY..............       1998      2,143,930.00       395,981.00
BUFFALO HUB OFFICE.....................  TROY HA, NY..............       1999      2,499,166.00     1,192,993.00
BUFFALO HUB OFFICE.....................  WATERVLIET HA, NY........       1999        471,295.00        70,222.00
BUFFALO HUB OFFICE.....................  RENSSELAER HA, NY........       1999        292,562.00       149,049.00
CHICAGO HUB OFFICE.....................  DECATUR HOUSING                 1999      1,865,509.00       520,193.00
                                          AUTHORITY, IL.
CHICAGO HUB OFFICE.....................  MENARD COUNTY HOUSING           1999        410,257.00        71,830.00
                                          AUTHORITY, IL.
CHICAGO HUB OFFICE.....................  KANKAKEE COUNTY HOUSING         1999        552,216.00       140,616.00
                                          AUTHORITY, IL.
CHICAGO HUB OFFICE.....................  ADAMS COUNTY HOUSING            1999        182,727.00        69,200.00
                                          AUTHORITY, IL.
CHICAGO HUB OFFICE.....................  LAKE COUNTY HOUSING             1999      1,415,393.00       310,677.00
                                          AUTHORITY, IL.
CHICAGO HUB OFFICE.....................  WHITE COUNTY HOUSING            1999        194,818.00        55,676.00
                                          AUTHORITY, IL.
CHICAGO HUB OFFICE.....................  OAK PARK HOUSING                1999        264,259.00       247,079.00
                                          AUTHORITY, IL.
CINCINNATI COMMUNITY SERVICE CENTER....  CLINTON MHA, OH..........       1998        202,280.00       117,453.00
CINCINNATI COMMUNITY SERVICE CENTER....  CLINTON MHA, OH..........       1999         61,177.00        24,611.00
COLUMBIA PROGRAM CENTER................  GREENVILLE HA, SC........       1999      1,302,973.00       167,258.00
COLUMBIA PROGRAM CENTER................  MYRTLE BEACH, SC.........       1999         41,404.00         4,767.00
COLUMBIA PROGRAM CENTER................  YORK, SC.................       1999        227,128.00        41,606.00
COLUMBIA PROGRAM CENTER................  CHARLESTON C0, SC........       1999        329,004.00        90,544.00
DETROIT HUB OFFICE.....................  DETROIT HC, MI...........       1999     20,258,934.00     8,567,878.00
DETROIT HUB OFFICE.....................  PONTIAC HC, MI...........       1999      1,178,664.00       247,375.00
FORT WORTH HUB OFFICE..................  PARIS, TX................       1999        378,192.00        95,000.00
FORT WORTH HUB OFFICE..................  GRAND SALINE HA, TX......       1999        162,364.00       107,667.00
GRAND RAPIDS COMMUNITY SERVICE CENTER..  MUSKEGON HEIGHTS, MI.....       1999        891,694.00       751,030.00
GRAND RAPIDS COMMUNITY SERVICE CENTER..  MUSKEGON, MI.............       1999        261,843.00       238,337.00
GREENSBORO HUB OFFICE..................  HA LUMBERTON, NC.........       1999      1,196,802.00       705,931.00
GREENSBORO HUB OFFICE..................  BENSON, NC...............       1999        776,516.00       611,024.00
GREENSBORO HUB OFFICE..................  HA WADESBORO, NC.........       1999        329,388.00        55,193.00
GREENSBORO HUB OFFICE..................  HA MIDEAST REGIONAL, NC..       1999        410,806.00       251,698.00
HARTFORD PROGRAM CENTER................  MERIDEN HOUSING                 1999        858,546.00       333,399.00
                                          AUTHORITY, CT.
HARTFORD PROGRAM CENTER................  GLASTONBURY HOUSING             1999        383,497.00       203,737.00
                                          AUTHORITY, CT.
INDIANAPOLIS PROGRAM CENTER............  INDIANAPOLIS HA, IN......       1998      3,440,145.00       780,340.00
INDIANAPOLIS PROGRAM CENTER............  INDIANAPOLIS HOUSING            1999      3,846,488.00     2,067,108.00
                                          AGENCY, IN.
JACKSON PROGRAM CENTER.................  MCCOMB, MS...............       1999        615,301.00       268,532.30
JACKSONVILLE HUB OFFICE................  ORLANDO, FL..............       1999      3,900,597.00       792,119.00
JACKSONVILLE HUB OFFICE................  UNION COUNTY, FL.........       1999        214,967.00       214,967.00
LOUISVILLE HUB OFFICE..................  HA LEXINGTON, KY.........       1999      2,728,620.00     1,822,626.00
MILWAUKEE PROGRAM CENTER...............  CITY OF BELOIT, WI.......       1999        263,692.00       171,043.00
NASHVILLE PROGRAM CENTER...............  MEMPHIS, TN..............       1998     12,314,347.00     3,066,870.00
NASHVILLE PROGRAM CENTER...............  PULASKI, TN..............       1999        439,626.00       108,127.00
NEW ORLEANS HUB OFFICE.................  CROWLEY HOUSING                 1999        708,324.00       687,074.00
                                          AUTHORITY, LA.
NEW YORK CITY HUB OFFICE...............  WHITE PLAINS HA, NY......       1999      1,748,410.00       568,792.00
NEW YORK CITY HUB OFFICE...............  NORTH HEMPSTEAD HA, NY...       1999        252,717.00       103,052.00
NEWARK HUB OFFICE......................  TRENTON HOUSING                 1999      4,717,627.00     1,624,992.00
                                          AUTHORITY, NJ.
NEWARK HUB OFFICE......................  BEVERLY HOUSING                 1998        939,257.00       385,249.00
                                          AUTHORITY, NJ.
NEWARK HUB OFFICE......................  BEVERLY HOUSING                 1999        128,111.00        24,934.00
                                          AUTHORITY, NJ.
PHILADELPHIA HUB OFFICE................  MONROE COUNTY HOUSING           1999        574,924.00       215,238.00
                                          AUTHORITY, PA.
PHILADELPHIA HUB OFFICE................  LACKAWANNA COUNTY HA, PA.       1999      1,825,518.00       571,812.00
PHILADELPHIA HUB OFFICE................  WILLIAMSPORT HOUSING            1999        372,544.00        45,755.00
                                          AUTHORITY, PA.
PITTSBURGH HUB OFFICE..................  JEFFERSON COUNTY HOUSING        1999        448,655.00       210,008.00
                                          AUTHORITY, PA.
SAN ANTONIO HUB OFFICE.................  DEL RIO HOUSING                 1998        411,901.00        96,138.19
                                          AUTHORITY, TX.
SAN ANTONIO HUB OFFICE.................  DEL RIO HOUSING                 1999        483,059.00        77,860.16
                                          AUTHORITY, TX.
SAN ANTONIO HUB OFFICE.................  EDCOUCH HOUSING                 1998        350,000.00       110,129.00
                                          AUTHORITY, TX.
SAN ANTONIO HUB OFFICE.................  INGLESIDE HOUSING               1999        179,647.00        60,078.00
                                          AUTHORITY, TX.
SAN ANTONIO HUB OFFICE.................  STARR COUNTY HOUSING            1999        163,288.00       157,063.00
                                          AUTHORITY, TX.
SEATTLE HUB OFFICE.....................  TACOMA HOUSING AUTHORITY,       1999      4,571,296.00     1,366,829.00
                                          WA.
SEATTLE HUB OFFICE.....................  SEDRO WOOLLEY HOUSING           1999        127,909.00        32,918.00
                                          AUTHORITY, WA.
ST. LOUIS PROGRAM CENTER...............  WEST PLAINS HOUSING             1999        313,340.00        92,709.00
                                          AUTHORITY, MO.
                                                                   ---------------------------------------------
      TOTAL............................  .........................         72    105,272,796.00    37,319,837.65
----------------------------------------------------------------------------------------------------------------


    Question. In addition, the HUD fiscal year 2003 Budget requests 
authority for HUD to permit PHAs to borrow private capital as a way to 
fund needed capital improvements. These private funds would be repaid 
through the provision of Section 8 project-based assistance for these 
units. In turn, there is proposed authority to convert this Section 8 
project-based assistance to vouchers and allow this housing to be 
rented on the private market. This essentially means that the best 
units in public housing would be converted to private housing and the 
inventory of affordable housing in many marketplaces would shrink. How 
does the Administration justify the risk of losing this affordable 
housing, especially in tight marketplaces?
    Answer. HUD believes that the result of this proposal will be a 
substantial improvement in the current public housing stock that would 
not have been possible otherwise. The proposal is not designed to 
convert public housing to private housing, does not cover the best 
units in particular and would not result in shrinkage in the inventory 
of affordable housing.
    The assistance proposed is Section 8 project-based vouchers. The 
ability to convert public housing subsidy to project-based vouchers 
will enable PHAs to borrow funds for capital improvements on a 
development-by-development basis, just like other multifamily real 
estate. This will enable PHAs to leverage private dollars to help 
address the $22 billion backlog in capital needs.
    The proposal is not limited to the best public housing. All public 
housing is eligible. HUD only would approve transactions where 
significant enough capital work is needed to justify use of this 
financing tool. Where a development has higher capital needs than the 
amount that could be financed within program limits, PHAs would have 
the choice of supplementing the funding with Capital Fund or other 
money.
    The proposal does not assume private for-profit ownership in any 
fashion. It is a voluntary program in which PHAs may participate. PHAs 
may retain control of a participating development's ownership, through 
a PHA-controlled subsidiary where this will facilitate financing. If a 
PHA desires to dispose of the property to any owner that is not PHA-
controlled, the public housing disposition rules would apply (as they 
would with any other public housing property).
    A participating development would have a continuing contract for 
project-based vouchers for all the units. The Administration proposal 
does allow renting of some units to unassisted tenants, up to one third 
of non-elderly or disabled units. To the extent this occurs, the PHA 
can use additional vouchers elsewhere, so that affordable housing 
opportunities are not lost. Even in that case, the project-based 
voucher contract would remain for all of the units in the development, 
so that the PHA later could again rent all the units at the development 
to assisted tenants (and reduce the number of extra vouchers used in 
the community accordingly). This proposal is designed to provide 
additional flexibility for producing mixed-income developments, and 
should not be confused with an effort to ``voucher out.''
    Question. If Congress does not provide this new authority to 
support the private financing of rehabilitation through Section 8 
funding, does Public Housing need the additional $400 million that the 
Administration is recommending be cut from the Public Housing Capital 
Fund?
    Answer. If that proposal is not enacted, the HUD-proposed amount is 
sufficient to cover the accrual of new capital needs during fiscal year 
2003. As of December 31, 2001, there were approximately $5.5 billion in 
unexpended Capital grant funds that were provided to PHAs. Included 
within this amount there were approximately $3.2 billion Capital grant 
funds that remained unobligated by the PHAs. These balances are 
significant. The Department will closely monitor obligations and 
expenditures and make appropriate budget proposals.
    Question. Doesn't this proposal just shift the cost of public 
housing from the Public Housing Operating and Capital Funds to the 
Certificate Fund?
    Answer. No, the proposal does not simply shift costs to the 
Certificate Fund. A different product is being funded--deteriorated 
public housing with significant capital needs is being replaced with 
renovated or new assisted housing. As a result, tenants will be able to 
live in decent conditions in the near future.
    This renovation or replacement otherwise could not be afforded for 
years with the resources available under historic patterns for Public 
Housing Capital Fund appropriations. At the same time, the developments 
will be managed and financed on a property-by-property basis, which 
should lead to more sound management practices.
                         project-based opt-outs
    Question. I remain concerned about the Administration's continuing 
emphasis on section 8 vouchers to the detriment of preserving section 8 
project-based housing especially in tight rental markets. Over the last 
3 years, how many projects and units have opted out of the section 8 
project-based program with the tenants converting to section 8 tenant-
based assistance?
    Answer. The Department is in the process of updating and revising 
its systems for tracking opt-outs in its Real Estate Management System 
(REMS), including a specific effort to confirm actual opt-outs from the 
project-based inventory and reconciling this data with public housing 
records for issuances of tenant protection vouchers for projects that 
have filed an intent to opt-out. Difficulty has been experienced in 
tracking these actions because project owners sometimes give formal 
notice of an intent to opt-out, but are later persuaded to continue 
with project-based assistance. Another issue is that opt-out data has 
been combined with counts of Section 8 contracts that have been 
terminated by HUD because the property fails to meet program standards. 
Preliminary results, however, indicate that approximately 10,000 units 
in about 230 projects were removed from the project-based inventory in 
fiscal year 2001 by a decision by a property owner to opt-out of the 
Section 8 project-based program.
                                opt-outs
    Question. How many of these projects have been elderly projects or 
designated for persons with disabilities?
    Answer. The Department does not have data that identifies whether 
projects with an elderly designation or primarily serving the disabled 
are among those to have opted-out from project-based assistance, 
however, it is unlikely that there are a significant number of projects 
in this category. Anecdotal evidence indicates that where there are 
opt-outs involving projects serving the elderly or disabled, the 
availability of tenant protection vouchers generally permits residents 
to remain in the project.
                          homeless assistance
    Question. HUD continues to fund over $1 billion per year in 
McKinney-Vento homeless assistance through State and local continuums 
of care. These funds generally are funded through the CDBG formula 
which includes no consideration of homelessness. What steps is HUD 
taking to ensure accountability that these funds are being used to 
assist the homeless.
    Answer. The CDBG formula is only applied to $150 million of the 
McKinney-Vento appropriation for allocating the Emergency Shelter Grant 
program. Funds for the remaining Homeless Assistance Grants are 
distributed based on competitions. HUD uses a variety of methods to 
ensure that funds awarded are being used to assist homeless people. On-
site monitoring of HUD grant programs is a key responsibility of HUD's 
field staff. Monitoring is conducted using established standards and 
procedures, and includes interviews, examination of files, and visits 
to grantee and sub-grantee sites. Written monitoring findings and 
concerns are provided to the grantee, and resolution is required within 
a specific time frame. Grantees are also required to submit an Annual 
Progress Report for each year that funding is provided. The report 
includes financial and progress information.
    In the annual homeless assistance competition, all grantees, 
including those applying for renewal grants, must meet application 
threshold review standards that include applicant capacity, eligibility 
of the homeless participants, and cost-effectiveness. Many grant awards 
are conditioned, requiring the conditionally selected grantee to 
clarify or provide additional information before a final award is made. 
In some cases, the original award offer is reduced or withdrawn, if 
program requirements are not met, or funding amounts not justified.
    Question. How are these accountability requirements different from 
a year ago?
    Answer. Since last year, HUD has increased its efforts to further 
ensure accountability. The Annual Performance Report has been 
automated, and the database is currently being populated. The data will 
not only enable better tracking of individual projects, but will also 
generate a variety of reports which will assist HUD in developing 
policies and procedures to address any specific accountability issues 
demonstrated in APRs.
    The application for the 2002 competition includes stronger 
performance requirements for previous recipients applying for renewal 
grants. In addition, all applicants must demonstrate specific actions 
they have taken with regard to ensuring clients will be assisted to 
obtain benefits of mainstream programs for which they are eligible. The 
application also requires more budget detail to help applicants better 
plan projects and request appropriate funding amounts. To address HUD's 
goal of ending chronic homelessness in 10 years, applicants in the 2002 
competition are asked for information that will enable us to establish 
a baseline against which progress toward the goal can be measured.
                   emergency food and shelter program
    Question. The President's Budget recommends that the Emergency Food 
and Shelter program be transferred from FEMA to HUD. This has been a 
very successful program at FEMA and there are significant concerns that 
any transfer could reduce the effectiveness of this program. What are 
the advantages to this transfer?
    Answer. We agree that the Emergency Food and Shelter Program (EFSP) 
has been efficiently and effectively administered and we propose to 
operate it in the same fashion. Significant amounts of EFSP funds are 
provided for shelter resources, often to the same entities receiving 
HUD's Emergency Shelter Grants (ESG) funds and Continuum of Care 
competitive funds. Many of the same activities are eligible under EFSP 
and ESG. Given HUD's successful role in implementing the Continuum of 
Care, it is anticipated that EFSP can be administered in a manner that 
more effectively coordinates EFSP with the Continuum of Care planning 
concept. However, HUD has no plan to alter the basic method of EFSP 
formula allocation. Any efforts to better coordinate the programs will 
be done only after careful consultation with key stakeholders in the 
EFSP allocation process, local providers and program clients.
                         mark-to-market savings
    Question. The Section 8 Mark-to-Market program was enacted to 
provide a mechanism to reduce the cost of oversubsidized, expiring 
section 8 contracts to market rents while preserving this housing as 
affordable, low-income housing. How much section 8 funding has actually 
been saved since the beginning of the program? How many projects have 
been preserved with section 8 project-based contracts?
    Answer. Since inception of the Mark-to-Market (M2M) program through 
February 28, 2002, 1,354 properties, with a total of 105,834 units, of 
affordable housing have been preserved. The M2M reviews resulted in:
  --407 full debt restructurings, 32,870 units;
  --270 Actions Other Than Closing (AOTC), 17,686 units. AOTC 
        transactions are comprised of those deals that are financially 
        infeasible, or where the owner refuses to complete the closing, 
        or where a bad owner/bad property is involved;
  --572 lites (reductions in contract rents that do not require debt 
        restructuring), 47,932 units; and
  --105 comparability reviews, 7,346 units.
    Of the 1,354 properties completed as of February 28, 2002, 968 
properties with 80,584 units received reduced rents. The remainder were 
either still in process, have ultimately been determined to have rents 
at or below market, or are not eligible for the M2M program.
    In the fiscal year 2003 Budget request, approximately $135 million 
in savings has been assumed in Housing Certificate Fund for fiscal year 
2002.
                       market-to-market opt-outs
    Question. How many projects have been removed from the section 8 
inventory by owners who opted out of their section 8 project-based 
contracts?
    Answer. Since inception of the Mark-to-Market program, through 
February 28, 47 owners with 2,498 total units gave notice to the Office 
of Multifamily Housing Assistance Restructuring that they would opt-out 
of their project-based Section 8 contracts; 34 owners, accounting for 
1,382 total units, have actually done so.
                     preservation of assisted units
    Question. For fiscal year 2001 and 2002, the VA/HUD appropriations 
acts have required HUD to preserve section 8 project-based assistance 
for the elderly and disabled upon foreclosure by HUD, except under 
certain circumstances. How many projects have been preserved under this 
requirement? How many of these projects have been disposed by HUD 
without maintaining the section 8 project-based assistance?
    Answer. See table below.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                   Number                        Preserved w/project-
          Property Name           of Units        Location         based Section 8?   Date Closed                         Comments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Bethesda Manor II...............        12  Plainview, TX......  No Property was       10/20/2000  Vacant property sold to Wayland Manor University.
                                                                  vacant.
Kenilworth Park Plaza...........        77  Portland, OR.......  Yes................   11/01/2000  Sold to City of Portland.
Project Independence............        49  Arkansas City, KS..  No Other              11/01/2000  Sold to Arkansas City. The conditions of the sale
                                                                  preservation tools                were agreed to by HUD before the field was aware of
                                                                  used.                             the new statute regarding retention of project based
                                                                                                    Section 8. However, other preservation tools were
                                                                                                    used. All tenants were provided rental housing
                                                                                                    vouchers, and rents were required to be maintained
                                                                                                    as affordable for 20 years. Nearly all of the
                                                                                                    tenants remained in residence using their vouchers.
NMARC...........................         6  Santa Fe, NM.......  No Property was       01/26/2001  Vacant property. Sold to the Santa Fe Civic Housing
                                                                  vacant.                           Authority without restrictions.
Monastery.......................        24  Way Sitka, AK......  No Other              03/30/2001  The conditions of the sale were agreed to by HUD
                                                                  preservation tools                before the field was aware of the new statute
                                                                  used.                             regarding retention of project based Section 8.
                                                                                                    However, other preservation tools were used. All
                                                                                                    tenants were provided rental housing vouchers.
                                                                                                    Nearly all of the tenants remained in residence
                                                                                                    using their vouchers. Property sold to Baranof
                                                                                                    Island Housing Authority for elderly housing.
Morningside Village.............        31  Alcester, SD.......  No Other              04/30/2001  The conditions of the sale were agreed to by HUD and
                                                                  preservation tools                the City of Alcester before the field was aware of
                                                                  used.                             the new statute regarding retention of project based
                                                                                                    Section 8. However, other preservation tools were
                                                                                                    used. All tenants were provided rental housing
                                                                                                    vouchers, and HUD created ``voucher ready units'' by
                                                                                                    requiring that rents cannot exceed the voucher
                                                                                                    payment standard. Nearly all of the tenants remained
                                                                                                    in residence using their vouchers.
Elmwood Group Home..............        15  Ottumwa, IO........  No Property was       06/08/2001  Vacant property sold to the Area XV Multi-County
                                                                  vacant.                           Housing Agency.
Edgewood/Eldercrest.............       147  Youngstown, OH.....  No Other              07/30/2001  The conditions of the sale were agreed to by HUD and
                                                                  preservation tools                the City of Youngstown before the field was aware of
                                                                  used.                             the new statute regarding retention of project based
                                                                                                    Section 8. However, other preservation tools were
                                                                                                    used. All tenants were provided rental housing
                                                                                                    vouchers. Nearly all of the tenants remained in
                                                                                                    residence using their vouchers.
J.C. Progress...................       204  Chattanooga, TN....  No Other              08/24/2001  Property was only about 50 percent occupied by
                                                                  preservation tools                elderly. The conditions of the sale were agreed to
                                                                  used.                             by HUD and the City of Chattanooga before the field
                                                                                                    was aware of the new statute regarding retention of
                                                                                                    project based Section 8. However, other preservation
                                                                                                    tools were used. HUD required that the property be
                                                                                                    repaired and provided an Up Front Grant to pay for
                                                                                                    part of the rehabilitation and conversion of the
                                                                                                    efficiencies to one bedroom units to better meet
                                                                                                    market demand for affordable elderly and near-
                                                                                                    elderly housing. Occupancy is limited to the elderly
                                                                                                    and near-elderly. All tenants were provided rental
                                                                                                    housing vouchers, and HUD created ``voucher ready
                                                                                                    units'' by requiring that rents cannot exceed the
                                                                                                    voucher payment standard. Nearly all of the tenants
                                                                                                    remained in residence using their vouchers.
Tiffin VOA......................        20  Tiffin, OH.........  No Property was       09/06/2001  Vacant property sold to Seneca County Commissioners
                                                                  vacant.                           to be used for public purpose.
Pickwick/Royal Tower............       233  Kansas City, MO....  No Other              09/23/2001  Majority of residents were chronically mentally ill.
                                                                  preservation tools                Other preservation tools were used. All tenants were
                                                                  used.                             provided rental housing vouchers, and HUD created
                                                                                                    ``voucher ready units'' by requiring that rents
                                                                                                    cannot exceed the voucher payment standard. Nearly
                                                                                                    all of the tenants remained in residence using their
                                                                                                    vouchers.
Gardner House...................         8  Gardner, MA........  Yes................   09/27/2001  Sold to North Central Human Services, Inc.
Monadnock Workshop..............         8  Peterborough, NH...  No Property was       09/27/2001  This was a vacant 8-unit property in an old historic
                                                                  vacant.                           property not suited for the elderly as configured.
                                                                                                    HUD sold the property to the Contooncook Housing
                                                                                                    Trust who plans to convert it to 3 units of
                                                                                                    affordable housing.
Sana............................       271  Hartford, CT.......  Yes................   02/01/2002  Sold to City of Hartford.
--------------------------------------------------------------------------------------------------------------------------------------------------------

          hud assisted housing in foreclosure and in inventory
    Question. For the record, I would like a list of projects by State, 
including location and number of units.
    Answer. See lists below.

                                                   MULTIFAMILY PROPERTIES IN FORECLOSURE AS OF 4/4/02
                                  (Please note that most of the unsubsidized notes will be offered the next note sale)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                  No. of
              FHA#                 Section of the Act                                        Property Name                                        Units
--------------------------------------------------------------------------------------------------------------------------------------------------------
023-35269.......................  221D4...............  EAST CANTON STREET APARTMENTS, 79 E CANTON STREET, BOSTON, MA 02118-2328...............       80
017-44076.......................  236.................  ST. CHRISTOPHER APTS., 360 MAIN STREET, HARTFORD, CT 06106.............................      100
024-22007.......................  232.................  SEACOAST HEALTH CENTER, 777 LAFAYETTE RD., HAMPTON, NH 03842...........................      169
024-22019.......................  232.................  FAMILY LIVING ADULT CARE, 24 HALL ST., SACO, ME 04072..................................       48
024-EH078.......................  202.................  OSSIPEE HOUSE, 70 MOULTONVILLE RD., CENTER OSSIPEE, NH 03814...........................        8
016-22006.......................  232.................  DESILETS NURSING HOME, 642 METACOM AVE., WARREN, RI 02885..............................       80
016-43017.......................  232.................  ROSE COTTAGE NURSING FACILITY, 151 HUNT STREET, CENTRAL FALLS, RI 02863................      100
016-43062.......................  232.................  EDMUND PLACE, 350 TAUNTON AVE., EAST PROVIDENCE, RI 02914..............................       79
016-43071.......................  232.................  COVENTRY HEALTH CENTER, BROAD STREET, COVENTRY, RI.....................................      344
012-43180.......................  232.................  TAPPAN ZEE MANOR, MOUNTAINVIEW RD, NYACK, NY 10960.....................................      100
012-44159.......................  236.................  PLEASANT EAST APARTMENTS, 446 E 117TH ST, NEW YORK, NY 10035-5038......................      111
012-57114.......................  221D4...............  HAROLD APTS, 437 MANHATTAN AVE., NEW YORK, NY 10026....................................       53
012-57115.......................  221D4...............  DESCHLER APARTMENTS, 1871 7TH AVE., NEW YORK, NY 10026-2800............................       60
012-57170.......................  221D4...............  PUEBLO DE MAYAGUEZ, 950 AVENUE SAINT JOHN, BRONX, NY 10455-3400........................       76
013-35073.......................  221D4...............  WASHINGTON PARK APARTMENT, 212 THIRD STREET, TROY, NY 12180............................       34
014-00002.......................  207.................  TROUT BROOK MOBILE HOME, 8 GARDNERVILLE RD., LE RAY, NY 13637..........................      100
014-43009.......................  232.................  BEECHWOOD RESTORATIVE, 900 CULVER RD., ROCHESTER, NY 14609.............................       82
014-43066.......................  232.................  LORETTO-UTICA HEALTH CARE, 1445 KEMBLE STREET, UTICA, NY 13501.........................      156
014-EH182.......................  202.................  ALFRED SENIOR HOUSING, 34 GLEN ST, ALFRED, NY 14802....................................       40
035-43049.......................  232.................  GREENBRIAR NURSING HOME, 191 N. EVERGREEN, WOODBURY, NJ 08096..........................      220
052-43051.......................  232.................  ANNAPOLITAN SENIOR CARE, 84 NORTH OLD MILL BOTTOM RD., ANNAPOLIS, MD 21401-9003........       84
052-43064.......................  232.................  NOBLE HOUSE NURSING HOME, 2327 NORTH CHARLES STREET, BALTIMORE, MD 21218...............      109
052-44133.......................  236.................  UPLANDS A, 4625 EDMONDSON AVE, BALTIMORE, MD 21229-2554................................      495
052-44143.......................  236.................  UPLANDS B, 4625 EDMONDSON AVE, BALTIMORE, MD 21229-2554................................      478
052-44157.......................  236.................  FREEDOM APARTMENTS, 4665 FREEDOMWAY W, BALTIMORE, MD 21213-2609........................      308
052-EH011.......................  202.................  APOSTOLIC TOWERS, 201 N. WASHINGTON ST, BALTIMORE, MD 21231............................      215
052-EH081.......................  202.................  BEREA APOSTOLIC TOWERS, 1401 N. LAKEWOOD AVE, BALTIMORE, MD 21213......................      102
034-35193.......................  221D4...............  NORTH QUEEN STREET APARTMENTS, 424 N QUEEN ST, LANCASTER, PA 17603-3055................        8
034-SH016.......................  202.................  MOUNT OLIVET VILLAGE, 642 N 41ST STREET, PHILADELPHIA, PA 19104........................      220
033-22003.......................  232.................  INDEPENDENCE COURT-OAKL, 4700 FIFTH AVENUE, PITTSBURGH, PA 15213.......................      128
033-33501.......................  221D4...............  CORA STREET APTS, 525 CORA ST., PITTSBURGH, PA 15208...................................       22
033-35159.......................  221D4...............  RENAISSANCE APARTMENTS, 308 N TAYLOR AVE, PITTSBURGH, PA 15212-4551....................       57
033-44015.......................  236.................  BRADDEHANNA APARTMENTS, 7515 SUSQUEHANNA ST., PITTSBURGH, PA 15208.....................       45
033-44028.......................  236.................  STERRETT-COLLIER APARTMENTS, 7335 HAMILTON AVE, PITTSBURGH, PA 15208-1937..............      145
033-55008.......................  221D3...............  LIBERTY PARK APARTMENTS, 6209 BROAD STREET, PITTSBURGH, PA 15206.......................      332
033-55018.......................  221D3...............  WESTGATE I, 287 VILLAGE RD, PITTSBURG, PA 15206-3702...................................      206
033-55032.......................  221D3...............  WESTGATE II, 287 VILLAGE RD., PITTSBURGH, PA 15205-1938................................      230
051-22001.......................  232.................  LAUREL MEADOWS NURSING HOME, RT. 1, BOX 181B, LAUREL FORK, VA 24352-9707...............       60
051-43087.......................  232.................  HERITAGE HALL XIII, 400 W. STARSBURG RD., FRONT ROYAL, VA 22630........................       60
051-43088.......................  232.................  HERITAGE HALL XV, 500 W. RIO RD., CHARLOTTESVILLE, VA 22901............................      120
051-43109.......................  232.................  HERITAGE HALL XX, 633 COOK AVE., BROOKNEAL, VA 24528-3111..............................       60
051-43110.......................  232.................  HERITAGE HALL XXII, 203 HOUSTON ST., LEXINGTON, VA 24450-2415..........................       60
051-43113.......................  232.................  HERITAGE HALL XXIX, 5580 DANIEL SMITH RD., VIRGINIA BEACH, VA 23462-1104...............       90
051-43116.......................  232.................  HERITAGE HALL XIV, ROUTE 5, BOX 104, GRUNDY, VA 24614-9504.............................      120
051-43135.......................  232.................  VANGILDERS CARE CENTER, 1011 PENNSYLVANIA AVENUE, WINCHESTER, VA 22601.................       78
051-43154.......................  232.................  DOGWOOD NORTH, 30 KINGS CREST DRIVE, STAFFORD, VA 22554................................       48
051-44071.......................  236.................  CARRINGTON GARDENS APARTMENTS, 1125 DOVE ST, RICHMOND, VA 23222-4524...................       95
000-44015.......................  236.................  SAYLES PLACE HOMES, INC, 2700-07 DOUGLAS PL SE, WASHINGTON, DC 20020...................       63
000-94014.......................  207.................  GOOD HOPE APARTMENTS, 1667 GOOD HOPE RD SE, WASHINGTON, DC 20020.......................       41
061-43113.......................  232.................  CAMPBELL-STONE ASSISTED L, 2911 SOUTH PHARR ROAD, NW, ATLANTA, GA 30305................       48
062-11028.......................  223F................  PINERY TOWNHOUSE APTS, 4930 PARKTOWNE WAY, MONTGOMERY, AL 36116........................      202
062-35087.......................  221D3...............  PARKSIDE APARTMENTS, 415 CUBA ST., MOBILE, AL 36603-5220...............................       48
062-44065.......................  236.................  SARALAND APTS., 527 US HIGHWAY, 43 SOUTH, SARALAND, AL 36571...........................       60
062-92002.......................  207.................  STONEGATE VILLAGE APTS., 1238 2ND ST., SW, DECATUR, AL 35601...........................      136
056-35137.......................  221D4...............  THE PENTAGON APARTMENTS, 1919 PONCE DE LEON AVE., SANTURCE, PR 00916...................       50
054-11038.......................  207.................  GREENWOOD PARK APARTMENTS, GREENWOOD PK, RT 3, TUBELLO CT, MARION, SC 29571-8040.......       32
054-35593.......................  221D4...............  MAGNOLIA LANE APARTMENTS, DESTINY LANE, CONWAY, SC 29526...............................       48
054-43070.......................  232.................  RIVERSIDE AT BELFAIR, 56 OAK FOREST ROAD, BLUFFTON, SC 29910...........................      101
054-43073.......................  232.................  COLONY HOUSE, 1036 MAXWELL MILL, FORT MILL, SC 29715-7852..............................       92
054-43077.......................  232.................  SEVEN OAKS ASSISTED LIVING, 119 CHESTERFIELD HWY, CHERAW, SC 29520.....................      114
053-35005.......................  221D3...............  THOMASVILLE CHURCH HOMES, 904 DOAK CT., THOMASVILLE, NC 27360..........................      100
053-94014.......................  207.................  FOUR SEASONS APTS, 3129 SPRING VALLEY DR., GASTONIA, NC 28052..........................       81
063-22004.......................  232.................  SOUTHLAND SUITES, RR 2 BOX 1785, MAYO, FL 32066-9201...................................       22
063-35196.......................  221D4...............  WARRINGTON VILLAGE APARTMENTS, 34 PATTON DR., PENSACOLA, FL 32507-3805.................      200
066-43078.......................  232.................  MUNNE CENTER AKA THE OAKS, 17250 SW 137TH AVE., MIAMI, FL 33177........................       94
067-35331.......................  221D4...............  ASHLEY CROSSINGS, 401 ROSERY ROAD EAST, LARGO, FL 33770................................      278
067-43089.......................  232.................  PALM TERRACE RESIDENT CARE, 5121 E. SERENA DRIVE, TAMPA, FL 33617......................       73
083-35211.......................  221D4...............  BEECHER HOUSE, 203 S MAIN ST., SOMERSET, KY 42501......................................       62
083-35272.......................  221D4...............  CYPRESS POINT, 1101 BURLEW BLVD., OWENSBORO, KY 42303..................................      120
083-35345.......................  221D4...............  TOWN BRANCH APARTMENTS, 221-A S HORD STREET, GRAYSON, KY 41143.........................       24
083-35367.......................  221D4...............  DIXIE PARK HOMES, 219 HORD STREET, GRAYSON, KY 41143...................................        8
083-35472.......................  221D3...............  KENTUCKY TOWERS, 514 S. FIFTH ST., LOUISVILLE, KY 40202................................      275
083-35544.......................  221D4...............  HAVERFORD PLACE, COLONY BLVD. & STURBRIDGE DR., GEORGETOWN, KY.........................      160
083-43087.......................  232.................  SHELBY MANOR HEALTH CARE, 100 CHURCH VIEW ST., SHELBYVILLE, KY 40065...................      153
087-43046.......................  232.................  VERANDA AT HAMILTON PLACE, 7429 SHALLOWFORD RD., CHATTANOOGA, TN 37421.................       60
081-15001.......................  232.................  FOX ACRES, 2180 MAGNUM RD., MEMPHIS, TN 38134..........................................       10
081-22003.......................  232.................  MAPLE RIDGE MANOR, 705 LAKE ROAD, DYERSBURG, TN 38024..................................       43
081-43021.......................  232.................  FOX ACRES, 2180 MAGNUM RD., MEMPHIS, TN 38134..........................................       10
081-55002.......................  221D3...............  WATKINS MANOR APTS, 2623 N WATKINS ST, MEMPHIS, TN 38127-8500..........................      214
071-94029.......................  223F................  CRESTVIEW VILLAGE APARTMENTS, 208 NORTH CRESTLANE DRIVE, KANKAKEE, IL 60901............      132
072-35078.......................  ....................  SAINT NICHOLAS APARTMENTS, 400 E JEFFERSON STREET, SPRINGFIELD, IL 66666...............       94
046-35605.......................  221D4...............  KINGS CROSSING, 4106 KINGS HIGHWAY, DAYTON, OH 45406...................................      298
046-44089.......................  236.................  MORIANE APTS, 27 S LUDLOW ST, DAYTON, OH 45402-1832....................................      110
046-44170.......................  236.................  GLENCOE-AUBURN APARTMENTS, 10 VIEW CT, COLUMBUS, OH 45219-1724.........................       90
042-35195.......................  221D3...............  CARTER MANOR APTS., 1012 PROSPECT, CLEVELAND, OH 44115.................................      280
042-35287.......................  221D4...............  PARK LANE VILLA, 10510 PARK LANE AVE, CLEVELAND, OH 44106-0000.........................      185
042-35326.......................  221D4...............  BUCYRUS ESTATES APTS., 1730 MARION RD., BUCYRUS, OH 44820..............................       50
042-35444.......................  221D3...............  THE NORTHWESTERLY, 1341 MARLOWE AVE., LAKEWOOD, OH 44107-0000..........................       92
044-SH004.......................  202.................  ROCHDALE COURT APTS, 1584 E LAFAYETTE ST, DETROIT, MI 48207-2959.......................       70
044-SH012.......................  202.................  FOUR FREEDOMS HOUSE, 1600 ANTIETAM ST, DETROIT, MI 48207...............................      320
044-SH021.......................  202.................  INDEPENDENCE HALL, 1935 CHENE CT., DETROIT, MI 48207...................................      216
073-11144.......................  223F................  VILLAGE PARK APTS., 2754 EAST PAULDING RD., FORT WAYNE, IN 46816.......................      484
073-44360.......................  236.................  PARKSIDE TERRACE I, 2340 SUNBURST BLVD, EVANSVILLE, IN 47714-4610......................      202
073-44457.......................  236.................  PARKSIDE TERRACE II, 2340 SUNBURST BLVD, EVANSVILLE, IN 47714-4610.....................      120
075-EH251.......................  202.................  MONROE MANOR, 2403 MONROE STREET, NEW HOLSTEIN, WI 53061-0000..........................       12
092-35133.......................  221D3...............  SOUTHGATE APTS. I, 3200 MAPLE AVE., SLAYTON, MN 56172-0000.............................       31
112-35015.......................  221D3...............  SUNNYDALE APT., 125 SUNNYDALE ST., JACKSONVILLE, TX 75766-3388.........................       64
112-35327.......................  221D4...............  PARK MANOR APTS., 2934 WEST PIONEER DRIVE, IRVING, TX 75061............................      210
112-35380.......................  221D4...............  HIGHLAND COURT APARTMENTS, 3618 WHEELER, DALLAS, TX 75209..............................       85
112-43065.......................  232.................  COUNTRY CLUB VILLAGE, 3400 NORTH COUNTRY CLUB RD., IRVING, TX 75062....................       38
113-44065.......................  236.................  SABINE TERRACE, 600 WEST SADOSA STREET, EASTLAND, TX 76448-3343........................       70
116-35121.......................  221D4...............  CUESTAS APTS., 2800 NORTH ROADRUNNER PKWY, LAS CRUCES, NM 88011........................      104
114-35280.......................  221D4...............  SATSUMA GARDENS APTS., 2008 JENKINS RD, PASADENA, TX 77506.............................      232
114-43032.......................  232.................  PARK CENTRAL NURSING HOME, 425 LAKE ARTHUR DRIVE, PORT ARTHUR, TX 77642-0000...........      120
059-35229.......................  221D4...............  SNAP II APTS., PO BOX 84, SHREVEPORT, LA 71161-0000....................................       59
059-35236.......................  221D4...............  GRAMBLING DEVELOPMENT, 200 EDITH ROSE LANE, GRAMBLING, LA 71254-0000...................       72
117-35127.......................  221D3...............  WESTERN VILLAGE APTS., 120 N. EDWARDS STREET, HOLLIS, OK 73550.........................       48
117-35185.......................  221D4...............  APACHE TRACE APARTMENTS, 1301 E HIGHWAY 3, GUYMON, OK 73942-5431.......................      144
117-43028.......................  232.................  CARRIAGE INN APTS., 1300 EAST AYERS, EDMOND, OK 73034-0000.............................       94
117-EH087.......................  202.................  REDBUD HOUSING, PO BOX 10, OAKS, OK 74359..............................................       24
115-35205.......................  221D4...............  LASBY PARK TERRACE APTS., 120 TERRACE DR., SAN BENITO, TX 78586-5906...................       65
115-43033.......................  232.................  VILLA SERENA ALZHEIMER'S, 4455 HORIZON HILL BLVD., SAN ANTONIO, TX 78229...............       36
115-94015.......................  221D4...............  CAMELOT RETIREMENT COMMUN, 2015 S. CYNTHIA AVE., MCALLEN, TX 78503-2846................      120
074-35162.......................  221D4...............  DAVENPORT MANOR APARTMENT, 7118 HILLANDALE RD, DAVENPORT, IA 52806-1049................      100
074-44026.......................  236.................  COUNTRY MANOR APTS., 1010 N. 16TH ST., CLARINDA, IA 51632-0000.........................       48
084-35252.......................  221D4...............  LOVETT PLACE, 2701-03 BENTON BLVD, KANSAS CITY, KS 64128...............................       48
102-35139.......................  221D4...............  MULBERRY COURT APTS., 1500 N. CEDAR ST., ABILENE, KS 67410.............................       37
102-35172.......................  221D4...............  FOX RUN APTS., 206 E. MIAMI, HIAWATHA, KS 66434-0000...................................       44
102-35177.......................  221D4...............  FLEMING PLACE APARTMENTS, 2914 FLEMING ST, GARDEN CITY, KS 67846-7409..................       96
102-43036.......................  232.................  MEADOWBROOK MANOR OF TOPE, 711 SW GARFIELD AVE., TOPEKA, KS 66606......................      168
103-94006.......................  221D4...............  STREHLOW TERRACE APTS., 2007 N. 18TH ST., OHAHA, NE 68110..............................       70
085-SH006.......................  202.................  COUNCIL HOUSE APTS., 300 S. GRAND BLVD., ST. LOUIS, MO 63103-2400......................      287
091-35093.......................  221D3...............  FRIENDSHIP VILLAGE, 211 S. WILSON AVE., FLANDREAU, SD 57028............................       18
101-35167.......................  221D3...............  LAMAR APARTMENTS, 708 SOUTH MULLEN, LAMAR, CO 81502....................................       48
101-35296.......................  221D4...............  ROTELLA PARK APARTMENTS, 1620 CORONADA PKWY, THORNTON, CO 80229........................       82
105-43038.......................  232.................  SERENITY RANCH ASSISTED L, 360 WEST 4200 NORTH, OAKLEY, UT 84055.......................       42
123-43042.......................  232.................  PALM VALLEY REHAB. AND CA, 13575 WEST MCDOWELL RD., GOODYEAR, AZ 85338.................      155
121-44082.......................  236.................  UNIVISTA APTS., 1340 TURK STREET, SAN FRANCISO, CA 94115...............................       24
121-EH065.......................  202.................  HOMES NOW IN THE COMMUNITY, 1800 LINDEN STREET, OAKLAND, CA 94607......................       10
127-35257.......................  221D4...............  RIVERSIDE APTS., 1109 ARTHUR ST., ABERDEEN, WA 98520...................................       20
171-43034.......................  232.................  LOGANHURST HEALTH CARE, EAST 1515 ILLINOIS AVE, SPOKANE, WA 99207......................       45
                                                                                                                                                --------
      TOTAL PROJECTS............  ....................  .......................................................................................      131
      TOTAL UNITS...............  ....................  .......................................................................................   14,750
                                                                                                                                                ========
      Hud-Owned Multifamily
    Properties, As of 4/4/02
 023-35213.......................  221D3...............  FRANKLIN PARK I, 278 HUMBOLDT AVE, DORCHESTER, MA 02121-2234...........................      181
023-35214.......................  221D3...............  THEROCH I, 107 ELM HILL AVE, DORCHESTER, MA 02121-2941.................................      106
023-35216.......................  221D4...............  FRANKLIN PARK II, 278 HUMBOLDT AVE, DORCHESTER, MA 02121-2234..........................       97
023-35218.......................  221D4...............  THEROCH II, 129 COLUMBIA RD, DORCHESTER, MA 02121-3106.................................      109
023-35229.......................  221D4...............  FIELDSTONE APTS, 887 BLUE HILL AVE, DORCHESTER, MA 02124-2902..........................       84
023-35292.......................  221D4...............  ACADEMY HOMES II, 2978 WASHINGTON ST, ROXBURY, MA 02119-1299...........................      316
023-55027.......................  221D3...............  GENEVA APARTMENTS, 229 GENEVA AVE APT B, BOSTON, MA 02121-3848.........................       48
023-55110.......................  221D3...............  CAMFIELD GARDENS, 115 LENOX ST, BOSTON, MA 02118-1051..................................      102
023-55147.......................  221D3...............  ROXSE HOMES, 1070 TREMONT ST, ROXBURY, MA 02120-2119...................................      389
023-99905.......................  221D3...............  BLUE HILL, BLUE HILL AVE, BOSTON, MA 02121.............................................       16
023-99906.......................  221D3...............  CASTLEGATE, CASTLEGATE, BOSTON, MA 02121...............................................       54
023-99907.......................  221D4...............  BLUE CASTLE GATE (DEMO), BLUE CASTLEGATE STREETS, BOSTON, MA 02121.....................       40
023-99909.......................  221D3...............  SONOMA, SONOMA STREET, BOSTON, MA 02121................................................       22
023-99910.......................  221D4...............  MAPLE, MAPLE STREET, BOSTON, MA 02121..................................................       66
023-99911.......................  221D3...............  SCHUYLER, SCHUYLER STREET, BOSTON, MA 02121............................................       12
023-99913.......................  221D4...............  WAUMBECK, WAUMBECK ST, BOSTON, MA 02116................................................       32
023-99914.......................  221D3...............  HUMBOLT, HUMBOLT STREET, BOSTON, MA 02121..............................................       52
023-99915.......................  221D3...............  CRAWFORD, CRAWFORD STREET, BOSTON, MA 02121............................................       89
023-99916.......................  221D4...............  REGENT, REGENT STREET, BOSTON, MA 02121................................................       15
017-11019.......................  223F................  WILLOW STREET APTS, 26-84 WILLOW ST, 111 PUTNAM ST., NEW BRITAIN, CT 06051.............       50
016-35056.......................  221D4...............  MELROSE APARTMENTS, 50 PRAIRIE AVE, PROVIDENCE, RI 02905-2437, HUD New York............       42
012-44033.......................  236.................  MEDGAR EVERS HOMES, 84 LIVINGSTON ST., BROOKLYN, NY 11201..............................      318
012-44043.......................  236.................  JOSE DE DIEGO BEEKMAN I, 324 POWERS AVE, BRONX, NY 10454-1633..........................      103
012-44051.......................  236.................  JOSE DE DIEGO BEEKMAN II, 328 BEEKMAN AVE, BRONX, NY 10454-1404........................      142
012-44052.......................  236.................  JOSE DE DIEGO BEEKMAN III, 694 E 141 ST, BRONX, NY 10454-2431..........................      176
012-44053.......................  236.................  JOSE DE DIEGO BEEKMAN IV, 597 E 138TH ST, BRONX, NY 10454-2727.........................      138
012-44054.......................  236.................  JOSE DE DIEGO BEEKMAN V, 578 E 141ST ST, BRONX, NY 10454-2350..........................      150
012-44134.......................  236.................  JOSE DE DIEGO BEEKMAN VI, 570 SAINT MARYS ST, BRONX, NY 10454-1428.....................      185
012-44140.......................  236.................  JOSE DE DIEGO BEEKMAN VII, 615 E 141ST ST, BRONX, NY 10454-2317........................      165
012-44160.......................  236.................  JOSE DE DIEGO BEEKMAN V III, 590 OAK TER, BRONX, NY 10454-1408.........................      172
012-55183.......................  221D3...............  GATES AVENUE HOUSING, 650-700 GATES AVE, BROOKLYN, NY 11221-1701.......................      163
012-57150.......................  221D4...............  EVENING STAR, 277 GATES AVENUE, BROOKLYN, NY 11238.....................................       35
012-HH002.......................  202.................  BRONX INDEPENDENT LIVING, 1310 MORRIS AVE, BRONX, NY 10451.............................       21
031-94002.......................  223F................  BRICK TOWERS, 685 MARTIN LUTHER KING JR BLVD, NEWARK, NJ 07102-1006....................      320
           HUD Baltimore
 052-35332.......................  221D4...............  KENSETT HOUSE, 1700 EUTAW PL., BALTIMORE, MD 21217.....................................       24
052-35471.......................  221D3...............  SCHOOL 181, 1645 N CALHOUN ST, BALTIMORE, MD 21217-2800................................      100
         HUD Philadelphia
 034-35175.......................  221D4...............  MACLAY STREET I APARTMENT, 501 MACLAY STREET, HARRISBURG, PA 17110.....................      129
034-35211.......................  223F................  MACLAY STREET II APARTMENT, 428 PEFFER STREET, HARRISBURG, PA 17102....................      172

        HUD Washington DC

000-44123.......................  236.................  CAPITOL VIEW PLAZA, 5929 E CAPITOL ST SE STE 104, WASHINGTON, DC 20019-7237............      309

        HUD Jacksonville

066-R4071.......................  236.................  HOLIDAY LAKES APARTMENTS, 973 N POWERLINE RD, POMPANO BEACH, FL 33069-2305.............      208

        HUD Indianapolis

073-35475.......................  221D4...............  ORCHARD PARK APTS, 3102 BALTIMORE AVE, INDIANAPOLIS, IN 46218-2059.....................       94

         HUD New Orleans

064-35040.......................  221D4...............  PECAN VILLA, 220 MARGARET ST, BREAUX BRIDGE, LA 70517-5942.............................      103

          HUD St. Louis

085-58505.......................  236.................  JVL HOUSING CORP PACKAGE, 2754 BACON ST, SAINT LOUIS, MO 63106-1099....................       56
085-58508.......................  236.................  JVL#14, 2754 BACON ST, SAINT LOUIS, MO 63106-1099......................................       65
                                                                                                                                                --------
      TOTAL PROJECTS............  ....................  .......................................................................................       44
      TOTAL UNITS...............  ....................  .......................................................................................    5,270
--------------------------------------------------------------------------------------------------------------------------------------------------------

               native american housing block grants fund
    Question. The Native American Housing Block Grant fund has been 
largely flat funded at some $650 million since its inception. How many 
low-income units have been preserved with these funds?
    Answer. On average, during the 5 years that funding has been 
appropriated for the Native American Housing Block Grant (NAHBG) 
program authorized by the Native American Housing Assistance and Self-
Determination Act of 1996, as amended (NAHASDA), Indian tribes or their 
tribally designated housing entities (TDHE) have provided assistance 
designed to preserve the viability of 77,838 units each fiscal year. 
The unit count includes moderate or substantial rehabilitation, and 
modernization and operating assistance related to units currently in 
management. It does not include other eligible affordable housing 
activities under the NAHBG, such as down payment and buy down 
assistance, minor rehabilitation under $5,000, housing services, 
housing management services, crime prevention and safety, and model 
activities. The total does include Section 8 type programs operated by 
a tribe or TDHE. Figures are derived from Formula Current Assisted 
Stock (FCAS) data used to determine the FCAS allocation portion of the 
NAHBG formula.
    Question. How many new units are created each year with these 
funds?
    Answer. Using 4 years of Native American Indian Housing Block Grant 
(NAHBG) funding (fiscal year 1998 through fiscal year 2001), on 
average, 2,149 units have been created each year. Fiscal year 2002 
figures are incomplete as of this date. Data are derived from Annual 
Performance Reports and Indian Housing Plans, and in one instance, an 
Area Office of Native American Housing Programs (ONAP) in-house data 
report. In most instances, figures reflect dwelling units started and 
completed. Figures are reliable to the extent those reports contain 
accurate information.
    Figures are affected by the transition from the way in which 
housing development funds were awarded competitively under the United 
States Housing Act of 1937, and the formula block grant allocation 
method under the NAHBG authorized by the Native American Housing 
Assistance and Self-Determination Act of 1996, as amended. Numbers do 
not reflect ``phased projects,'' where it may be necessary for a tribe 
or tribally designated housing entity (TDHE) to complete several pre-
construction steps, such as acquisition of land and development of 
infrastructure prior to actual construction of dwelling units. Phased 
pre-construction activities are necessary in most areas of Indian 
Country, but somewhat more common in the East, the Midwest and the 
Northwest, less common in the Plains States. Alaska's phased 
construction is more the result of limited weather-related building 
seasons, materials acquisition challenges and smaller project sizes.
                                hope vi
    Question. The Public Housing HOPE VI program is scheduled to sunset 
at the end of fiscal year 2002. This program has been tremendously 
valuable in revitalizing both distressed public housing and distressed 
communities. Is the Administration going to seek an extension of this 
program?
    Answer. Yes, the Department submitted a reauthorization proposal.
    Question. What is the cost of this program per unit?
    Answer. The cost per unit of this program is $161,755. This amount 
represents the amount budgeted from all sources, such as HOPE VI funds, 
leveraged funds, and funding from other sources, as well as the hard 
and soft construction costs and supportive services. The sum is based 
on the number of units planned for participating in the HOPE VI 
program. This information is based on the HOPE VI Quarterly Report for 
the quarter ending December 31, 2001.
    Question. Please provide a breakdown of costs for all projects by 
unit with the soft costs identified as a separate breakout?
    Answer. Below is the breakdown of costs for all HOPE VI projects. 
Which is based on data from the HOPE VI Quarterly Report for the 
quarter ending December 31, 2001. Total costs represents the amount 
budgeted from all sources. Number of units represents all units planned 
(ACC and non-ACC as well as rental and homeownership).

                                                All HOPE VI UNITS
----------------------------------------------------------------------------------------------------------------
                                                          Housing-Related
                                                               Costs            Soft Costs           Total
----------------------------------------------------------------------------------------------------------------
Total Costs............................................     $8,501,556,044     $3,159,331,262    $11,660,887,306
Number of Units........................................  .................             72,090  .................
Cost per Unit..........................................           $117,930            $43,825           $161,755
----------------------------------------------------------------------------------------------------------------

    Question. Please identify the reforms that should be considered 
before additional funds are appropriated?
    Answer. The Department has requested the reauthorization of HOPE 
VI. HUD is currently finalizing proposals for program reforms and 
believes that they are best discussed in the context of reauthorization 
legislation. At the request of the Appropriations Committees, the 
Department submitted a report on the HOPE VI programs on June 14, 2002. 
The report describes the lessons that have been learned during the 
first 10 years of the program's operation.
                       lack of affordable housing
    Question. There is a lack of affordable housing in many communities 
throughout the country, especially for extremely low-income families 
(those at or below 30 percent of median income). Vouchers do not work 
well in these communities and housing is too expensive to build to 
assist many of these low-income families. How do address this 
production problem, especially since tax credit production does not 
reach extremely low-income families?
    Answer. It is true that many Americans cannot afford the costs of 
rental housing and that affordability problems are most prevalent among 
extremely low-income families. The Department does not agree, however, 
that ``vouchers do not work well in these communities.'' A recent HUD 
study found that in 2000, roughly 7 out of 10 families who received 
vouchers in metropolitan areas nationwide succeeded in using them. 
Vouchers that are not used by the initial recipients are re-issued to 
other families, and most of these families are successful.
    With respect to the production of new rental housing, despite 
overall Federal budget limitations due to the war against terror and 
the weakened economy, HUD's fiscal year 2003 budget seeks to expand the 
number of households that can afford the costs of rental housing.
  --HUD is requesting 34,000 additional housing vouchers--most of which 
        will be used to assist extremely low-income families.
  --HUD is proposing a $74 million increase in HOME, in addition to the 
        $200 million proposed for the American Dream Downpayment Fund.
  --HUD continues its strong commitment to Section 202 for the elderly 
        and Section 811 for the disabled.
  --HUD is adding $15 million to the Housing Opportunities for Persons 
        with AIDS program--raising it from $277 million to $292 
        million.
    Last year, HUD raised the loan limits for FHA multifamily 
insurance, a step that has led to a substantial increase in volume in 
that program. HUD is also reducing the mortgage insurance premium from 
80 basis points to 57 basis points, effective in October. Finally, it 
is important to note that in recent years, Congress has increased the 
Low-Income Housing Tax Credit by 40 percent and raised the caps on tax-
exempt bond authority.
    Taken together, these changes will have a significant impact in 
expanding the availability of affordable rental housing.
    With respect to serving extremely low-income families, it is 
important to consider that housing vouchers can be combined with 
existing production programs to make units affordable to extremely low-
income families. The Department would be happy to discuss how to 
improve the linkages of these various programs.
                       d.c. sfpd fraud and abuse
    Question. There have been a number of recent news stories about a 
church-sponsored group in the D.C area called the Church Association 
for Community Service which was identified as defrauding a HUD program 
whereby nonprofits rehabilitate and resell HUD housing. In this case, 
the nonprofit used a private entity to rehabilitate the housing and 
made some $100 thousand on average per house in violation of the rules. 
The news stories also indicated that this group did not qualify to 
participate in the program absent broad waivers by HUD under the last 
Administration. How big a problem is this type of fraud and what steps 
has HUD taken to ensure accountability of HUD's nonprofit partners in 
these types of programs?
    Answer. On April 5, 2002, the Department announced that it would be 
conducting a full review of the Asset Control Area (ACA) program, and 
that during the review period, existing ACA agreements would be allowed 
to expire. In part, this step was taken in response to the concerns 
raised above and raised by HUD's Inspector General in a report issued 
in February 2002. Two key components of this program review will be to 
determine if any additional fraud has taken place within the program, 
and what controls the Department must implement to prevent fraudulent 
activity.
         hud integrated information processing service (hiips)
    Question. HUD recently announced a re-competition of its HUD 
Integrated Information Processing Service (HIIPS) contract. This 
contract is key to HUD implementing a comprehensive IT system to track 
HUD programs and funding. When will this contract be awarded and when 
will HUD have a comprehensive IT system in place to track all HUD 
funding and programs?
    Answer. The service that will be the follow-on contract to HIIPS 
has been named the HUD Information Technology Service (HITS). HITS will 
be a 10-year IT infrastructure contract. The HITS contract is not a 
systems development contract and is not pivotal in the development of a 
system to track HUD programs and funding.
    The HITS contract is scheduled for award in November 2002. 
Implementation of the HITS contract is not directly related to a system 
to track HUD programs and funding.
    Question. What are the overall expected costs for full 
implementation?
    Answer. The existing HIIPS contract will transition to the next 
contract, HITS. There is a transition cost associated with the 
migration from HIIPS to HITS. The transition cost is considered source 
selection information and since this is an active procurement, Pursuant 
to the Official Federal Procurement Policies Act, 41 U.S.C. Section 
423, HUD employees may not disclose contractor proposal or source 
selection information.
    Question. Please describe what the IT system will do when complete?
    Answer. HITS includes all of the supplies and services required to 
support HUD's Information Technology (IT) infrastructure. It includes:
    Hardware Maintenance, Repair, Upgrade and Support
    Data Storage and Retrieval
    Database Management
    Facilities Management
    Telecommunications of Data and Video
    Software Support (For Systems Software), Help Desk Operations for 
all Commercial off the Shelf (COTS) and HUD Unique Software
    Electronic Data Interchange (EDI)
    Configuration Management
    Technology Assessment
    Integration & Test Integration
    Test Center Resources
    IT Accessibility Support
    Training
    Enterprise Engineering Document Library Services
    Nationwide IT including Telecommunications Disaster Recovery
                   fha multifamily premium reduction
    Question. HUD has proposed to reduce the mortgage insurance 
premiums for most of its FHA Multifamily Mortgage Insurance programs. 
When would these reductions go into effect and how many additional 
units does HUD anticipate will be funded under this change?
    Answer. The Department will soon publish a Notice in the Federal 
Register implementing the decreases in mortgage insurance premiums that 
will go into effect for FHA Firm Commitments issued on or after October 
1, 2002. The Department has not estimated any potential unit increases 
in FHA commitments attributable to the MIP decrease.
                   multifamily accelerated processing
    Question. In addition, I have concerns that FHA's Multifamily 
Accelerated Processing (MAP) does not have adequate protections against 
default since the owner/lender essentially self-certifies the 
underwriting. How does HUD protect against unreasonable risk of 
default?
    Answer. MAP does provide adequate protections against unreasonable 
risk of default through the HUD staff (architecture and cost, 
appraisal, mortgage credit) pre-commitment review of the lender's 
underwriting package. The appraisal is the key element of multifamily 
transactions and HUD appraisal staff are required to conduct a field 
review of the property and the comparable rental properties which 
support the proposed rental estimates. The HUD technical staff can 
recommend modifications or rejection of the application if the 
underwriting conclusions are not supportable. The HUD staff 
recommendation must specifically address major issues like the adequacy 
of the initial rent-up (operating deficit), escrow for new 
construction/substantial rehabilitation transactions, the adequacy of 
the reserve for replacement for existing transactions and any 
environmental concerns. The FHA supervisor in the field office who 
makes the decision on issuing a commitment has clear authority in the 
MAP Guide to modify or reject the lender's underwriting package. MAP 
has freed HUD staff from preparing much of the multifamily paperwork 
and allowed staff to concentrate their review on the essential parts 
and risk of the proposed transaction.
                            fha default rate
    Question. I am concerned that FHA single family mortgage insurance 
tends to take the highest risk of default despite currently exceeding 
actuarial requirements. What is the current rate of default on FHA 
single family mortgage insurance?
    Answer. As of the quarter ending December 31, 2001, the 90-day 
default rate, including loans in foreclosure, was 4.60 percent of all 
FHA loans in force.
              default rate for conventional home mortgages
    Question. How does this compare to the private market?
    Answer. Using comparable data compiled by the Mortgage Bankers 
Association of America, the 90-day default rate for conventional 
mortgages, including loans in foreclosure, was 1.11 percent as of the 
quarter ending December 31, 2001.
                              mmi reserves
    Question. At what point does a downturn in the economy put the 
Mutual Mortgage Insurance Fund at risk of failing to meet its actuarial 
floor?
    Answer. As of the end of fiscal year 2001, the Actuarial Review of 
Mutual Mortgage Insurance (MMI) Fund estimated the financial reserves 
of the Fund at approximately $18.5 billion, yielding a capital ratio of 
3.75 percent. Based on estimates of MMI activity for fiscal year 2002, 
the estimate of reserves was projected to increase to $22.5 billion by 
the end of the fiscal year, with a capital ratio of 4.24 percent. 
Actual program volume through the first half of this fiscal year 
indicates substantially increased performance over that projected in 
the Actuarial Review. Alternative economic scenarios analyzed in both 
the Actuarial Review and by the General Accounting Office indicate that 
it is very unlikely that this substantial reserve would be depleted to 
the extent of dropping below the currently mandated 2 percent capital 
ratio established in the Cranston-Gonzalez National Affordable Housing 
Act of 1990, however the prolonged and adverse economic circumstances 
that would yield such a result cannot be eliminated as a possibility.
                              601 program
    Question. What is the status of HUD's implementation of the single 
family property disposition program--more specifically, the asset 
control areas or ACAs? The 1998 property disposition legislation 
directed HUD to sell these properties to local governments and 
qualified nonprofits at a price that allows their adequate 
rehabilitation and resale to low-income homebuyers, without the need 
for additional Federal subsidies.
    Answer. During the Accelerated Claims Disposition (Section 601) 
program demonstration phase, the initiative will have a limited scope 
and operate only in certain regions of the country. Further, in those 
16 communities that have signed Asset Control Area (ACA) agreements, 
properties in those revitalization areas will be excluded from the 
Section 601 Demonstration, even during the ACA program review period. 
In the initial demonstration phase of the Accelerated Claims 
Disposition program, the Department wants to learn if the profit-
motivated Joint Venture Partner will team with high capacity nonprofit 
organizations in carrying out loss mitigation and asset disposition on 
notes in impacted revitalization areas to meet its recovery objectives. 
The Department wants to be able to evaluate and report conclusively at 
the end of the demonstration if the objectives of operationalizing the 
claim processing, increasing recoveries to the FHA fund and achieving 
budget savings have been addressed. The Department, upon publishing 
Regulations, will consider allowing nonprofits to purchase mortgages in 
the future.
            single family property disposition holding costs
    Question. Also, HUD is proposing to block sell many of the 
foreclosed FHA single family properties and get HUD primarily out of 
the business of selling individual houses. What are the current costs 
for HUD to hold foreclosed FHA houses, including the per unit cost of 
management and rehabilitation. This cost breakout should include the 
costs associated with HUD staff and overhead as well as the per unit 
cost for the use of management companies, including all associated 
costs.
    Answer. Daily per unit holding costs equal $36.75. This includes 
$4.00 for taxes, $30.84 for property management and marketing, $.63 for 
lost interest, and $1.28 for HUD staff costs. (This assumes 30,000 on-
hand properties and 125 HUD staff. Management & marketing costs include 
actual management fees, maintenance expenses, and the costs for limited 
repairs completed to address health and safety concerns.)
                     puerto rico housing authority
    Question. What is the status of funding for PRPHA?
    Answer. Under the operating fund the Puerto Rico Housing Authority 
has received $73,822,415 and is scheduled to receive an additional 
$18,948,123 for a total of $92,770,538 for its fiscal year ending June 
30, 2002.
  per unit amount of operating subsidy for puerto rico public housing 
                               authority
    Question. How much funding does PRPHA receive per unit?
    Answer. Under the Operating Fund, the Puerto Rico Housing Authority 
will receive a subsidy of $1,652 per unit for its fiscal year ending 
June 30, 2002.
           comparison of per unit amount of operating subsidy
    Question. How does this compare to the funding received 3 years ago 
per unit and how does it compare to the funding received per unit by 
other PHAs such as Atlanta, New York City, Chicago and Los Angeles?
    Answer. The data below shows a comparison of annual per unit 
amounts for the Public Housing Authorities (PHAs) in question for 
operating subsidies received over a 3-year period based on the PHAs' 
fiscal years:

        Fiscal Year                                        Per Unit Cost
PRPHA:
    6/30/2002.....................................................$1,652
    6/30/2001..................................................... 1,433
    6/30/2000..................................................... 1,987
New York:
    12/31/2001.................................................... 4,687
    12/31/2000.................................................... 4,265
    12/31/1999.................................................... 3,724
Chicago:
    12/31/2001.................................................... 5,863
    12/31/2000.................................................... 5,898
    12/31/1999.................................................... 5,277
Los Angeles:
    12/31/2001.................................................... 3,507
    12/31/2000.................................................... 3,529
    12/31/1999.................................................... 3,244
Atlanta:
    6/30/2002..................................................... 4,031
    6/30/2001..................................................... 2,813
    6/30/2000..................................................... 3,191

    As reflected by the above data, the per unit amount of subsidy 
received by an individual PHA can vary from year-to-year and there can 
be a significant variation in funding levels between PHAs. For its 
December 31, 2001 fiscal year, the Chicago Housing Authority received 
about 3.5 times the average funding per unit than the Puerto Rico 
Public Housing Authorities (PRPHA's) received for its June 30, 2002 
fiscal year and 1.7 times the December 31, 2001 fiscal year average 
funding per unit than the Los Angeles PHA. Using this gross type of 
average, however, masks the impact of several important factors that 
determine operating subsidy eligibility and would help explain why 
Chicago receives more funding than the Los Angeles PHA or the PRPHA.
    The amount of operating subsidy received by any particular PHA is 
determined by a formula that takes into account factors such as routine 
operating expenses, utility costs, add-ons permitted by HUD, audit 
expenses, and rents charged to residents. For example, heating costs 
are a major expense to Chicago, but less of an expense for the PRPHA. 
Another example where costs vary by PHAs is that of routine operating 
costs, which is represented by the Allowable Expense Level (AEL). The 
AEL is a formula factor intended to represent the costs of operating a 
well-managed PHA. For the PRPHA, routine operating costs are low, but 
these costs are relatively higher for Chicago. Finally, in terms of 
comparing per unit amounts of operating subsidies, Chicago has a 
significant number of units approved for demolition by HUD and, as a 
result, receives operating subsidy for phase down or transition funding 
as well as funds to preserve and protect the units until they are 
demolished. On the other hand, the Puerto Rico PHA is not undertaking 
major demolition actions.
                                 ______
                                 

             Questions Submitted by Senator Larry E. Craig

                             rural housing
    Question. I remain concerned over HUD's decision to not request 
funds for the rural Housing and Development Program. I am well aware 
other mechanisms exist within HUD to fund development block grants and 
sweat-equity programs; however, while that is encouraging, I find that 
HUD's rationale in shifting responsibility for the Rural Housing and 
Development Program onto the USDA, is questionable. What assurances are 
there that this is not a cut or elimination of services?
    Answer. The Rural Housing and Economic Development Program has a 
current portfolio of grantees that include rural nonprofit 
organizations, community development corporations, Indian tribes, State 
Housing Finance agencies, and State economic development and/or 
community development agencies. HUD has grant agreements for up to 36 
months with these entities to carryout the projects until they are 
completed, based on the organization's project timelines. The current 
projects will be administered by HUD through fiscal year 2003. The 
Administration's proposal to eliminate HUD's program reflects the much 
greater assistance provided by the U.S. Department of Agriculture and 
other agencies and presumes that there will not be a meaningful change 
in the overall Federal assistance to rural America.
    Question. What assurances can you give to me that at least the same 
level of services will be delivered, and that our government's helping 
hand in rural America would be made more effective by this change?
    Answer. The U.S. Department of Agriculture (USDA) continues to 
manage a substantial portfolio of rural housing grant programs and 
economic development grant programs, the service delivery will allow 
for a continuation of services provided to rural constituents. USDA's 
current rural development portfolio greatly exceeds HUD's Rural Housing 
and Economic Development Program in terms of programs and services from 
budgets to staffing.
                       housing counseling program
    Question. I've noted the Administration's proposal to restore 
funding for the Housing Counseling Program, which helps teach first-
time home buyers with modest incomes about often-complicated things 
like mortgages, inspections, and predatory lending practices. The 
previous Administration cut this funding, and also succeeded in almost 
eliminating participation by State housing finance agencies (HFAs). 
This made no sense, because State HFAs have the expertise and resources 
to offer new home buyers the broadest possible range of services.
    In Idaho, for example, our Idaho HFA is launching a program to help 
overcome language barriers and reach out to the Hispanic population 
through its homebuyer education program.
    Am I correct in assuming the Administration proposal for increased 
funding reflects your plans to fully re-engage State HFAs in the 
Counseling program?
    Answer. Most Housing Finance Agencies (HFAs) that operate good 
programs, such as the Idaho HFA, should receive substantial awards with 
the funding proposed for fiscal year 2003. The overall funding for the 
Housing Counseling program was increased and then cut significantly 
between fiscal years 1998 and 2000. An increase from $15 million in 
fiscal year 1997 to $20 million in fiscal year 1998 permitted HUD to 
seek out and fund additional organizations providing counseling 
services. However, a cut back to $15 million in fiscal year 2000 forced 
HUD to make a decision regarding how to spread substantially less money 
among the same types of groups.
    Experience clearly demonstrated to HUD that many State HFAs were 
not able to provide counseling services directly nor suballocate the 
funds to other local groups. In fact, over the last few years, HUD has 
recaptured hundreds of thousands of unspent funds from State HFAs. This 
funding was reserved in the names of several HFAs for an entire year-
long grant period, before HUD could recover it; clearly, it could have 
been well-used by other counseling agencies to serve many hundreds of 
clients in need. For this reason, HUD plans only a minimal increase in 
the amount of funding available for State HFAs for fiscal year 2003. 
However, HUD's decision to increase funding for this category only 
minimally should not affect high-performing HFAs such as Idaho's.
                equal opportunity and access to housing
    Question. In the President's basic budget document, one of HUD's 
main strategic objectives was to Ensure equal opportunity and access to 
housing, in other words, promote fair housing. HUD's own Budget 
Summary, spent just over a page describing HUD's programs to enforce 
fair housing laws.
    I commend the Administration's emphasis in this year's budget of 
assessing performance and effectiveness. However, I didn't see 
assessments in the area of fair housing.
    Using the Administration's red-light, green-light approach, how 
would you assess HUD's effectiveness in its strategic objective to 
ensure equal opportunity and access to housing?
    I realize, of course that you have inherited programs that 
previously were not subject to performance measurement and that this 
Administration is still implementing its policy of conducting such 
reviews. HUD's programs include both education and enforcement 
components. I think we all agree that an effective fair housing agenda 
includes both, adequate education and fair enforcement. How would you 
assess HUD's effectiveness in each of these areas?
    Answer. HUD has made significant progress in accomplishing the 
Department's strategic objective to ensure equal opportunity and access 
to housing, but at the moment we would still have to give ourselves a 
red light in this area. While our enforcement efforts have contributed 
to the reduction of discrimination in America, significant problems 
persist. The effectiveness of HUD's enforcement efforts has been 
historically impaired by the excessive length of time it has taken to 
resolve discrimination complaints. Also, while knowledge of what 
constitutes illegal discrimination under the fair housing laws is 
generally high, research indicates that the public requires more 
education about some prohibited practices.
    HUD is completing several studies that provide quantitative 
measures of the level of discrimination against different groups in our 
society. The preliminary findings of the Department's nationwide 
Housing Discrimination Study (HDS), to be released shortly, show that 
the Nation has made progress on some measures of discrimination against 
African Americans and Hispanics over the last 10 years but some serious 
problems remain. Moreover, an examination of the actual instances of 
discrimination reveals that many real estate professionals blatantly 
disregard the law. For example, in many cases agents openly confess 
their racial prejudices while steering prospective renters and 
homebuyers to certain neighborhoods.
    In the area of mortgage lending, HUD will release a study this 
month that shows that generally Blacks and Hispanics in Chicago and Los 
Angeles are treated no worse than whites when they inquire about 
financing options. However, the data also indicates that Blacks and 
Hispanics are more likely to be quoted worse terms and conditions on 
loans than equally-qualified or less-qualified whites. For example, in 
Chicago, Whites were offered higher loan amounts than similarly-
qualified Hispanics 51 percent of the time, while Hispanics were 
offered higher loans 19 percent of the time. In Los Angeles, the study 
showed that Blacks who were clearly qualified for conventional loans 
were steered to FHA loan products 31 percent of the time while Whites 
with comparable profiles were steered to FHA 8 percent of the time.
    The Department's research and other activities also reveal 
widespread non-compliance with the fair housing laws that require that 
new multifamily buildings be accessible to persons with disabilities. 
The Department will soon release a study that provides quantitative 
measures of the extent of such non-compliance. In many cases, the 
violations involve the failure to provide a basic level of 
accessibility (no ramped access, front doorways are too narrow, lack of 
access to common areas). HUD has made substantial progress in 
ameliorating these problems through its enforcement efforts and 14 
years of education, but substantial non-compliance remains.
    HUD has taken several steps to improve the effectiveness of its 
fair housing enforcement. The Bush Administration has made it a 
priority that fair housing complaints be processed in a timely manner. 
The Fair Housing Act requires that complaints be resolved in 100 days. 
Since President Bush took office, HUD has reduced by 29 percent the 
number of complaints remaining unresolved past 100 days. HUD 
accomplished this reduction through the commitment of additional staff 
and resources.
    Second, HUD is focusing more attention on particular communities 
and enforcement needs that weren't adequately addressed in the past. 
HUD has identified recent immigrants and persons living in Southwest 
Border ``colonias'' as populations who face significant barriers in the 
housing market, and have been traditionally underserved by HUD-funded 
fair housing programs. HUD's fiscal year 2002 Notice of Funding 
Availability (NOFA) and its fiscal year 2003 Budget emphasize fair 
housing projects that provide greater assistance to these communities. 
The NOFA also recognizes the need to be responsive to circumstances 
when they first arise, emphasizing projects that address national 
origin and religion discrimination that is on the rise since the 
September 11 terrorist attacks. HUD has also entered into an 
Interagency Agreement with the Department of State in furtherance of 
Executive Order 13166, ``Improving Access to Services for Persons with 
Limited English Proficiency,'' to translate FHEO publications into 
Arabic, Cambodian, Chinese, Korean and Vietnamese.
    As the Administration has become aware of enforcement needs 
requiring greater attention, HUD has committed additional resources to 
address them. For example, HUD has proposed reprogramming $1.95 million 
of fiscal year 2001 FHIP funds, originally planned for the third phase 
of HDS, to respond to immediate enforcement needs, including addressing 
the kind of discrimination HDS is uncovering. The reprogrammed funds 
will also support projects to combat lending discrimination, including 
predatory lending; post-terrorism discrimination; and fair housing 
issues in the colonias.
    HUD continues to aggressively enforce the fair housing laws on 
behalf of people with disabilities, seeking voluntary compliance where 
possible. As people with disabilities are disproportionately 
represented among low-income persons, HUD is responding to the lack of 
accessible housing units in public and assisted housing. HUD has 
recently signed Voluntary Compliance Agreements with the District of 
Columbia and the Boston Housing Authorities, which collectively will 
create more than a thousand new units of accessible housing. HUD has 
also developed a Web-based system that will assist its field offices in 
their review of non-compliant FHA-insured properties and in targeting 
their enforcement efforts. In addition, as the IRS-administered low-
income housing tax credit program currently produces more units of 
affordable housing than any other Federal program, HUD has joined 
forces with the Department of Justice and the IRS to notify tax-credit 
beneficiaries that failure to comply with the law places their tax 
credits in jeopardy.
    Finally, HUD is moving toward more effective enforcement by making 
sure more States, localities, and private organizations have the tools 
and the resources they need to tackle the specific fair housing 
problems in their communities. HUD now reimburses 95 States and 
localities for their enforcement of substantially equivalent laws under 
the Fair Housing Assistance Program (FHAP). This includes 33 States 
plus the District of Columbia. Under FHIP this past year, HUD awarded a 
record-number, 90 grants to a diverse range of fair housing groups 
throughout the country. The Department is also providing a more 
continuous funding stream for FHIP enforcement projects by eliminating 
a policy that made successful applicants ineligible for new enforcement 
grants the following year.
    In the area of education, HUD's soon-to-be-released Fair Housing 
Act Awareness study indicates that while most people understand the 
most commonly discussed provisions of the Fair Housing Act, a majority 
are not aware of the full scope of the Act's prohibitions. Moreover, a 
significant minority of people remain ignorant even of the law's most 
basic provisions.
    The Department carries out much of its education activities through 
FHIP, for which the 2002 NOFA provides $6 million in grants (grantees 
may also use a portion of enforcement and new-organization grants for 
education purposes). A few representative successes include: the 
education project of the Colorado Coalition for the Homeless (CCH), who 
formed a statewide Fair Housing Task Force, which consists of rank-and-
file citizens and State, local, and Federal Government representatives, 
delivering fair housing services to many communities throughout the 
State; Citizen Action of New Jersey's ``train-the-trainers'' sessions, 
whereby grassroots and faith-based organizations replicate trainings on 
predatory lending and other emerging fair housing issues to fulfill the 
needs of their individual communities; and the work of the State of 
Kentucky Fair Housing Commission, who have provided statewide 
translators and disseminated Spanish-language materials to educate 
Kentucky's growing Hispanic population of their fair housing rights.
    This year's FHIP NOFA provides funding for a national Predatory 
Lending Awareness campaign and greater outreach to underserved 
populations, including those persons living in the colonias. The NOFA 
also recognizes the historic role faith-based organizations have played 
in educating people on their civil rights by providing extra points for 
applicants who are either faith-based or grassroots organizations, or 
partnered with such organizations. Over the years, the Department has 
undertaken several education and outreach initiatives to ensure greater 
access to housing for people with disabilities. This has involved 
outreach to housing industry groups and to advocates. The Department 
continues to build on these efforts. Not only has HUD reprogramming 
proposed $1.7 million in Fair Housing Initiatives Program funds to 
continue a project that provides training and technical assistance in a 
manner that the housing industry advises works best for them, but HUD 
also has provided nearly $1 million to the International Codes Council, 
who are actively working with the National Association of Homebuilders 
and others to encourage States and localities to incorporate 
accessibility features into their building codes. This latter effort 
will help address these matters upfront, when builders seek permits.
    The Department believes that its retooled, more responsive 
enforcement program, combined with enhanced education and outreach 
projects, will bring the fair housing program closer to green-light 
status in the future.
                    fair housing initiatives program
    Question. In your proposed budget, how much is provided for each 
fair housing component education and enforcement?
    Answer. HUD's fiscal year 2002 budget includes $6,000,000 to fund 
the Fair Housing Initiatives (FHIP) Program education and outreach 
activities; $12,150,000 for private enforcement activities; and 
$2,100,000 to support the fair housing organizations initiative. To 
make additional funds available for education and outreach, HUD allows 
grantees to allocate a percentage of fair housing organization grants 
and private enforcement grants for these activities.
                                 ______
                                 

            Questions Submitted by Senator Pete V. Domenici

                   community development block grants
    Question. Secretary Martinez, according to the latest CBO estimate 
of the President's budget the funding level for the CDBG program drops 
about $300 million from its 2002 level after you take out the $2.0 
billion the program received in the Emergency Response Fund.
    Mr. Secretary could you please justify this cut to what many 
consider to be an immensely important program?
    Answer. The CDBG budget for fiscal year 2003 is a reduction from 
its 2002 level because it does not request funding for several set-
aside programs. The request for the CDBG formula grants represents a 2 
percent increase of $95 million over 2002.
    Question. Mr. Secretary, the President's budget briefly discusses a 
legislative proposal that would reduce the number of grants made to the 
wealthiest 1 percent of eligible communities. The hope here, obviously, 
is to allocate more funds to those who need it the most.
    Could you please give this committee a bit more detail on this 
legislative proposal and the Department's rationale behind this 
proposal?
    Answer. The Department's proposed budget for fiscal year 2003 
requests $4.436 billion in budget authority for the formula CDBG 
program to address locally identified community and economic 
development needs. Although the CDBG program allocates funds by formula 
in a way that targets most funds to our neediest communities, the 
current formula distribution of these funds also provides grants to 
higher-income communities. Because of the great disparity in per capita 
income among our grantees, the budget proposal seeks to re-evaluate the 
method of allocating the limited resources of the CDBG program.
    A legislative change has been proposed for fiscal year 2003 to 
reduce, by 50 percent, the amount of the grant to the wealthiest one 
percent of eligible grantee communities. The wealthiest communities 
would be defined as those with per capita income equal to, or greater 
than, two times the national average. However, it must be noted that 
this proposed legislative change is intended to further target limited 
CDBG funds to the neediest communities. If this proposal is enacted, 
the Department will use data on per capita income from the 2000 Census 
to identify the communities whose funding would be reduced.
    The funds captured by the 50 percent reduction would become 
available to all the other entitlement communities with lower per 
capita incomes and would not directly fund the Colonias Gateway 
Initiative. However, the savings achieved by this movement of funds to 
more needy communities would create room in HUD's overall budget to 
provide resources for the Colonias Gateway Initiative, which is 
designed to serve some of the poorest communities in the Nation.
    The Department does not consider this a new formula for CDBG. The 
data from the 2000 census needed to do a comprehensive analysis of the 
CDBG formula should be available this fall. We expect to do a study and 
present it to Congress for their consideration next spring so that 
consideration could be made for the 2004 allocation of funds. Rather 
than wait for the process and a full examination of the formula, we 
choose to propose this adjustment to move a limited amount of funds 
from very wealthy communities.
    Question. Also can you give us a rough estimate of the percentage, 
or even better, a dollar value of the funding that went to these 
wealthier communities as you define them?
    Answer. Provided is a list of those high-income entitlement 
communities that exceed 200 percent of the Per Capita Income (PCI) 
national average based on 1990 census data and their 2002 CDBG 
allocations. This list, however, is only illustrative because the 
proposal would be based on 2000 census data, which will not be 
available until the spring. The list of the communities that would be 
affected based on 1990 census data is:

------------------------------------------------------------------------
                                              Per capita
                                               Income as
                                              a multiple    Fiscal year
                  Community                       of         2002 CDBG
                                               National        funds
                                                Average
------------------------------------------------------------------------
Greenwich, CT...............................        3.2       $1,157,000
Newport Beach, CA...........................        3.2          490,000
Lower Marion, PA............................        2.9        1,407,000
Naples, FL..................................        2.9          149,000
Palo Alto, CA...............................        2.3          808,000
Westchester County, NY......................        2.1        7,004,000
Santa Monica, CA............................        2.0        1,787,000
Brookline, MA...............................        2.0        1,872,000
Newton, MA..................................        2.0        2,663,000
------------------------------------------------------------------------

              empowerment zones and enterprise communities
    Question. Mr. Secretary, for fiscal year 2003 the President's 
budget does not include any funding for Round 2 Urban Empowerment Zones 
and Enterprise Communities. In addition, a similar program but one that 
is funded through the Agriculture Subcommittee, the Rural Empowerment 
Zone, has also received no funding in the President's budget. I hasten 
to add that the word ``termination'' is never used in the President's 
budget in relation to these programs but in budget materials received 
from OMB no new budget authority is given to these programs over the 
next 10 years. I might also add that on page 176 of the President's 
budget it is explained how HUD has just designated communities for a 
Round 3 initiative.
    Can you explain the discrepancy I have just described and could you 
please explain what the future holds for these programs, or at the very 
least, the future of the Urban side of the EZ and EC initiative?
    Answer. The EZ initiative is not being terminated even if no grant 
funds are included for fiscal year 2003. HUD's efforts will henceforth 
concentrate on enabling the Empowerment Zones to develop the capacity 
to use the funds they've received over the remaining few years of the 
authorization. If successful, the Administration would consider 
additional grants, if appropriate. HUD will also be emphasizing tax 
incentives and leveraging funds in the Empowerment Zone program through 
greater attention to Tax Incentive Utilization Plans.
    Each of the Round III Empowerment Zone applications selected came 
with over 100 commitment letters from the private sector, non-profits 
and other public entities. One community remarked that it was 
refreshing to have partners come to the table with commitments to offer 
instead of an open hand asking for grant money. Rather than seeing the 
President's fiscal year 2003 budget as a threat to the Round II, we 
encourage them to see it as an opportunity to share the enthusiasm of 
the Round IIIs. For example, they can take advantage of the two point 
scoring bonus for HUD programs in our March 2002 SuperNOFA and bundle 
other Federal, State and local grant and incentive programs for a 
prosperous tomorrow. All Empowerment Zones will qualify for Federal tax 
incentives until December 31, 2009.
    Question. Is it your position that these programs have enough 
carryover from the previous fiscal year and this is why they have 
received no funding for this year?
    Answer. Yes. Funds were not requested for fiscal year 2003 because 
over $225 million in carryover remained. Collectively, the Empowerment 
Zones have only used 20 percent of the funds already appropriated. It 
would be more appropriate at this time for HUD to concentrate on 
enabling the Empowerment Zones to develop the capacity to use the funds 
they've received. HUD will also be emphasizing tax incentives and 
leveraging funds in the Empowerment Zone program through greater 
attention to Tax Incentive Utilization Plans.

                          SUBCOMMITTEE RECESS

    Senator Mikulski. This Subcommittee stands in recess. Next 
week we will take the testimony on the Environmental Protection 
Agency. We look forward to working with you.
    Secretary Martinez. Thank you.
    [Whereupon, at 10:55 a.m., Wednesday, March 13, the hearing 
was concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]
















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

                              ----------                              


                       WEDNESDAY, MARCH 20, 2002

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

                    ENVIRONMENTAL PROTECTION AGENCY

STATEMENT OF CHRISTINE TODD WHITMAN, ADMINISTRATOR
ACCOMPANIED BY:
        LINDA FISHER, DEPUTY ADMINISTRATOR
        ROBERT BOSTOCK, CHIEF SENIOR ADVISOR TO THE ADMINISTRATOR
        MORRIS X. WINN, ASSISTANT ADMINISTRATOR, OFFICE OF 
            ADMINISTRATION AND RESOURCES MANAGEMENT
        JEFFREY HOLMSTEAD, ASSISTANT ADMINISTRATOR, OFFICE OF AIR AND 
            RADIATION
        SYLVIA K. LOWRANCE, ACTING ASSISTANT ADMINISTRATOR, OFFICE OF 
            ENFORCEMENT AND COMPLIANCE ASSURANCE
        KIMBERLY T. NELSON, ASSISTANT ADMINISTRATOR, OFFICE OF 
            ENVIRONMENTAL INFORMATION
         LINDA M. COMBS, CHIEF FINANCIAL OFFICER
        MICHAEL W.S. RYAN, DEPUTY CHIEF FINANCIAL OFFICER
        ROBERT FABRICANT, GENERAL COUNSEL, OFFICE OF GENERAL COUNSEL
        NIKKI TINSLEY, INSPECTOR GENERAL
        JUDITH AYRES, ASSISTANT ADMINISTRATOR, OFFICE OF INTERNATIONAL 
            ACTIVITIES
        SUSIE HAZEN, DEPUTY ASSISTANT ADMINISTRATOR, OFFICE OF 
            PREVENTION, PESTICIDES AND TOXIC SUBSTANCES
        HENRY L. LONGEST, II, ACTING ASSISTANT ADMINISTRATOR, OFFICE OF 
            RESEARCH AND DEVELOPMENT
        MARIANNE HORINKO, ASSISTANT ADMINISTRATOR, OFFICE OF SOLID 
            WASTE AND EMERGENCY RESPONSE
        DIANE REGAS, ACTING ASSISTANT ADMINISTRATOR, OFFICE OF WATER
        BENJAMIN GRUMBLES, DEPUTY ASSISTANT ADMINISTRATOR, OFFICE OF 
            WATER
        THOMAS GIBSON, ASSOCIATE ADMINISTRATOR, OFFICE OF POLICY, 
            ECONOMICS AND INNOVATION
        EDWARD D. KRENIK, ASSOCIATE ADMINISTRATOR, OFFICE OF 
            CONGRESSIONAL AND INTERGOVERNMENTAL RELATIONS
        JOSEPH MARTYAK, ACTING ASSOCIATE ADMINISTRATOR, OFFICE OF 
            COMMUNICATIONS, EDUCATION AND MEDIA RELATIONS
        JOSEPH L. DILLON, COMPTROLLER, OFFICE OF THE CHIEF FINANCIAL 
            OFFICER
        NANCI E. GELB, DIRECTOR, ANNUAL PLANNING AND BUDGET DIVISION

            OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Good morning and welcome. The Subcommittee on 
VA, HUD, and Independent Agencies will come to order for the 
fiscal year 2003 appropriations for EPA.
    The Chair is tied up in traffic, as I gather several people 
were. I just went to the wrong room. So, I did not have an 
excuse.
    But, Madam Administrator, we are always delighted to 
welcome you to testify on the budget request.
    As we discussed last year, EPA, has one of the most 
difficult challenges of any Federal agencies, with the 
responsibilities for the clean-up of Superfund and brownfield 
sites and the funding of clean water and drinking water 
infrastructure to the enforcement of environmental laws to 
representing our Nation with regard to issues of climate 
change.
    On top of these important responsibilities, EPA, since 
September 11, has embraced the unfortunate new challenges posed 
by the threat of terrorism to our Nation's water supply, and 
has provided leadership within the Federal Government with 
regard to toxic biochemical agents and other hazards, such as 
Anthrax.
    This year, the Administration has requested some $7.7 
billion in budget authority; a reduction of about $283 million 
from the fiscal year 2002 funding level. However, assuming a 
number of adjustments, including the Administration's fantasy 
reduction of $488 million in Congressionally designated EPA 
water and sewer grants, the EPA funding level is approximately 
equivalent to the fiscal year 2002 level.
    Within these funding levels, the Administration is 
requesting $200 million for the brownfields grant program, an 
increase of $100 million from fiscal year 2002, $21 million for 
a new targeted watershed program, a repeat request for a new 
State Enforcements Grant Program at $15 million, and $124 
million for Homeland Security.
    I continue to have one primary area of concern, both in my 
role here on this committee and as a member of the committee on 
Environment and Public Works. The Administration is again 
recommending a reduction of the Clean Water State Revolving 
Fund, from $1.35 billion, for the current year, to $1.2 for the 
next year, while maintaining a level request of $850 million 
for the Drinking Water State Revolving Fund.
    I strongly support the continued funding of both these 
State Revolving Funds at the 2002 level, especially the Clean 
Water Revolving Fund at $1.35 billion. The need is especially 
relevant, since the EPA gap analysis is expected to indicate 
that the United States will need to spend over $350 billion 
over the next two decades on new and existing water 
infrastructure.
    Even more troubling, outside estimates have concluded that 
as much as $740 billion is needed over the next 20 years, with 
some $200 billion more in financing, and as much as $980 
billion for local governments to operate and maintain this 
water infrastructure.
    The programs must be maintained and increased, if possible. 
The huge funding estimates for water infrastructure needs also 
beg the question of how Congress and the EPA should prioritize 
and allocate the available funding to meet our most pressing 
needs.
    Now, Madam Administrator, I have places in my State, in 
rural Missouri, where they do not have adequate water 
treatment. And I can tell you that you do not have to get very 
close to them to tell they have got a problem. You can smell 
it. And if you are talking about cleaning up the environment 
and making sure we take care of public health, when we do not 
take care of the clean water needs, we are neglecting one of 
the most serious and real threats to our environment and to the 
health of our population, because with polluted water, comes 
significant health problems.
    In addition, the EPA faces significant challenges with 
regard to the new requirement for the total maximum daily load, 
or TMDL pollutants, the impact on public health and the 
environment by large animal feeding operations, increased 
public health risks attributable to combined sewer overflow 
problems, and statutory requirements for the protection of 
wetlands.
    I also am concerned about issues related to air quality 
standards on the Clean Air Act, including the implementation of 
the New Source Review provisions of the Clean Air Act, which 
authorize EPA to set standards for certain facilities for the 
installation of air pollution control equipment.
    It is an especially important issue, as we seek to maintain 
the economic viability of U.S. producers of energy all meeting 
the air quality standards.
    I applaud EPA's attention and commitment to homeland 
security. As a follow-up to the $175.6 million Congress 
appropriated for EPA's investment in 2002 emergency 
supplemental, the Administration is asking for an additional 
$124 million in follow-up funding to protect the Nation's water 
supply, for continued security upgrades to EPA facilities, and 
to continue to operate the West Coast Emergency Response Team.
    There is one other issue I am compelled to raise at this 
time. On March 8, the Wall Street Journal printed an editorial 
regarding the awarding of EPA funds to non-profit groups that 
have used the funds primarily for lobbying or litigating on EPA 
issues, and that these funds may have totaled as much as $2 
billion from 1993 to 2001. The editorial goes on to indicate 
that EPA's top six non-profits that have received these funds 
were not environmental organizations, but senior citizens' 
groups. AARP received some $99 million. There are even 
allegations that EPA officials have erased hard drives and 
destroyed e-mail tapes.
    These, Madam Administrator, are very troubling allegations 
that need to be addressed, especially since the VA/HUD 
Appropriations Act prohibits the use of agency funds for 
lobbying or litigation, and requires the Chief Executive 
Officer to certify that no funds have been used to lobby or 
litigate on EPA issues. I trust you and the Inspector General 
will pursue these allegations and report back to us on what you 
found, and if there, in fact, has been such a problem, and the 
definitive steps that you are going to undertake to make sure 
it never happens again.
    Finally, I am very glad that EPA is focusing on meeting its 
primary program and legal obligations, rather than creating a 
new series of programs and responsibilities. You have got 
enough work to do with what you have. In the past, we have seen 
lots of side efforts going off in different directions that 
took away from the main responsibility. We are delighted that 
you are going to stick with the very important primary 
responsibilities you have.
    With that, I am going to turn to a distinguished member of 
the committee, Chairman of the Budget Committee, in whose good 
graces we all seek to be. And he can speak as long as he wants. 
At least until the Chair arrives.

                 STATEMENT OF SENATOR PETE V. DOMENICI

    Senator Domenici. I will not be long. I thank you very 
much, Senator Bond. And let me open the discussion with you by 
telling you that I understand that the nomination of Mr. Paul 
Gilman, who has been selected by the President to work with you 
to be your Science Director, was being held up. I did want to 
tell you that there was a hold on his nomination but last 
night, it was released. At least, the Senator that suggested 
the hold, when I went to talk with him, said he would release 
it sometime yesterday. So, perhaps it is ready to go through.
    Senator Bond. Thank you.
    Senator Domenici. We look forward to his being confirmed, 
and I compliment you on getting a very talented science 
advisor, who also understands a lot about the way things are 
done up here. I might say that he used to work for me. He was 
my Administrative Assistant or Chief of Staff, but he is a 
great scientist. I look forward to his being at EPA, so we can 
work science issues with him. He will be a very big asset.
    Now, I am going to talk about just one subject, and I will 
do it as quickly as I can. I think if I said to you, write down 
the subject that Domenici is going to talk about, you could 
write it down, because it is arsenic and the new arsenic 
standard in communities and cities in my State, the State of 
Nevada, the State of Arizona, and many others.
    As an example, the City of Albuquerque has briefed us, 
Madam Administrator, and told us that their estimate now is 
$150 million to fix their system so it is in compliance. With 
that, we think we have an estimate for the State of New Mexico, 
from the largest, which is Albuquerque, down to some very small 
ones that if they have to put in an arsenic treatment system, 
they will have to go back to individual wells, because they 
will not be able to afford the water. Between $400 million and 
$700 million will be the cost in New Mexico. We are told that 
Arizona is very similar. So, they are between $400 million and 
$700 million. When we were discussing this issue on the floor, 
that last time, several Senators, including Senator Mikulski, 
who chairs this committee, Senator Boxer, Senator Clinton, 
Reed, Bingaman, Hagel, Hutchison, happened to be on the floor, 
and each, in turn, stood up and said they would like to be 
helpful in the passage of a bill that would grant assistance to 
these cities that have to make these changes that you know, 
they never would have made on their own. Many of them would 
have fought to convince anyone that their water was not 
dangerous. We now have a standard that for many out in the 
Southwest is a ludicrous standard. I think you know how we feel 
about it, but it is the standard.
    I have two questions. One, if we were to pursue some kind 
of assistance, by way of grants or the like to communities so 
that they might be able to afford the equipment and changes 
that are required, would you be supportive of that?
    Ms. Whitman. Would you like me to answer that now, Senator?
    Senator Domenici. Yes, please.
    Ms. Whitman. We would certainly look very closely.
    Senator Domenici. I am going to be leaving, so I cannot 
stay long.
    Ms. Whitman. Okay. I would be happy to answer that. We have 
identified $20 million in our budget to begin this process. One 
of the things we are looking at very closely is how we can aid 
these communities with new technologies that will help bring 
down the cost. We would look very closely at any legislation 
you propose, because we are very sensitive to this being an 
enormous issue for those States where you have a lot of 
naturally occurring arsenic.
    Senator Domenici. And the second issue has to do with one 
that you touched on, that has to do with research and 
development of technology. I gather, from looking at your 
budget, you have up to $20 million for research and development 
in this area.
    I am going to give you a hypothetical question. If, in 
fact, we had a technology, and it was close, not quite there, 
but close, and if in fact some kind of a certification could be 
obtained that will be ready, but not exactly on time, will you 
have an open mind to considering, with these communities, some 
way of alleviating the enormous cost, as long as they are ready 
to go, thereafter, with new technology?
    Ms. Whitman. We are certainly going to do everything we can 
to make sure that they have time to comply with the new arsenic 
in drinking water standard, so it does not put them into 
bankruptcy and does not force people to drill their own wells, 
because that is one of the issues that was of concern at the 
very beginning. Then we have the ability to protect them 
against actually getting water that has much higher levels of 
arsenic----
    Senator Domenici. Right.
    Ms. Whitman [continuing]. Than is acceptable. So, we would 
certainly look forward to working with you and the communities 
to see what we can do to make this a feasible standard, an 
achievable standard. We already have, in the rule, exemptions 
for which communities can apply.
    Senator Domenici. I thank you so much. I will not be able 
to stay. We are starting the budget mark-up, but I thank you 
for your consideration. And we will be working with you and 
those in your department who are experts in this field, because 
we have to solve this. So, I will be dedicating time to this is 
my number one--let us solve the problem issue.
    I think my friend would vouch that if I do that, we are 
probably going to find a solution.
    Senator Bond. Senator Domenici, you have made a very 
compelling case.
    And I work with you, not always successfully, to try to 
find a modus vivendi, but certainly, Madam Administrator, with 
research dollars, with assistance, and where appropriate, if 
there are specific actions you need to take or need legislative 
provisions, we would like to work with you, because my great 
fear is that in seeking the perfect, we will be the enemy of 
the good, and force many small communities to go back to 
untreated wells. And by trying to do something that is beyond 
our grasp, we could actually put people in greater harm.
    Senator Domenici. Thank you.
    Senator Bond. So, with that, Madam Administrator, I know 
the Chair--I am sure the Chair is avidly reading your opening 
statement as she comes in. She has asked that if you would go 
ahead and present your comments, and then we will continue 
until she is able to get here until traffic lets up, so she can 
be here.
    So, Madam Administrator.
    Ms. Whitman. Thank you very much, Senator. It is a pleasure 
to appear before you, once again. It is always a pleasure to be 
able to see you and to present the President's budget for the 
Environmental Protection Agency for fiscal year 2003.
    This budget request provides the funds that EPA needs to 
complete its mission efficiently and effectively. As you know, 
the President's total request for fiscal year 2003 is $7.7 
billion, which is more than a $200 million increase over last 
year's request.
    Overall, our proposed budget reflects the goal that 
President Bush and I have of leaving America's air cleaner, 
it's water purer, and it's land better protected.
    I should also point out that EPA's proposed budget is part 
of the Administration's record overall request of $44.1 billion 
for the environment and natural resources; the highest ever 
such request, representing a $1.1 billion increase over the 
enacted levels of the current fiscal year.
    If I may, I would like to discuss some of the highlights of 
our proposal.
    Madam Chair, good morning.
    Senator Mikulski. Good morning.
    Ms. Whitman. And submit a somewhat more detailed statement 
for the record, if that is all right.
    Senator Bond. We would be happy to have it. Thank you.
    Ms. Whitman. I would defer to the Chair, if she wants to 
make some comments, now.
    Senator Mikulski. I apologize to the Administrator. It has 
taken me 2 hours to get here this morning from Baltimore. Why 
do you not go ahead with your testimony? And then, when I get 
ready to ask you questions, I will do it that way. Let us keep 
our momentum going. We both have to be at a hearing. And thank 
you for----
    Ms. Whitman. Thank you.
    Senator Mikulski [continuing]. Starting, please.
    Ms. Whitman. All right. First, as you know, almost half our 
budget is in grants to State, local and tribal governments. 
This is reflective of our experience that many innovative, 
creative and effective environmental achievements are being 
made at the State, local and county levels.
    As I have traveled around the country during the past year, 
I have seen some very exciting work in action. The Chair and I 
actually spent some time with the Alliance for Chesapeake Bay 
last summer, and saw just how much strong partnerships can 
accomplish. Good work like this is taking place in countless 
communities across the country, and the results speak for 
themselves.
    In this budget, we are going to build on those results to 
achieve even greater environmental progress, recognizing that 
not all wisdom resides in Washington.
    Next, this budget more than doubles the funds available for 
brownfields reclamation, as you pointed out, Senator, providing 
$200 million. This money will lead to thousands of acres of 
better protected land in the years ahead.
    The success that so many communities have had already in 
cleaning our less challenging brownfields will be replicated at 
thousands more difficult sites across the country.
    We have also continued to ask for steady funding for the 
Superfund Program at $1.3 billion. At a time of national 
crisis, this commitment to the continuity of Superfund 
reaffirms its significance to this Administration.
    Third, this budget provides important funding for a new 
watershed initiative. As you mentioned, we are requesting $21 
million for a program that will allow us to build an effective 
public-private partnership to help restore and protect 20 of 
the Nation's most precious watersheds.
    This initiative is another opportunity to show the real 
results that partnerships can achieve and how such partnerships 
can bring together existing programs in a unified approach, 
including the Nonpoint Source Grant program, which we propose 
funding at $238.5 million. As a result, this budget will help 
improve water quality for drinking, boating, swimming and 
fishing, in those watersheds that we target.
    There are numerous other important initiatives in our 
proposed budget. They include funding to increase the 
development of new technologies for environmental progress, 
funding for research that could lead to the significant 
reduction or curtailing of animal testing by building on the 
discoveries of the human genome project, and funding to 
increase our knowledge base about our air quality challenges, 
so that we can save lives and prevent illnesses, such as 
asthma, among America's children.
    In addition, the funding we propose for the Drinking Water 
and the Clean Water State Revolving Funds is the largest such 
combined request. Of course, our budget request also includes 
significant new money to help EPA meet its homeland security 
responsibilities. The $124 million in new funding we are 
requesting, will support such important efforts as protecting 
the Nation's water infrastructure by funding vulnerability 
assessments at the Nation's drinking water utilities, and 
wastewater facilities securing additional personnel and 
equipment to expand our ability to respond to biological 
attacks, and investing in research designed to enable the 
Nation to better detect and respond to chemical or biological 
attacks.

                           PREPARED STATEMENT

    I am pleased to say, Madam Chair, that taken together, the 
President's proposed EPA budget for fiscal year 2003 fully 
supports the work of this Agency. It will enable us to 
transform the Agency's 30-year mission to meet the challenges 
of the twenty-first century, and it brings us that much closer 
to realizing that goal of cleaner air, purer water, and better 
protected land.
    I look forward to answering any questions that you might 
have.
    [The statement follows:]

              Prepared Statement of Christine Todd Whitman

    Madam Chair and Members of the Committee, I am pleased to be here 
to discuss President Bush's budget request for the Environmental 
Protection Agency (EPA). The President's budget provides the necessary 
funds for the Agency to carry out our mission efficiently and 
effectively to protect human health and safeguard the environment. The 
fiscal year 2003 request is $7.7 billion, which includes more than a 
100 percent increase in funding for Brownfields, and significant 
increases for watershed protection.
    I would like to begin, Madam Chair, by emphasizing that the 
President's budget request for EPA reflects the Agency's strong 
commitment to leaving America's air cleaner, its water purer, and its 
land better protected than it was when we took office. It promotes that 
goal in a manner consistent with our commitment to fiscal 
responsibility; by further strengthening our partnerships with State, 
local and tribal governments; by funding innovative new programs, and 
by strengthening existing programs that work.
    I'd like to touch on a few of the highlights: nearly half of EPA's 
budget request provides funding for State and tribal programs, 
including almost $3.5 billion in assistance to States, tribes and other 
partners. The President and I both believe that much of the innovative, 
creative, and effective environmental progress being made comes from 
State, county and local governments and our budget request supports 
that.
    As I have traveled around the country during the past year, I've 
seen some really exciting programs in action. From the people of 
Kentucky PRIDE to the members of the Paiute Tribe in Nevada, and in 
countless other communities across America, the EPA is building strong 
partnerships for environmental progress and the results speak for 
themselves. In this budget, we will build on those results to achieve 
even greater environmental progress.
Homeland Security
    I would like to thank the appropriators for recognizing the 
important role EPA plays in homeland security by providing $176 million 
in the fiscal year 2002 supplemental. Since September 11, we have seen 
the traditional mission of our Agency safeguarding the environment and 
protecting the public health take on new meaning. We now play a 
critical role in preparing for and responding to terrorist incidents 
because of our unique expertise and experience in emergency 
preparedness and response to hazardous material releases. Our new role 
of supervising the decontamination of anthrax infected buildings has 
shown us that better information and new technologies are needed. To 
continue to do our part to ensure that the nation is prepared to 
respond to terrorist incidents, we are investing an additional $124 
million for homeland security.
    Included in this figure is $75 million for research in technologies 
for decontaminating buildings affected by bioterrorists attacks. We 
will provide guidance, technical expertise and support to Federal, 
State and local governments in building contamination prevention, 
treatment and cleanup capabilities. Combined with resources provided in 
the Emergency Supplemental Appropriation Act of 2002, this represents a 
two-year total of $300 million in new resources. Also included in this 
figure is $20 million to address threats to the nation's drinking water 
supply. We, at EPA, play a significant role in working with State 
Governments and local utilities to protect drinking water supplies. We 
have already begun working with states and local utilities to assess 
this vulnerability. The additional $20 million being requested in 
fiscal year 2003 will augment $88 million appropriated as part of the 
Emergency Supplemental Appropriation Act of 2002. Together, these funds 
will ensure that utilities have developed a comprehensive assessment of 
these vulnerabilities and emergency operations plans using the most 
current methods and technologies.
Brownfields
    Our fiscal year 2003 budget more than doubles the funds available 
for brownfields reclamation by providing $200 million. This money will 
allow states, tribes, and local governments to build on the work 
they've already done in turning thousands of neighborhood eyesores into 
community assets. Despite that progress, thousands of brownfields still 
mar America's landscape. That is going to change. Thanks to President 
Bush's commitment to brownfields, this money will help us get at some 
of the most difficult brownfields challenges that remain. Those 
reclaimed brownfields will provide their communities with new jobs, new 
places to play, and a new sense of optimism for the future.
Watershed Projects
    By providing $21 million for a new watershed initiative, our budget 
will target up to 20 watersheds around the country for improvement 
funding that will lead to millions of gallons of purer water in the 
years ahead. This initiative will allow us to build on existing public-
private partnerships to restore and protect up to 20 of America's most 
threatened watersheds. When I visited Boston last year and saw first-
hand the excellent work done by the Charles River Initiative, I knew we 
could use that effort as a model for other communities. I've heard a 
watershed defined as ``communities connected by water.'' Well, with 
this initiative, we are connecting EPA with local watershed protection 
through the flow of Federal dollars. As a result, we will help improve 
water quality for drinking, boating, swimming, and fishing.
National Environmental Technology Competition
    Of course, underlying everything we do is our commitment to 
partnership. One of the most exciting new partnerships this budget 
seeks to build upon is our proposed National Environmental Technology 
Competition. Over the past 30 years, advances in technology have helped 
us address some of our most pressing environmental challenges. I 
believe technology can play an even greater role as we seek to achieve 
the next generation of environmental progress. That is why we are 
proposing $10 million for our National Environmental Technology 
Competition. This program will use competition to foster technological 
innovation through public-private partnerships. It will promote the 
development of new, cost-effective environmental technologies that will 
help clean the air, water, and land. For example, in fiscal year 2003 
EPA will solicit proposals related to arsenic removal in drinking 
water. This work will help further EPA's commitment to help fund, 
through research and development, cost effective methods of arsenic 
removal for small systems.
Cleaner Air
    Under the Clean Air Act, we continue work to make the air cleaner 
and healthier to breathe by setting standards for ambient air quality, 
toxic air pollutant emissions, new pollution sources, and mobile 
sources. In fiscal year 2003, we will assist states, tribes and local 
governments in devising additional stationary and mobile source 
strategies to reduce ozone and particulate matter, and other 
pollutants. A key component to achieving the Clean Air Goal for all 
citizens is the request for over $232 million for air grants to states 
and tribes. In addition, EPA will continue to build upon its voluntary 
government/industry partnership efforts to achieve pollution reductions 
and energy savings. For example, as we continue our Energy Star 
Labeling and Building Program efforts, our goal is to reduce the 
emissions of greenhouse gases by more than 40 million metric tons 
annually, by 2010, while saving consumers and businesses an estimated 
$14 billion in net energy bill savings when using energy-efficient 
products.
Purer Water
    Over the past three decades, our nation has made significant 
progress in water pollution prevention and cleanup. While we have 
substantially cleaned up many of our most polluted waterways, and 
provided safer drinking water for millions of U.S. residents, 
significant challenges remain. This budget request addresses the 
challenge to provide clean and safe water in every American community.
    Protection from Drinking Water Contaminants.--The fiscal year 2003 
request supports our coordinated efforts with the states and tribes to 
implement new health-based standards to control for microbial 
contaminants, disinfectants and their byproducts, and other 
contaminants.
    Drinking Water State Revolving Fund.--The Drinking Water State 
Revolving Fund (DWSRF) request of $850 million will provide substantial 
funding to states and tribes to upgrade and modernize their drinking 
water systems. At this funding level, EPA will eventually meet its goal 
of providing an average of $500 million annually in assistance.
    BEACHES Grants.--This budget includes $10 million to support our 
implementation of the ``Beaches Environmental Assessment and Coastal 
Health Act of 2000.'' The money will be provided in the form of grants 
to states to develop local monitoring and notification programs for 
coastal recreation waters.
    New Watershed Investments.--Our $21 million Targeted Watershed 
Program is designed to support the need for additional funding for 
priority watershed restoration efforts. This request supports a range 
of water quality restoration tools to assist local communities in 
restoring their waterways. This Program would provide direct grants to 
watershed stakeholders to implement comprehensive restoration actions.
    Helping States Address Run-off and Restore Polluted Waters.--The 
President's fiscal year 2003 Budget provides significant resources to 
states to build on successes we have achieved in protecting the 
nation's waters, by providing states and tribes with grants to address 
polluted run-off, protect valuable wetlands, and restore polluted 
waterways.
    Clean Water State Revolving Fund.--Our budget request includes 
$1.212 billion for states and tribes for the Clean Water State 
Revolving Fund (CWSRF). States receive capitalization grants, which 
enable them to provide low interest loans to communities to construct 
wastewater treatment infrastructure and fund other projects to enhance 
water quality. This investment allows our Agency to meet the goal for 
the CWSRF to provide $2 billion average in annual financial assistance 
over the long-term.
    Protecting Human Health along the U.S.-Mexico Border.--This budget 
includes $75 million for water and wastewater projects along the U.S.-
Mexico Border. These resources help our Agency to address the serious 
environmental and human health problems associated with untreated and 
industrial and municipal sewage on the U.S.-Mexico border.
Strong Science
    The fiscal year 2003 budget supports our efforts to further 
strengthen the role of science in decision-making by using scientific 
information and analysis to help direct policy and establish 
priorities. EPA will achieve maximum environmental and health 
protections through our request of $627 million for the Office of 
Research and Development to address both current and future 
environmental challenges. This Administration is committed to the 
incorporation of science into regulatory decisions by having scientists 
participate early and often in the regulatory development process. The 
budget request supports a balanced research and development program 
that addresses Administration and Agency priorities, as well as meets 
the challenges of the Clean Air Act (CAA), the Safe Drinking Water Act 
(SDWA), the Federal Insecticide, Fungicide, and Rodenticide Act 
(FIFRA), the Food Quality Protection Act (FQPA), and other 
environmental statutes.
Environmental Information
    In fiscal year 2003, we will further our commitment to providing 
assistance to states and tribes to develop and implement the National 
Environmental Information Exchange Network. The goal of this program is 
to advance collaborative efforts to integrate environmental data 
between and among EPA, states and the Agency's other partners. The 
ability to easily exchange up-to-date, accurate information is critical 
to meet today's increasingly complex environmental challenges. The 
grant program has several components, each of which is aimed at 
building on the growing success of states and tribes in finding smarter 
alternatives to the current approaches for exchanging environmental 
data. The grants being offered include grants to enable states and 
tribes to re-engineer their environmental reporting; grants to 
demonstrate progress in developing a joint EPA/state National 
Environmental Information Exchange Network, and grants that challenge 
State or multi-state or tribal efforts to integrate environmental 
information.
    As EPA works with states and tribes to develop the National 
Environmental Information Exchange Network, we will also continue to 
build and institutionalize a Central Data Exchange (CDX) which will be 
EPA's focal point for securely receiving, translating, and forwarding 
data to EPA's data systems. In fiscal year 2003, the CDX will service 
45 States and an assemblage of 25,000 facilities, companies, and 
laboratories. By widely implementing an electronic reporting 
infrastructure, this infrastructure will reduce reliance on less 
efficient paper-based processes, thereby improving data quality, 
reducing reporting burden, and simplifying the reporting process.
                       enforcement grant programs
    Most of our nation's environmental laws envision a strong role for 
State Governments in implementing and managing environmental programs. 
The fiscal year 2003 request includes $15 million in a new grant 
program to continue to support State agencies implementing authorized, 
delegated, or approved environmental enforcement programs. These funds 
will continue to afford states a greater role in the enforcement of 
environmental laws and regulations.
    This budget request will allow our Agency to continue to support 
the regulated community's compliance with environmental requirements 
through voluntary compliance incentives and assistance programs. We 
will provide information and technical assistance to the regulated 
community through the compliance assistance program to increase its 
understanding of all statutory or regulatory environmental 
requirements. The program will also continue to develop strategies and 
compliance assistance tools that will support initiatives targeted 
toward improving compliance in specific industrial and commercial 
sectors or with certain regulatory requirements.
Safe Food
    The fiscal year 2003 request includes $142.3 million to help meet 
the multiple challenges of the implementation of the Food Quality 
Protection Act (FQPA) of 1996 so that all Americans will continue to 
enjoy one of the safest, most abundant, and most affordable food 
supplies in the world. FQPA provides for the expedited registration of 
reduced risk pesticides to introduce alternatives to the older versions 
on the market. EPA implements its various authorities in a manner to 
ensure that farmers are able to transition with a minimal disruption in 
production to safer substitutes and alternative farming practices. 
Expanded support for tolerance reassessments will reduce the potential 
risks to public health from older pesticides. Reassessing existing 
tolerances promotes food safety, especially for infants and children, 
while ensuring that pesticides meet the most current health and safety 
standards. This budget request also supports FQPA-related science 
through scientific assessments of cumulative risk, including funds for 
validation of testing components of the Endocrine Disruptor Screening 
Program.
Summary
    Taken together, the President's proposed EPA budget for fiscal year 
2003 fully supports the work of our Agency. It will enable us to 
transform the Agency's 30-year mission to meet the challenges of the 
21st century. It brings us that much closer to realizing our goals of 
cleaner air for all Americans to breathe, purer water for all Americans 
to drink, swim and fish in, as well as safeguarding public health.
    This concludes my prepared statement. I would be pleased to answer 
any questions that you may have.

                STATEMENT OF SENATOR BARBARA A. MIKULSKI

    Senator Mikulski. Well, thank you very much, Administrator 
Whitman. And sorry I was late. It was just rolling accidents 
this morning. But we want to welcome you to your third hearing 
before this subcommittee. You came last year for the EPA's 
regular appropriations hearing, and then you testified in 
November about EPA's role in helping with the Anthrax 
decontamination, particularly in the Hart Building. And we have 
worked together on many issues.
    Before I go into my comments about the President's request 
and questions that I will be following, I really want to thank 
you, personally, and your entire team, for their dedication in 
helping us come to grips with the Anthrax situation in the Hart 
Building, at Brentwood, in our postal facilities, and also in 
the Nation. I know that they were tireless. I know that they 
were dedicated.
    And I just want to on behalf of our colleagues here and 
also postal employees, again, thank you for that. It was a very 
tough time for our country. I have a saying that when we face 
tough times, the tough have to get going. We want to talk more 
about the threats to the Nation and the role of EPA and 
homeland security, but let me go on to some of the other 
basics, and then get to my questions.
    I want to note that as we get ready to look at next year's 
appropriation, we are at somewhat of a disadvantage, because we 
have not received EPA's operating plan. I am not finger-
pointing you about this, Madam Administrator. I know that you 
sent the operating plan to OMB some time ago. But it is the 
only agency for which we have not received an operating plan. 
And we would like you to really use your good office, as we 
believe you have developed an operating plan. We know you have. 
We would like to see it. We would just like to see it, so we 
can start operating on the plan. So, we really do need that.
    I am going to ask unanimous consent that my full statement 
go into the record.
    EPA serves this very important issue of protecting human 
health and the environment. And I am so pleased where the 
appropriations request is strong in several key areas. I really 
acknowledge the fact that doubling the brownfields program to 
$200 million will create new jobs and increase the tax base in 
the communities. And we want to work with you on, not only 
adequate funding, but really robust implementation.
    As a former governor of New Jersey, a former governor of 
Missouri, we know that brownfields are a cornucopia of 
opportunity to clean up the environment, but turn them into 
greenfields of economic opportunity.
    We also know that you have a request in here for the cost 
of dealing with the Anthrax both here and at Brentwood--and we 
will be talking more about that.
    I want to talk about the enforcement of the environmental 
laws. I am concerned that this year's budget proposes to cut 
100 ``environmental cops on the beat,'' and move more of our 
efforts into State enforcement programs. I know that there has 
to be a partnership with the State, but in doing so, I do not 
believe we should weaken Federal enforcement capabilities. And 
in our question and answer, I would like to probe that in more 
detail.
    I know that, right now, there are 130 unfilled positions at 
EPA. And these have been jobs that have been vacant since 2001. 
So, let us have a conversation about that.
    Enforcement will be a big issue. Water infrastructure is 
another very big issue. I am very pleased that the 
appropriations request fully funds the Drinking Water State 
Revolving Loan Fund. This is absolutely crucial to our 
communities. But I am puzzled by the $140 million cut in the 
Clean Water State Revolving Fund. Communities in Maryland and 
across the Nation are really challenged by the enormous cost of 
upgrading old and failing sewer systems.
    In Maryland, these projects, of course, are critical to the 
Bay. Now, water and sewer are just not sexy issues. We do not 
have a ``Save the Sewer'' group, like we have a ``Save the 
Whale'' group, but it is a whale of a job trying to save the 
sewers.
    Everywhere I go in my State and I think Senator Bond can 
speak to this as well--when I go in my State to every county, 
they ask me for two things for the--to help them cope with 
twenty-first century demands. They want a fiberoptic system for 
schools, business, and economic development. And they either 
want a new sewer grant or a new waste water treatment facility. 
And just the cost of modernizing, replacing, or even building, 
is just really overwhelming.
    We cannot be skimpy on this priority. EPA is currently 
negotiating with Mayor O'Malley on this issue. I am not going 
to get into the negotiations. It is not appropriate at the 
hearing. But it could cost us $1 billion to comply with what we 
ought to comply with, but where is the $1 billion? It is not 
that kind of stalemate.
    The State of Maryland has recently done a survey through a 
task force process. We have got $3.5 billion that we could 
spend in Maryland.
    I know that OMB is critical of what we call our 
``earmarks.'' We call them ``Congressionally-designated 
projects,'' probably, the biggest demand that we get are from 
our colleagues, really, on waste water and sewer replacement. 
And I feel that if we could give every one of the states $1 
billion, that they would spend it wisely, going on your own 
excellent criteria for State plans.
    So, this is an area where I think we are really in a 
national crisis, here. And vigorous enforcement to communities 
who do not have the power to pay to comply, when they want to 
comply--this is not stonewalling you and pushing you aside and, 
you know, the way we sometimes run into. They want to comply 
with you. And when I say, ``with you,'' comply with the law and 
the regs. But it is really just a tremendous economic issue.
    So, we--I think we need a new national plan for this, and a 
national plan that would really modernize our sewers and waste 
water treatment. And at the same time, this would really be 
creating jobs in the private sector and laying the groundwork.
    Now, another area that is very troublesome is the air 
quality power plant issue. I am concerned about the impact of 
the recent decision to revisit the section of the Clean Air Act 
called the New Source Review, and replace it with something 
called the Clear Skies Initiatives. I understand that there is 
a desire to find ways to increase domestic utility and refinery 
capacity, but at the same time, taking what is a mandated 
proposal and turning it into a voluntary proposal. We need to 
hear more about that.
    Also, I believe Senator Bond and I want to work very 
closely with you and our colleagues in the House. We really do 
not want riders this year, as we have resisted every year. But 
I am concerned that in the power plant issue, we could end up 
with the committee being caught in the middle, between those 
who want to stay the current course and those who want to 
follow the new course. And we become the authorizers by proxy.
    The other is the issue of homeland security. And I know you 
have a request in here on the role you want EPA to play in 
Anthrax research. We would like to know how you want to do this 
and how this coordinates with CDC and the other Federal--even 
DOD, in working on this, because one agency cannot do this by 
itself. And we saw that here and at Brentwood.

                           PREPARED STATEMENT

    And then the other is, particularly, when protecting 
America's water supply. And I know that mayors and governors 
have spoken to Senator Bond and I about this. They are very 
concerned. And yet, local government cannot do this on its--on 
its own. So, we look forward to hearing your comments on that.
    So, that is my opening statement.
    [The statement follows:]

           Prepared Statement of Senator Barbara A. Mikulski

    I welcome Administrator Whitman to her third hearing before the 
Subcommittee. She appeared before us last year for EPA's regular budget 
hearing, and also testified in November about EPA's role in anthrax 
decontamination. We have worked with her through arsenic and anthrax, 
and I thank her for the very productive relationship we have with her 
and her team.
Where is the Operating Plan?
    Unfortunately, the Subcommittee is at a disadvantage right now 
because we still have not received EPA's 2002 Operating Plan. The 
Operating Plan is required within 30 days after our bill is finalized. 
So I am puzzled why, over 3 months after the VA-HUD bill was signed 
into law, we still have not gotten the plan. In fact, EPA is the only 
Agency within our jurisdiction that we haven't heard from yet.
    It's not a question of fault. I know that EPA sent the Operating 
Plan to OMB some time ago. But it is really unacceptable that we are 
beginning the 2003 budget cycle without knowing how the funding we 
provided last year is being prioritized. I know Administrator Whitman's 
staff has been willing to provide some details. But in order for the 
Subcommittee to give EPA the resources it needs, we really need to see 
the entire big picture.
Overall Budget
    The 2003 budget request for EPA totals $7.7 billion, a $,175 
million decrease from the 2002 level. But the request includes over 
$100 million for retirement funding that the budget shifts government 
wide. When we exclude this shift of mandatory funding to the 
discretionary side, the 2003 EPA budget is $7.6 billion, or about $300 
million below the 2002 level.
    Every Administration responds to cuts in EPA by saying that the 
budget eliminates earmarks. Each year, the Administration tells us that 
many of the Committee's priorities are not important enough to be 
carried in the budget. This is troubling because it implies that our 
decisions are inferior or not an appropriate use of limited resources. 
But we know that what it really means is cuts in programs to protect 
water quality, infrastructure, clean air, and scientific analysis.
    EPA serves the very important mission of protecting human health 
and the environment, so I am pleased that the budget is strong in 
several key areas. The budget proposes to double the Brownfields 
program to $200 million. This will create new jobs and increase the tax 
base in our communities, and I thank Administrator Whitman for her 
support of this important program. The budget also proposes to spend 
$75 million researching ways to cleanup contaminated buildings. This 
will help ensure that places like the Brentwood postal facility are 
cleaned up and safe for employees. The budget also increases funding 
for State air programs to help manage and reduce pollution from 
factories and traffic congestion.
    But I am also puzzled about many areas of this budget proposal. I 
know that EPA didn't get everything it wanted from OMB, but I really 
question some of the priorities here.
    For example, once again, the budget seeks to reduce Federal 
enforcement capacity. It also cuts critical water infrastructure 
funding at a time when many communities--large and small, urban and 
rural--are facing enormous challenges in getting their facilities to 
comply with the law.
Enforcement of Environmental Laws
    Once again, the budget proposes to shift enforcement resources from 
the Federal government to the states. The Committee had serious 
concerns about a similar proposal last year, and we rejected it. We 
were troubled that cuts in Federal enforcers would result in more 
polluters ignoring the law. So I am perturbed that this year's budget 
proposes to cut another 100 ``environmental cops on the beat.''
    Instead, most of the resources freed by these cuts would go to the 
states in the form of a new enforcement grant program. I know that we 
need to do more to help enhance State enforcement programs, but in 
doing so we should not weaken our Federal enforcement capabilities. We 
need both a strong Federal and strong State enforcement presence to 
achieve compliance with our environmental laws not one or the other. 
The Committee was clear on this last year, and we will be clear again. 
So I am very interested in hearing more about this proposal and how it 
differs from the proposal we rejected last year.
    I also want to know how priorities are being set within the 
enforcement funding this Committee provided in 2002. Last year, we told 
EPA to fund Federal enforcement at no less than the 2001 level--about 
$465 million. I understand that EPA met that goal by eliminating about 
130 unfilled positions. These were jobs that had been vacant even prior 
to 2001. Administrations--current and past--failed to fill them. Nobody 
lost their job, and I know that even under this year's proposal there 
wouldn't be any layoffs.
    I also know that OMB sets artificial personnel ``ceilings'' that 
Agencies never meet. But at the same time, there are currently over 100 
unfilled enforcement jobs at EPA. So it's not just a question of 
funding--this Subcommittee has really emphasized Federal enforcement. 
This is really a question of management, and the Administration's 
priority in recruiting and retaining the experts it needs to enforce 
environmental laws. We're not talking about building bureaucracies or 
empires, just about giving the Agency the resources and staff it needs.
    We have ``cut all the fat'' that we can, and this year we don't 
want to hear that there are vacancies that should be eliminated. These 
are real jobs that provide real expertise to get polluters to comply 
with the law. The Subcommittee doesn't want to take the position of 
micromanaging staff positions. But if we have to this year, we are 
prepared to do so. So I want to know why EPA isn't doing more to fill 
these slots and how can the Subcommittee be helpful in this area.
Water Infrastructure
    Water and sewer are not sexy issues. We don't have ``Save the 
Sewer'' groups like we have ``Save the Trees'' or ``Save the Whales.'' 
But water funding means just as much to the environment. Water 
infrastructure funding gives us ``double value'' for the taxpayer 
dollar. It helps keep our waterways clean and safe. And for every $1 
billion spent, about 19,000 jobs are created.
    But Baltimore City can't hold a cocktail party to raise money to 
fix its crumbling sewer system. And Albuquerque can't have bingo night 
to raise dough to get arsenic out of its drinking water. We just cannot 
skimp on this priority. We can't expect communities to comply with 
numerous regulations--arsenic, radon, discharges, just to name a few--
without giving them the money to do so.
    So while I am pleased that the budget fully funds the Drinking 
Water State Revolving Loan Fund (SRF) at $850 million, I am puzzled by 
the $140 million cut to the Clean Water SRF. Communities in Maryland 
and all across the nation are challenged by the enormous costs of 
upgrading old and failing sewer systems. In Maryland, these projects 
are critical to protecting the Chesapeake Bay.
    In fact, Maryland recently identified over $3.5 billion in 
immediate needs. Nationwide, it is estimated that we will need to 
invest over $20 billion each year for the next 20 years in wastewater 
infrastructure.
    This budget does not acknowledge these needs. It cuts the Clean 
Water SRF from $1.35 billion to $1.2 billion. And those who have not 
read the finer print in the budget will be startled to know that it 
ZEROES out the Clean Water SRF program in 2006 and beyond. I have to 
believe that this is just a budgeting gimmick by OMB to make the 
numbers add up. But the Committee is really paying attention to the 
commitments made in this area, and we're not pleased.
    I know that our authorizing committee is working to reauthorize 
these critical programs at much higher levels in the future. While I 
have serious concerns about the new formula they are proposing, I 
applaud Senator Jeffords' leadership in seeking additional resources 
for critical water infrastructure improvements. This is even more 
important now that water utilities must take steps to safeguard their 
facilities, and the chemicals they use, from possible threats.
Anthrax Decontamination
    Again, I am pleased that the budget proposes $75 million to 
research ways to decontaminate buildings from chemical and biological 
agents. We need better science in this area. I have several hundred of 
constituents who worked out of the Brentwood postal facility, which 
remains closed. So I am interested in hearing how EPA plans to move 
forward with this research, and how the Agency will be involved at 
Brentwood.
    I really want to thank EPA for its outstanding work at the Capitol 
complex, including the Hart building. I know many employees worked 
around the clock to get us back up and running safely.
    The Subcommittee provided some $21 million in last year's 
Supplemental Appropriations bill for decontamination, including $12.5 
million in Superfund funding to ensure that EPA didn't have to divert 
regular cleanup resources to pay for the Hart building. This was based 
on EPA's best estimates at the time, and we know now that the cleanup 
actually cost much more. So we'd like to know how much in anticipation 
of another Supplemental. We want to be sure that EPA, and the Superfund 
program, are made whole for their efforts. I also look forward to 
hearing what progress EPA has made since our hearing last fall.
Environmental Education
    For many years, EPA has run an environmental education program 
called the STAR fellowship program. The budget proposes to shift this 
modestly funded program--just $10 million per year--to the National 
Science Foundation. I have heard from many graduate students who are 
concerned that this means their funding will be canceled. So I would 
like to know why this shift has been suggested, and what this proposal 
will mean for students who are specializing in the environmental 
sciences and engineering.
Regulations and Riders
    I am concerned about the impact of the recent decision to revisit 
the section of the Clean Air Act called ``New Source Review,'' and to 
replace it with the proposed ``Clear Skies Initiative.''
    I understand the desire to find ways to increase domestic utility 
and refinery capacity. But we must have certainty and reliability in 
the program for industry and the environment. I want to be sure that 
we're not changing the rules midstream. We can't have an open-ended 
dodge ball situation on this.
    We need to protect children and the elderly, who are most 
vulnerable to the health effects of air pollution. We have record-high 
levels of childhood asthma, and a recent study has confirmed that air 
pollution contributes to lung cancer. Many water quality problems in 
the Chesapeake Bay and other waterways are due to air pollution. So we 
want to be sure that we continue the public health and environmental 
gains made under the Clean Air Act.
    Finally, Senator Bond and I have always taken the position that the 
VA-HUD bill should not be a vehicle for environmental riders--good or 
bad ones. And I hope that as we move a bill through the Committee this 
year, we can continue this policy.
Ouster Study Thank You
    In closing, I want to personally thank Administrator Whitman for 
working quickly to help fund a study by the National Academies of 
Sciences on the possibility of introducing a new oyster species into 
the Bay. I understand that EPA was able to dedicate $90,000 of existing 
resources for this study--more than any other Federal agency that is 
involved. The environmental groups and watermen who are working so hard 
to bring oysters back to the Bay really appreciate your efforts, and so 
do I.

    Senator Mikulski. Do you want to kick off the questioning 
part by going right to this whole issue of enforcement? And we 
understand that the budget cuts $10 million from enforcement, 
100 ``environmental cops on the beat.'' And I wonder, what are 
the consequences of this policy shift? What will be the 
consequences to the environment? And then, you want to do a 
State program, and do we need authorizing? So, why do I not 
just offer some broad questions and--but let us go for it.
    And, again, thank you.
    Ms. Whitman. Certainly, Senator. First, let me say that the 
budget that we have proposed for enforcement, represents the 
highest funding level in that part.
    Okay. In that part of the Agency, it is the largest 
commitment to vigorous enforcement. We expect to hire up 
another 100 in the coming months. We are looking forward to it.
    We have just come off one of the most successful years ever 
in enforcement. We had outstanding results. Last year, alone, 
it was nearly record-setting. It was not quite record-setting, 
but nearly record-setting expenditure for violators of 
pollution controls and environmental clean-up.
    As you know, states typically do about 90 percent of the 
enforcement and compliance work. And what we are seeking to do 
with this budget is to enhance that. Again, that is the $15 
million program that we have in this budget. But we are very 
comfortable that the levels proposed for enforcement in this 
budget proposal will enable us to continue the very successful 
track record that we established last year. And we do not see 
any reduction in enforcement focus. There is going to be no 
reduction in the kind of dedication that we commit to 
enforcement.
    What we are doing and what you are seeing reflected in 
numbers, is a reduction of the overhead. But as you pointed 
out, we have about 130 vacant positions. And that has been 
somewhat traditional for the Agency. I think we have lapsed 
about 120 each year. It is a question of getting people in and 
keep training them, keeping them in, and people leaving. The 
normal attrition.
    So, we do not feel that this reduction in the overhead is 
actually going to be detrimental to the enforcement efforts of 
the Agency, particularly if we are able to help the States some 
more.
    Senator Mikulski. So, I just want to be clear. The request 
is to cut $10 million from enforcement. You have 100-and-some 
vacancies. Then you are saying you are going to hire 100 
people. Is that correct?
    Ms. Whitman. Right. We anticipate hiring 100.
    Senator Mikulski. Now, is that 100 to fill the vacancies?
    Ms. Whitman. That will--yes. It is part of the normal----
    Senator Mikulski. Or is that in addition to, and therefore, 
you would have 200 people----
    Ms. Whitman. No. It will be----
    Senator Mikulski [continuing]. To fill the vacancies, plus 
the 100?
    Ms. Whitman. They--it will be to fill the vacancies.
    Senator Mikulski. Fill the vacancies. And then you are 
saying the $10 million cut would have no consequence on 
enforcement.
    Ms. Whitman. It is not coming out of those people who are 
doing the actual enforcement and inspections. It is coming from 
other parts within the Agency. The actual personnel of the 
enforcement division represents about a fifth of the overall 
personnel of the Agency. And that will continue to be true.
    Senator Mikulski. Well, I think we want to see how that 
really works, in terms of this, and ask your staff to be able 
to follow-up.
    Ms. Whitman. I would be happy to give you a more detailed 
breakdown for the record, if you would like it.

                    ENFORCEMENT: STATE GRANT PROGRAM

    Senator Mikulski. Now, you are requesting a $15 million for 
a new State Enforcement Program. I would like you to describe 
that. And, also, do you need authorizing legislation to be able 
to create this, or do you want us to create it by a line item?
    So--but tell us, now, what this $15 million would buy to 
protect the environment, if it protects it at all?
    Ms. Whitman. Well, as I indicated to you before, the States 
now do 90 percent of the compliance and 90 percent of the 
inspections. What we want to do is leverage that, to make it as 
effective as it can possibly be.
    They are the ones on the ground. They know where the 
problems are. They know who they have to go after. Some States 
are more sophisticated in their enforcement than others. What 
we are proposing, it would be a competitive program that States 
would submit to us what they would do with those dollars; 
whether they would use it to enhance--some States, for 
instance, may be very good on water enforcement; they may have 
all the technology and trained personnel, but not as good in 
air. And with a little bit more money, particularly, now, when 
they are facing budget squeezes, they could use that to enhance 
their ability to do the air monitoring. Others might see it as 
an ability to make a commitment that they have not made before 
to enforcement.
    And so, it would be a competitive program, but it is 
reflective of the fact that they already do a great deal of the 
work. And it makes sense that they do a great deal of the 
compliance and enforcement work, because they are there full-
time.
    Senator Mikulski. Do you need an authorization to do this?
    Ms. Whitman. No, we do not.
    Senator Mikulski. But it does create a new enforcement 
program. You think you can do it through an executive 
direction.
    Ms. Whitman. It is a current--I mean, we----
    Senator Mikulski. That is not a confrontational question.
    Ms. Whitman. Yes. We have current grant authority in this 
area. This is an enhancement. It is a change, in that we have 
current grant authority but are proposing to expand the current 
grant authority.
    Senator Mikulski. I see. Senator Bond? Thank you. We will 
come back----

                          CLEAN WATER FUNDING

    Senator Bond. Thank you very much, Madam Chair.
    Pursuing the line that you and I both mentioned in our 
opening statements, I am very disappointed that the EPA did--or 
the OMB, for EPA, requested a $138 million reduction from the 
O2 level for clean water fund. As I mentioned in my statement, 
the--there are tremendous needs. And we see it in each State.
    I would like your views on what a reasonable level of 
funding should be. How do we prioritize it? We have got aging 
and obsolete water infrastructure of concern to many cities in 
the East and Midwest, and yet, we just heard Senator Domenici 
talk about the huge new capital costs that the arsenic standard 
is going to pay require is going to require in the West, and 
yet, we see, with the needs going up, the money coming down. 
How do we balance it?
    Ms. Whitman. Well, Senator, first of all, I would repeat 
what I said in my opening statement; that, in fact, the 
combined monies for the two programs, $1.2 billion for the 
Clean Water State Revolving Loan Fund, and $850 million for the 
State Revolving Loan Fund for the Drinking Water, is the 
highest request that has been made before.
    But the issue that you are talking about is one where had a 
little bit of this discussion last year. And it is becoming 
even more important. I honestly, believe that water is going to 
be the major environmental challenge of the twenty-first 
century; both in quantity and quality.
    Obviously, our responsibility, here, is not quantity. But 
the numbers that we are talking about are going to require that 
we engage very closely with Congress; that we reach out and 
work with States, and with local water authorities. Whether you 
take our projections or you take the gap analysis or you take 
the utilities' projections, we are talking about literally 
billions and billions,--upwards of a trillion dollars in 
infrastructure needs. This is far beyond the ability of any one 
branch of government to satisfy.
    We are putting money into a great deal of research, to see 
if there are new technologies out there, to look at new 
technologies that can help address the needs. We are working 
closely with the water utility organizations to see what we can 
do to support the kind of work they are doing; to see how, in 
fact, we can help lower the cost for this enormous challenge 
that we have in both drinking water and sewer, as well as 
septic systems.
    But this is something that is going to be far beyond any 
one budget cycle. And we really do need to work closely with 
you.

           HOMELAND SECURITY: TECHNOLOGIES AND METHODOLOGIES

    Senator Bond. We very much appreciate your attention to it, 
because I really think that the problems are big and they are 
getting bigger. And I would just note, parenthetically, I have 
had discussions with high Administration officials, who do not 
think that members of Congress should be able to provide 
funding for high-priority needs in their States.
    I assure you that we see those needs. We are going to 
continue to do it. I know the Executive Branch does not like 
it. You have lots of authority, but we also are living with and 
listening to our people. We are going to continue to provide a 
very small portion where the needs are greatest. And just--my 
only suggestion is just relax and enjoy it, because we are 
going to help where we think the needs are most pressing in our 
State.
    Let me turn to the matter that Senator Mikulski was 
discussing, and that is--well, first, let me turn to some 
problems in counter-terrorism. There are many, many challenges 
that you have faced. And we congratulate you and the agencies 
who worked with them, but you had to coordinate with FEMA at 
the World Trade Center site, and with the Department of 
Justice. You have a special role to play in researching 
technologies and methodologies. How are you coordinating with 
other Federal agencies?
    Ms. Whitman. We are coordinating very well. Most of it is 
done through the Office of Homeland Security, as a 
clearinghouse, but we also do it directly.
    For instance, in the situation of the World Trade Center 
and up in lower Manhattan, I have put together a task force of 
the other Federal agencies, as well as the State and the city, 
to look at the issue of indoor air. If there is a gap in 
response, that is where we have it. I believe determining who 
is responsible for the indoor air and the clean-up is required 
after something as catastrophic as what we saw September 11.
    We are working directly with drinking water systems to 
ensure the safety of drinking water supplies. We have been 
working since September 11 with the various water companies. 
There are 165,000 independent, individual, municipal, and State 
water systems nationwide. We have worked with them. We work 
closely with Sandia Labs and the Department of Defense in 
enhancing our knowledge of what kind of chemical or biological 
attack could be expected; best ways to detect contaminants; and 
what is the most current technology available to deal with 
that.
    We also, obviously, are working with the chemical industry 
to ensure that they have done vulnerability assessments, as 
well. We have done the same thing with the water systems, to 
make sure that they know what their vulnerabilities are. We 
have worked with the FBI and conducted outreach to every single 
local law enforcement agency right after September 11 to help 
expand their knowledge of what to look for around reservoirs 
and what kind of vulnerabilities water systems have, so that 
they could, in fact, help us. They need to help the systems.
    We have been working very closely, as an agency, with the 
individual groups for which we have a responsibility, and then 
reaching out to our Federal counterparts. We work closely with 
ATSDR, the CDC, the Department of Defense, on a regular basis.

             SMALL AND RURAL WATER SYSTEMS VULNERABILITIES

    Senator Bond. Madam Chair, if I may just finish up on that, 
without asking a question.
    I would ask that you submit it for the record, Madam 
Administrator, but we have a number of small businesses in our 
State, working on decontamination processes, remediation 
processes. One of them was working with the Department of 
Defense on a electrostatic decontamination. I want to make sure 
that those technologies are reviewed by the appropriate 
scientists in EPA to see what works, because we have got a new 
challenge. And our small businesses are very mobile. They may 
be coming up with something. We would like to be able to work 
that.
    The other thing, for the record, I would like to know how 
you are planning to help small and rural water systems prepare 
for and reduce their vulnerabilities. I have been very 
impressed. The large water systems are very sophisticated.
    And just for the record, if you would let us know what you 
can do to help the small systems, because a water system attack 
in a small community could be very deadly, because they do not 
have the protections built in that the large systems have.
    And thank you, Madam Chairman.
    Ms. Whitman. I can give you a little bit of that answer 
right now, Senator, if you would like. We are doing a great 
deal of work with the small and mid-sized water systems. We are 
conducting training for them in the use of vulnerability 
assessments and in the development of emergency operations 
plans. As I indicated before, we worked with Sandia Labs, and 
enabled them to move ahead in much more rapid fashion with a 
vulnerability study and training manuals and a disk that we are 
adapting that methodology to supply the small water systems.
    To support them, there is $3 million that we are putting 
toward working with the small and medium water systems to train 
them on the use of vulnerability assessments and the 
development of emergency response plans. So that they know what 
they need to look for and how they need to better protect 
themselves.
    We are very sensitive to that. Our focus is on making the 
most, the safest, fastest. That is how we have been guiding--
how we have gone forward with the overall process of protecting 
the Nation's drinking water supply. As far as research is 
concerned, we are constantly getting applications for approval 
as new technologies to deal with contaminants, such as Anthrax 
and other types of biological and chemical weapons. We are 
reviewing those as quickly as we can. We have an expedited 
process that we are undergoing, but, obviously, we have to make 
sure they do what they claim.
    Senator Mikulski. Thank you very much. I am going to do a--
kind of a next-come/next-serve, if you would proceed--Senator 
Craig and then Senator Kohl.

                   COEUR D'ALENE BASIN SUPERFUND SITE

    Senator Craig. Well, Madam Chairman, thank you. I will be 
very brief.
    And I apologize for running late, Director Whitman, and 
missing your opening comments. I will read your testimony. The 
EPA is very important to all of us and the work you do and the 
work you are doing is critical. And I thank you for it.
    I have got a brief statement that will probably only 
require a brief comment from you, that is of great concern to 
the Idaho delegation and our governor. And I am quite sure 
that, by now, you are aware of it. We have a Superfund site in 
north Idaho, in the Coeur d'Alene Basin area. Most know it is 
an old lead and silver mining area that has been in operation 
for nearly 100 years. And we are in what I hope are the final 
days of that effort. A great deal of work has been done. A 
great deal of time and money has been spent, but the 
communities involved are still in limbo as the site continues 
to work its will.
    You are probably also aware that the citizens of north 
Idaho are profoundly concerned, as are we, about EPA's proposal 
for a 30-year, $1.3 billion clean-up in the basin. That is 
currently a proposal that is out there. I must tell you, in as 
blunt a term as I can, it does not make any damn sense.
    Now, having said that, and that is probably as blunt as I 
will get, EPA's proposal plan is so aggressive and so far-
reaching, that I do not believe that it can be effectively 
implemented. It will allow EPA staff a generational opportunity 
to live in one of the most beautiful areas in the world, which 
is a prime vacation site for most of the inland empire.
    No, Madam Chairman, we are talking about a Superfund site. 
No, we are talking about one of the prime vacation sites in the 
United States. That is why, Director Whitman, I think it is so 
important that you come to the ground and see this.
    Anything that is going to ask of you to find $1.3 billion 
and dedicate your Agency for 30 years in a place that has one 
of the premier golf courses of the world, one of the top 
destinational resorts of the world, and some of the most 
beautiful glacierly gouged lakes in the northern tier of our 
country, deserves your attention.
    Now, having said that, our frustration is multiple. We know 
that EPA has spent a good deal of time and a lot of money. It 
is a 21-square-mile site. There are recommendations that it be 
expanded to over 1,200 square miles. Now, if you think you have 
got management problems, now, try to manage a 1,200-square-mile 
Superfund site. That is bigger than some of the eastern States.
    Senator Mikulski. How big is that?

 COEUR D'ALENE BASIN: NATIONAL ACADEMY OF SCIENCE STUDY OF CHILDREN'S 
                                 HEALTH

    Senator Craig. 1,200 square miles is what some EPA people 
are proposing be a new Superfund site. It is watershed upon 
watershed, mountain range upon mountain range. It is time we 
all get real. The bureaucracy has run amok.
    And here is what I am proposing we do: While the State of 
Idaho would like to manage this, because they think they can do 
it with so much more efficiency, less bureaucracy, and get a 
good deal more done in a shorter period of time--what I am 
proposing is that we ask the National Academy of Science to 
come in and look at the science.
    While there is physical work to be done here and there, and 
hot spots left, what is driving all of this are blood-level 
measurements of the children of the area. There is, in my 
opinion, ample evidence to demonstrate that those blood levels 
have plummeted dramatically over the course of the last two 
decades. We have taken all of the top soil away and replaced 
it. We have torn down all of the old buildings and buried them. 
We are reconstituting the area, totally. The streams now run 
clear. They are swimmable and fishable. And yet, somehow, the 
old science lingers on and drives the bureaucracy forward, in 
my opinion.
    Even the website of EPA on this issue has the old science. 
It is one of the fastest growing economic areas in Idaho, 
outside the edge. And yet, we had a company with 300 new jobs, 
less than 6 months ago, look at the website and look at the old 
science in a final decision-making process whether to come and 
locate in that area, and they left. And it was devastating to 
the opportunity of the economy of that area.
    It really, I believe, demands our attention. Now, what I am 
proposing, Madam Chairman, is that we get the National Academy 
of Science in to look at the science, to peer review it, to 
give it an objective second- or third-party view. It has had 
none of that. It has been in-house science. And I believe it is 
obsolete science today. And to do that, I am going to be asking 
this committee to help me find some money to direct them. I 
would like your support, Director Whitman. But most 
importantly, we need your attention to resolve this issue.
    I hold a golf tournament in the middle of a proposed 
Superfund site each year, along the shores of this beautiful 
lake that is full of boats and vacation homes and all of that, 
and people say, ``Larry, they are talking about this being a 
Superfund site?'' And I say, ``Uh-huh.''
    It just does not stand the test. Therefore, it does, I 
believe, require your attention, and ours, to resolve this 
issue, to bring some closure to it and some permanency and some 
direction. It should not allow 30 years and $1.3 billion, 
because this committee and this Congress and America's 
taxpayers do not have that kind of money to waste, when, I 
believe, for a less than a third of that, you can clean up the 
remaining hot spots and let Mother Nature help to finish the 
rest.
    That is all I have to say, but I hope I have gained your 
attention and that we can work together to resolve this. I know 
that you are aware of it, and we chatted about it. It is time, 
now, for us to lead on this issue and bring some finality to 
it.
    Thank you, Madam Chairman.
    Senator Mikulski. Thank you, Senator Craig.
    And the Idaho situation has--I think, first of all, its 
enormity and significance is most compelling for, really, your 
personal attention, I believe, Madam Administrator.
    And I know Senator Murray also wanted to be at the hearing, 
because of its impact also on Washington State, and would ask 
that whatever dialog occurs and problem-solving, that Senator 
Murray be included. But there is no doubt that this is a big 
issue and it is a big buck issue, and its consequences are 
significant to Idaho, Washington State.

                        SPOKANE RIVER HOT SPOTS

    Senator Craig. Thank you, Madam Chairman. That is well put, 
because these drainages do flow into the State of Washington. 
And we have done work in that area to know that there are hot 
spots along the Spokane River that deserve our attention--the 
Coeur d'Alene River.
    Senator Mikulski. Senator Craig, I think Senator Murray 
wanted to talk, but I--I think, right now, let us really make 
this a really top priority with EPA, and perhaps could make it 
really an--a real model for cleaning up this. But when you are 
talking about cleaning up mountain ranges and so on, this is--
this is something.
    So, let us turn, then, to Senator Kohl. I hope you have 
some easier problems.
    Senator Craig. Madam Chairman.
    Senator Mikulski. Yes, sir. I just----
    Senator Craig. Could we give the Director an opportunity to 
make a comment on that?
    Senator Mikulski. Oh, I am sorry. I am sorry. Go ahead.
    Ms. Whitman. No. That's all right. I just wanted----
    Senator Mikulski. Please. I apologize, Senator Craig.
    Ms. Whitman. I wanted to assure the Senator that his 
eloquent plea has not gone unheard. I have had the opportunity 
to talk to Governor Kempthorne on a number of occasions. We 
have sent the Regional Administrator for Region 10 there to sit 
down and see if we cannot bring a resolution to this issue.
    The National Academy of Science remains a very real 
potential possibility. I know there are some proposals that 
would clean up at least the residential area, within 5 years, 
at a much lower cost than had originally been proposed by the 
Agency. We are looking at all of those things.
    I also believe that they are trying to set up a trip for me 
to be able to go out there and see it and take advantage of the 
beautiful park.
    Senator Craig. Well, we would like to have you. We will--we 
will show you a good time. And what is most important about 
that is to look, Madam Chairman, in its whole perspective. A 
lot of work has been done. A lot of good work has been done. An 
awful lot of money has been spent, and a phenomenal amount of 
time.
    It is not a showcase of efficiency, but it has solved a lot 
of problems. And I am not condemning the work of the past. What 
I am condemning is the perspective of the past lurking in 
future proposals.
    Thank you.
    Ms. Whitman. I look forward to working with you on this, 
Senator.
    Senator Craig. Thank you very much. Thank you, Madam 
Chairman.
    Senator Mikulski. Senator Kohl.

                     STATEMENT OF SENATOR HERB KOHL

    Senator Kohl. Thank you, Senator Mikulski. Governor 
Whitman.
    Ms. Whitman. Senator.
    Senator Kohl. Lord Alfred Tennyson wrote, and I quote, ``In 
the spring, a livelier iris changes on the burnished dove. And 
in the spring, a young man's fancy lightly turns to thoughts of 
love.''
    Senator Kohl. However, Governor Whitman, in Wisconsin----
    Ms. Whitman. I do not think that is what is happening.

                    REFORMULATED GAS PRICE INCREASE

    Senator Kohl [continuing]. We worry about whether gasoline 
prices are going to go through the roof, again. I can assure 
you, as my constituents start to defrost this year, we--you and 
I are going to be grilled, and rightly so, over what we are 
doing to make sure that regional gas prices do not go through 
the roof again, like they did last year.
    We do appreciate, very much, the new regulations that EPA 
has put forth, allowing refiners some flexibility in making the 
shift from winter to summer fuel. And we are hopeful that will 
be enough to solve the problem; however, if it is not, and if 
we see another gas price spike unique to our region, will the 
EPA be prepared with some additional policy or response? Can we 
get your commitment that if gas prices skyrocket again, solely, 
in the Chicago-Milwaukee area, EPA will engage immediately and 
actively to fix the problem?
    Ms. Whitman. We will certainly work with you to determine, 
first of all, what is causing that problem and if we need to 
take some action to help alleviate it, as we did last year.
    As you point out, we have made some regulatory changes that 
should ease the burden. And we do not believe that with the 
flexibility we have given to the refineries on the blended 
stock and the flexibility we have given on the 2 percent, that 
there is no reason to assume, unless there is a major 
catastrophe at one of the refineries, that there should be any 
price spike due to the reformulated gas. But we certainly will 
watch that very carefully and work with you on that.

                       FOX RIVER CLEANUP PROJECT

    Senator Kohl. I thank you. Governor Whitman, EPA has issued 
a new guidance for river clean-up or sediment management. You 
recommend a so-called iterative process, that is being used on 
the Hudson River clean-up. As I understand, it means that the 
EPA will clean up large river sites in phases, starting 
upstream and moving downstream, so that you can learn from the 
work and modify the remedy as the work is done.
    For us, in Wisconsin, what could this mean for the Fox 
River Clean-Up Project?
    Ms. Whitman. Well, Senator, we are moving forward, 
obviously, with Fox River. We are very focused on it. Fox River 
is larger and there are more contaminants to be taken out of 
the river there. At this point, it appears to be a much less 
expensive program, but that is because of the way that the 
sediments will be handled once they are taken out of the river.
    There is not a transportation issue, because of some of the 
willingness of the responsible parties and agreements that have 
been reached that settle--the sediment will be taken care of 
closer to the site. And that vastly reduces the cost.
    I believe, as we go forward on any of these major 
undertakings, that we should constantly be looking at the 
science, looking at the results, to determine whether or not 
what we project is going to happen is happening, and be 
willing, as we look at these, to change, if we see we are 
having an adverse impact; if something--if we are resuspending 
more than we thought we were resuspending, and it becomes a 
bigger threat to the health and the environment of the river, 
then we ought to stop and take another look and go back at it 
in the right way.
    These are large undertakings. The Hudson River and the Fox 
River Project are both enormous. They are very important. They 
need to get done, but they need to get done right. We believe 
we have the science. We believe we have the appropriate 
approach, but I do not think there is anything wrong with 
checking yourself as you go along.
    There have been some allegations that have said that if you 
do that, you are really just looking for a way out. I do not 
see it that way at all. I see it as a way of doing it better, 
making sure we are getting it right, making sure we are doing 
exactly what we said we would do for the river and for people 
who live in those areas.

         FOX RIVER CLEANUP PROJECT: COST AND PUBLIC ACCEPTANCE

    Senator Kohl. Okay. In the case of the Fox River, there is 
a great deal of uncertainty about the cost of the clean-up, 
because people are concerned that the disposal site identified 
in the plan is not practical. Local disposal sites for dredge 
sediments are an important part of any clean-up effort, as we 
know. The disposal site influences costs and public acceptance 
of the clean-up plan, as we know.
    Should EPA try to identify and tell the public about 
potential disposal sites before the clean-up plan is proposed 
for public comment?
    Ms. Whitman. Well, we are in the process of reviewing the 
comments. As far as the actual work on the river goes, as you 
may know, we did a demonstration project that we did with the 
State of Wisconsin, and were able to meet all the goals.
    Once we have proposed the solution, we go through the 
comment period and the proposed plan, and that will obviously 
include the concerns raised by citizens as for ultimate 
disposal. And that will be part of our response to the citizens 
and to the concerns that they raise.
    Senator Kohl. As I understand it, the disposal site permit 
has not been granted, and there is some considerable question 
as to whether or not it is going to be granted.
    Ms. Whitman. I am not as up-to-date with that.
    Senator Kohl. I will, perhaps, work with your office on 
that in greater detail.
    Ms. Whitman. Certainly.

    ENVIRONMENTAL EDUCATION: TRANSFER TO NATIONAL SCIENCE FOUNDATION

    Senator Kohl. One other question, Governor Whitman. I have 
been told that the Office of Management and Budget has proposed 
a transfer of the EPA's Office of Environmental Education to 
the National Science Foundation. OMB claims that the transfer 
was made because the Environmental Education Program was 
ineffective; however, supporters of the program think this is 
only an attempt to de-fund Environmental Education. And I have 
heard nothing but good things about the work that the EPA is 
doing.
    Was EPA unhappy with the way Environmental Education was 
working? As an Administrator of EPA, did you recommend that the 
Environmental Education Program be transferred to the National 
Science Foundation? Does the EPA agree with OMB's evaluation of 
the Office of Environmental Education, or was this an attempt 
to cut the budget for Environmental Education?
    Ms. Whitman. Senator, I do not believe this was an attempt 
to cut the budget for the Environmental Education. When I 
talked to those who were concerned about it and making the 
recommendation, it was more an effort to consolidate 
Environmental Education at the National Science Foundation. 
There was a finding that, in fact, their work had not been 
recognized enough in previous budgets and they need to and 
deserved to continue to broaden the scope of their work, and 
that they, in fact, have the ability to administer this very 
well.
    We did keep, as you know, a part of our research fellowship 
program, our work with minority universities. I think we were 
doing a pretty good job on the Environmental Education program, 
but I can understand the desire to consolidate Environmental 
Education in one place, if that allows you to maximize your 
dollars and make sure you are having the most effect that you 
possibly can.
    Senator Kohl. It was my understanding that this was a $9 
million program, and when it was transferred to the National 
Science Foundation, the funding did not go along. So, the 
inference was at least given that the program was going to be 
de-funded, which, to most people, means it is going to be, 
basically, eliminated.
    I do not know whether or not you are aware of those 
details, but----
    Ms. Whitman. No.
    Senator Kohl [continuing]. But that is the information that 
I got. And it is in that connection that I bring the question 
to you today.
    Ms. Whitman. I can appreciate that. I am not aware of the 
National Science Foundation's budget, as it reflects 
environmental education.
    Senator Kohl. I thank you very much. And I thank you, Madam 
Chairman.
    Senator Mikulski. Senator, you have raised some very 
important questions. And the questions that you raised 
regarding environmental education, really, very much paralleled 
my own. And I want you to know, as we look at NSF, which is 
funded at this committee, that I would encourage you and your 
very able staff to also look at it.
    I am concerned about the transfer. Everyone who seems to 
work with the small but obviously very effective program, and 
the EPA is quite satisfied. The Chesapeake Bay Foundation, 
which is a premier environmental advocacy and education agency 
just speaks so highly of it, and their networks with their 
counterparts around the country speak about this. And this is 
really where we teach the stewardship of the environment, where 
the young people get hands-on experience and so on.
    So, I think we need to look at it. Senator Bond and I need 
to talk about it. And we welcome your input. Just rearrange--
the question is: What is the objective we seek? If it is really 
to have a really outstanding environmental education program, 
it is where is the best place to put it, and where should we be 
putting our money?
    So, we thank you for that.

              CHESAPEAKE BAY RESEARCH PROGRAM: RECRUITMENT

    Administrator Whitman, I am going to come back to the--
speaking of the Bay, before I go on to clean water. How are we 
on getting a permanent head of the Chesapeake Bay Foundation 
Research--I mean, the Chesapeake Bay Research Program?
    Ms. Whitman. We have a number of outstanding candidates. We 
have winnowed the list down from seventy. We had seventy 
applications. We have gotten that down now to a number where we 
are going to start to do the interviewing and hope to be able 
to appoint somebody very quickly.

                   CLEAN WATER REVOLVING LOAN PROGRAM

    Senator Mikulski. Yes. Because we have been without one 
since Mr. Murkowski retired. And so, we really think it needs 
the--needs a permanent appointment. So, we look forward to 
hearing about this.
    Let us go on, back to the Clean Water State Revolving Loan 
Program. In the budget, it really does cut it from $1.35 
billion to $1.2, and also, when we read the fine print, it 
startled us, because the fine print indicated to myself and my 
staff that it will zero out the Clean Water State Revolving 
Loan Program when we get to 2006, just at the same time when--I 
think if the committee had its way, we would make this a $3 
billion or even $5 billion program.
    Have we read this wrong, or is this OMB? We do not want to 
put you in a difficult situation with OMB, but we--and I know 
they are trying to cope with how to achieve the budget, 
homeland security, and Nonpoint source. I mean, this is not the 
committee that is going to debate that. But we will debate that 
this program cannot be phased out and we cannot use budget 
gimmickery with it.
    Ms. Whitman. Senator, I think the important thing here is 
that the fund has enough money and will continue to have enough 
money to revolve at more than $2 billion a year. It has been at 
least for the last few years. It is revolving at almost $4 
billion now, because it is a fund that gets repaid and 
replenished by those who are using it.
    It is really at a very healthy stage. Now, this gets back 
to the broader question that both you and Senator Bond have 
been talking about this morning, which is that the needs are 
far, far greater than that. And that is why we need to have 
vigorous support of Congress in the discussion of how we 
address these issues. But as far as the actual dollars going 
in, the fund will be able to continue to revolve. Congress 
initially had supported a $2 billion revolving loan fund. It 
will certainly be at that, even if no more money is provided. 
Right now, it is revolving at closer to $4 billion.
    Senator Mikulski. Well, I am troubled about this. I am 
troubled by the whole Clean Water SRF and its lack of funds. I 
know our colleague, Senator Jeffords, is leading an effort to 
re-authorize this program. I am concerned about the formulas. 
And we do not want to get into an East Coast-Midwest-Western 
struggle. Under the current proposal, I lose out. What I do 
think, when they are--I just heard, ``Me, too.''
    So, you can understand. The appropriators are not going to 
lose out to the authorizers.
    Ms. Whitman. You never do.
    Senator Mikulski. No. We just will not but I think that 
this is the time where, really, you and your team have to 
really get in it with the efforts that are being made by the 
Environmental Public Works Committee. They are the authorizers. 
We respect them. We value them, but not necessarily their 
formula changes.
    But really, this is a great opportunity for us to create a 
21st century Clean Water State Revolving Loan Fund and to be 
serious about what we need to do and the amount that it is 
going to take, and then the best way to do it.
    We really would encourage your very strong hands-on 
involvement with the committee. You know it as a governor, you 
know it now as an Administrator; you--you were very active, of 
course, with the National Governors Association. I mean, you 
have kind of been there, too. And you know what it is like 
passing water weights along to those--like those older 
communities in New Jersey. And we could go to--we could go to 
Wisconsin, we could--you heard Senator Craig talk about 
arsenic. Anyway----
    Ms. Whitman. Senator, there is no question that there is a 
gap developing between the existing level of water and waste 
water infrastructure investment and the growing need. There is 
just no question about that. Just to reassure you that, while 
the planning assumptions of the President's budget do recognize 
a ramp-down, that is nothing new. It does not reflect any 
policy decisions.
    This is the way the formula was set up in the beginning, 
and it will not affect any of the decisions that we are making, 
but we do need to address what is a very serious growing gap. 
When I say I think water, both its quality and its quantity is 
the environmental challenge for the Twenty-first Century, I 
mean it. And this discussion is part of it. We do need an 
investment in water infrastructure, but we are going to have to 
work together. We need to work very closely with you to try to 
identify the best way.
    Senator Mikulski. Well, are you actively involved with the 
efforts of the Environmental Public Works Authorizing Committee 
on this topic, and their legislative initiatives?
    Ms. Whitman. Yes. Yes.

             U.S. GEOLOGICAL SURVEY: CONTAMINENTS IN WATER

    Senator Mikulski. And so, we--we do need to be talking 
about it. My time has expired, and I want to go to Senator 
Bond, but one other question about water. I was very troubled 
to read about the U.S. Geological Survey recently identifying 
that there is a number of contaminants showing up in water, 
from birth-control pills to steroids to pesticides to--et 
cetera. As a result of the recent study, FDA said it was going 
to take a look at its effects on the environment.
    Where do you come in, with this startling report of the 
U.S. Geological Survey? Again, validating your belief and mine, 
that water is the big issue.
    Ms. Whitman. We're working very closely with all of the 
other Federal agencies that are addressing this issue, to get 
an understanding of what this means. This is reflective of 
something that we have seen coming and, I think, all of us have 
seen coming for some time. As science gets more sophisticated, 
it is able to identify more substances. It is not, at the same 
time, able to tell us exactly what the impact of those 
substances are on the human body or on the environment, in 
general. That is where we need to turn our attention, now that 
we are beginning to identify that, in fact, these things are 
appearing in water.
    We need to get a better understanding of what levels do 
they affect humans or at what levels do they affect the 
environment? We need a lot of scientific research here. We are 
putting our scientific focus on this. And we are working very 
closely with all those who are involved in it in the Federal 
Government.
    Senator Mikulski. Are you working with FDA----
    Ms. Whitman. Yes.
    Senator Mikulski [continuing]. And the Geological Survey?
    Ms. Whitman. Yes.
    Senator Mikulski. Well, again, I would like to come back to 
that, probably, even, maybe, at another hearing, because it 
is--the question is: Where--how did this get into the water? 
And now that it is in, what--what is the effect, but also, what 
is the synergistic effect? But that is a little bit more than 
for this appropriations hearing. But I really welcome your 
staff paying very close attention to this. And your own 
commitment to science, I think, will help us be able to get 
in--get into this and solve it.
    Senator Bond?

                           NEW SOURCE REVIEW

    Senator Bond. Thank you very much, Madam Chair. I am going 
to have to ask you a couple of quick questions, because we have 
got a long way to go and a short time to get there. And the 
Chair and I both have other hearings we are supposed to be in.
    Number one, I commend you on your emphasis on water. We 
look forward to working with you. I commend you for having the 
largest request in history for the SRFs. It is not enough. This 
committee criticized previous Administrations, because they 
provided even less. So, we look forward to working with you on 
that.
    New Source Review--this is going to be a real challenge to 
balance the environmental goals, the energy policy, without 
driving up costs. Give a quick thought on how you balance those 
two compelling needs.
    Ms. Whitman. Well, New Source Review is a part of the Clean 
Air Act that has been subject to a lot of attention and the 
subject of a lot of concerns particularly from the utility 
industry. Some of the concerns are the lack of clarity in some 
of the definitions, what was routine maintenance, repair and 
replacement; what triggered New Source Review. There is some 
compelling evidence that, in fact, initiatives that might have 
cleaned up some emissions from power plants were not 
undertaken, because of concern of triggering New Source Review, 
but it is always hard to prove the negatives. So, it is 
something that has been very contentious.
    The New Source Review reform was first undertaken by the 
previous Administration, back in 1996. We are looking very 
closely at what was proposed there. It was also a plea from the 
National Governors Association that we look at how we can 
reform New Source Review, in order to ensure that we protect 
the environment. We need to make it more efficient and more 
effective. And, we are looking at doing that.

         INSPECTOR GENERAL DRAFT REPORT: POLLUTION ENFORCEMENT

    Senator Bond. I will be looking forward to working with you 
in the EPW Committee, there, as well.
    In addition, EPA IG issued a draft report out, criticizing 
the EPA for failing to monitor and enforce pollution levels. 
Only 64 percent of the major sources apparently have obtained 
permits. The New England region and the States near and dear to 
us are at the bottom of the list.
    How does the EPA plan to address the problem?
    Ms. Whitman. We are continuing to focus on that. We have 
done a great deal, even since the draft report was issued, to 
address the failings that they found and the concerns that they 
raised, to ensure that we continue to enforce the laws. And we 
are enforcing the laws. As I said, last year, we had almost the 
best year ever as far as enforcement actions that were 
undertaken against those who had violated permits. We have 
required them to spend a great deal of money because we believe 
in polluter-pays to rectify the situation. And we will continue 
to enhance the enforcement efforts of the Agency.

             WALL STREET JOURNAL ARTICLE: NON-PROFIT GRANTS

    Senator Bond. I mentioned, in my opening statement, the 
allegations in the Wall Street Journal editorial about EPA 
funds being used by not-for-profits.
    What steps has the EPA taken to ensure that--that this has 
not occurred? Have--have you done any preliminary 
investigations? What steps can you take to make sure these 
allegations do not, in fact, occur in the future?
    Ms. Whitman. The first and most important thing is we are 
going to move to a competitive basis for non-profit grants. 
That, I think, is a very important commitment. And that is the 
way we are going to move those non-profits grants to a 
competitive funding source.
    We are also going to ensure that we are focusing on the 
kind of compliance that is required of the grantees; those that 
get these awards. We are going to ensure that we are doing 
everything possible to have them submit to us, in a timely 
fashion, the kind of data that would ensure that what was 
alleged has not gone on or does not go on in the future. And we 
will look at what has been done.
    Senator Bond. We would like you to advise us when you find 
out what has happened or has not happened--
    Ms. Whitman. Certainly.
    Senator Bond [continuing]. We would like to know, because 
the--the allegations are very serious. If they are untrue, we 
need to put them to rest.
    Ms. Whitman. Yes.

            HOMESTAKE MINES IN SOUTH DAKOTA: INDEMNIFICATION

    Senator Bond. If they are true, then we also need to know 
about it.
    The final issue I am going to have time to ask about today, 
I would like just your quick response, Homestake Mine in South 
Dakota. We are very much concerned about that. This is a 
potential multi-billion dollar project. We are going to have to 
ask the NSF about it. There are environmental reviews required, 
but I have a specific question about indemnification.
    A January 29th Associated Press article said the Mining 
Committee was unhappy, because the legislation did not protect 
the company from litigation regarding environmental hazards. 
The article mentioned that some kind of side letter would be, 
essentially, developed as a memorandum of understanding to 
outline that the Department of Justice and EPA would implement 
indemnification measures.
    This is a very major project, with some very serious 
implications for funding, as well as remediation.
    Is there any truth to the report, or where does that 
process stand?
    Ms. Whitman. Right now, Region 8 is working very closely 
with South Dakota Department of Environment to address this 
issue. We intend to continue to work together and to try to 
work with the company to see if we cannot get resolution as 
quickly as possible. We are in the process of consultation and 
due diligence, and public participation to meet the 
requirements of the time tables and the legislation.
    Senator Bond. Well, if you would keep us involved, because 
this committee is in the middle of this thing. And this could 
be an extremely expensive effort. We need to know what your 
take is on it.
    Thank you, Madam Chair.
    Madam Administrator, always a pleasure.
    Senator Mikulski. Thank you, Senator Bond, for those 
insights and also calling to the attention the excellent work 
of the IG. In fact, perhaps, while you are here, would you, 
would Ms. Tinsley come up, please, for a minute?
    Ms. Tinsley. Yes, ma'am.

      WALL STREET JOURNAL ARTICLE: INSPECTOR GENERAL DRAFT REPORT

    Senator Mikulski. First of all, this committee really 
appreciates the role of the Inspector General. And though 
they--we sometimes do not extend our hearings, et cetera, and 
we are not going to ask the IG to testify, but we want to 
express the--really, the outstanding work that IGs perform in 
all of the agencies and bring them to our attention.
    And we are going to ask Ms. Tinsley to brief both of our 
staffs on, kind of, what you consider some of the flashing 
yellow lights in the Agency.
    But Senator Bond raised something, and then I am going to 
come back, in my round of questioning, to--to the issues over 
the Clear Skies Initiative. The--The Journal, on March 12th--
and I ask unanimous consent that it go into the record--says 
that you concluded that efforts to monitor and enforce 
pollution levels have fallen behind, and asserts that EPA has 
not realized the benefits from Congress--that Congress intended 
in the 1990 Clean Air Act, and that it should give us pause, 
because of the tremendous backlogs, bureaucratic confusion, and 
so on.
    [The information follows:]

             [From The Wall Street Journal, March 12, 2002]

   Report Says Many Major Polluters Operate Without Required Permits

    A third of the nation's major polluters operate without permits and 
monitoring systems that Congress had required by 1997 because of a 
chronic lack of resources and bureaucratic confusion in State agencies, 
according to a draft report by regulators.
    The report from the Environmental Protection Agency's inspector 
general's office concludes that efforts to monitor and enforce 
pollution levels have fallen behind, and asserts that the EPA has ``not 
realized'' benefits that Congress intended in 1990, when it made the 
last major changes to the Clean Air Act.
    The latest report is likely to give Congress pause as it considers 
deeper cuts in pollution levels being pressed by both Democrats and the 
Bush administration.
    In 1990, Congress required each major industrial polluter to obtain 
one permit that holds their emissions on regulated pollutants to 
specific levels and requires monitoring. The permit was to be issued by 
state agencies paid through fees charged to polluters based on 
emissions.
    The report states that by last July, only 63 percent of the 19,025 
major sources of industrial pollution in the U.S. had obtained permits, 
although the law imposed a deadline of 1997. The most delinquent 
region, according to the report, is New England, where on average only 
37 percent of the permits had been issued. Among states, the most 
delinquent region is New Jersey, where only 30 percent have been 
issued.
    Kyla Bennett, director of the Boston office of Public Employees for 
Environmental Responsibility, which had obtained a copy of the internal 
report, said the ``poor track record'' of industrial states ``should be 
setting off alarm bells.'' The largest polluters, such as power plants, 
are generally the ones lacking permits, according to PEER, which 
represents employees in some of the 112 State and local agencies that 
implement the program.
    EPA spokesman Joe Martyak acknowledged the program has had problems 
and blamed some of the delays on lawsuits by industries. ``We've given 
the message to our offices in various regions to focus on things that 
really matter and to get these permits in place and correctly in 
place.'' The final version of the report is expected to be released in 
April.
    Bradley Campbell, named last week as commissioner of New Jersey's 
Department of Environmental Protection, said, ``I share the concerns 
that are raised in the report.'' He has launched an investigation on 
the permit backlog and how to deal with it.
    The report noted that several states in the EPA sample lacked 
sufficient resources to run the program and that many states had 
difficulties getting EPA guidance on how the agency's regulations 
should be applied to a specific polluter.
    One big problem is a so-called new source review section of the 
Clean Air Act that applies to power plants and other complex 
facilities. John D. Walke, a lawyer who formerly oversaw the program 
for the EPA, said that industries often pressured State legislatures to 
``low ball'' the fees charged to operate the program. Legislatures in 
states that had collected adequate fees sometimes shifted the money to 
other purposes. ``These were two of the dirty secrets we had to deal 
with,'' Mr. Walke said.

    Senator Mikulski. Again, this is not meant to be a debate 
or a confrontation. It is meant to--how do we get a cleaner 
environment?
    Could you share with us--essentially, is what was reported 
in The Journal your position? And could you then share with the 
committee your concerns, as the Inspector General, about the 
pollution control efforts that are hit by bureaucratic concerns 
and the lack of funds?
    And I think Senator Bond would like to hear this. And we 
work together on these kinds of issues. So----
    Ms. Tinsley. The comments in the Wall Street Journal were 
actually premature. The Wall Street Journal got a copy of a 
report that was a draft document. We have not issued that 
report, in final, yet. We hope to have it out by the end of 
March. We have a revised draft that the Office of Air and 
Radiation is looking at now.
    And so, I would really rather wait until we have a final 
report to give you to talk about that in detail, because the 
comment process is very important to us on draft documents.
    Senator Mikulski. No. I am not asking you to comment here.
    Ms. Tinsley. Right. And so----
    Senator Mikulski. No. We believe that you are supposed to 
find things, and then the agencies are supposed to tell you if 
they think you really did find them.
    Senator Mikulski. I mean, is that not right?
    Ms. Tinsley. Well, yes. I probably would not say it exactly 
that way, but, yes, we value the agencies' comments, because we 
want to make sure that what we do report is as accurate as 
possible.
    Senator Mikulski. Well, Ms. Tinsley, this is what The 
Journal reported prematurely still is of concern. We recognize 
the appropriateness that we discuss this after the final report 
is issued, which is in a matter of weeks--a matter of a week. 
And we really invite you, then, to come and brief our staffs 
and, perhaps, if appropriate, then--or necessary, to come back 
and discuss this with Senator Bond and myself.
    But before I turn back to Ms. Whitman, are there any other 
flashing yellow lights that you want to tell us about at EPA? 
And then--or did I catch you by surprise, here?
    Ms. Tinsley. Yes. Well, you caught me by surprise, but I am 
trying to be responsive. We have a lot of issues around the 
management challenges. And, in fact, the President's Management 
Score Card, that we are working closely with the Agency on. And 
these are important to help this Administration better manage 
Agency activities and make better decisions about how to spend 
the limited resources that it does have.
    Senator Mikulski. Well, why do we not take a look at the 
report? And I know--first of all, Administrator Whitman, 
everything I know about her and everything I believe about her 
is she really--really sound management and good management is 
really kind of one of her--in--in terms of being the way--one 
of her signature issues.
    So, we did not mean to catch you by surprise or--or 
whatever, but you never know what we are going to do here.
    Ms. Tinsley. No. No. That is fine. I am happy to speak to 
you about that.

              CLEAR SKIES INITIATIVE AND NEW SOURCE REVIEW

    Senator Mikulski. Well, let us get that report, and then 
let us look at this report, because whether it is--whether it 
is the Clear Skies Initiatives or the New Source Review, again, 
if it is not working at the State level and so on, all we are 
doing is top-down rearrangement.
    [The information follows:]
    [Clerk's Note.--The Office of Inspector General Evaluation 
Report on Air EPA and State Progress In Issuing Title V 
Permits, can be found at the following website www.epa.gov/
oigearth.]
    Senator Mikulski. So, let me say thank you. And I am going 
to turn, now, to Administrator Whitman.
    Senator Bond raised issues about the Clear Skies 
Initiative. And as you know, Administrator Whitman, they have 
become enormously controversial. There are ads about you by 
TomPayne.com and a variety of things.
    My questions goes, I think, to the core. How will replacing 
this mandatory review with a voluntary program, be better to 
protect the environment and public health, when the mandatory 
program, in and of itself, had so many problems? And why would 
volunteer be good? And is this not just a loophole for 
community--for polluters to squeeze-out, fade-out, loophole-
out?
    Ms. Whitman. Well, Senator, I am glad you asked that 
question, because there is nothing voluntary about the Clear 
Skies proposal. It is mandatory. It proposes mandatory caps. It 
is based on what I think was a very prescient piece of 
legislation enacted by the Congress when they did their reforms 
to the Clean Air Act, which was the Acid Rain Trading Program, 
which has been enormously successful.
    The proposal, here, is to establish mandatory caps on three 
of the most onerous emissions from power plants: 
SO2, NOX, and mercury. Under the 
proposal, what we would do is set those standards up front, so 
that the utilities understand exactly what those standards are. 
Under the current Clean Air Act, we have at least five 
different regulatory proceedings that are either in place or 
about to be in place, but they come at different time frames, 
and they are subject to litigation.
    They are subject to a lot of back and forth. They do not 
result in the environmental benefits that we necessarily seek 
in the time frame that we want to seek it.
    What we are proposing is, to have Congress set out, now, 
standards for SO2 emissions, for emissions of 
NOX for emissions of mercury. The utilities will 
know what they are. We establish a cap and trade program. And 
as with the Acid Rain Program, we feel, and all our models 
show, this will be faster; we will get deeper cuts, deeper 
reductions.
    In fact, from our modeling, at the numbers that the 
President has proposed in the Clear Skies Program, we should 
get 25 million tons better reductions in sulfur dioxides over 
the next 10 years, than under the Clean Air Act; 10 million 
tons better reduction in nitrogen oxides over the next 10 
years, than under the current Clean Air Act; and 20 tons better 
reduction in mercury over the next 6 years, than under the 
current Clean Air Act.
    That is because you make it simpler. We are not proposing 
to roll back the Clean Air Act. We are not proposing to do away 
with New Source Review, until we know what those numbers are. 
But if the numbers are what the President proposed, we are 
actually getting, as I indicated, better reductions than under 
the current regulatory process, which is very complicated and 
convoluted, takes a long time, and costs a lot of money. Then 
New Source Review as it applies to utilities, would become 
redundant, and there would not be a need for it. But that is 
not something that we could do. That is something that Congress 
would have to consider, as they consider the legislation.
    The reform of New Source Review was first seriously 
undertaken by the previous Administration. And with the support 
of governors and State environmental commissioners, we are 
looking at again, subject to a lot of misinformation, shall we 
say--looking at finalizing, over the next few months some parts 
of those original proposals that were put out in 1996 and have 
been subject to the full comment period. Then moving it on to 
the White House.
    Along with that, we would make other recommendations for 
anything else that we thought would improve the program. 
Anything else would have to be subject to the regular rule-
making process, which is at least a 3-year process.
    Clear Skies is totally separate from New Source Review; 
however, in our minds, as we look at the numbers, if the Clear 
Skies mandatory cap on these emissions is set in accordance 
with what the President recommended, then New Source Review 
becomes redundant and, in fact, could be a deterrent to moving 
forward and reaching these goals.

      CARBON DIOXIDE EMISSIONS: VOLUNTARY VS. MANDATORY REGULATION

    Senator Mikulski. Well, I want to just take a minute to 
talk about carbon dioxide. As you talked about the voluntary--
that it is not a voluntary program; that it is a mandatory 
program.
    Ms. Whitman. Right. For those three emissions.
    Senator Mikulski. My--what staff has shared with me, as we 
looked at this, is that, yes, the carbon dioxide, though--the 
carbon dioxide pollutant is--would be a voluntary one, and the 
other three would stay--would be a mandatory effort. And my----
    Ms. Whitman. Clear skies it does not deal with carbon 
dioxide.
    Senator Mikulski. Tell me about carbon dioxide.
    Ms. Whitman. It does not deal with carbon dioxide. It talks 
about sulfur dioxide, nitrogen oxides, and mercury. Carbon 
dioxide is an issue that I know will be subject to a very broad 
and thorough and in-depth discussion. But these three emissions 
are the ones that have the most immediate impact on public 
health, on asthma, bronchitis, heart disease. They are the ones 
that contribute to smog. They are the ones that impact on our 
visibility at national parks. And we feel it is important to 
move forward with these three, but carbon dioxide is not part 
of the President's proposal.
    Senator Mikulski. Well, during President Bush's campaign, 
he said that carbon dioxide emissions should be regulated as a 
pollutant, and that--because the CO2 is a greenhouse 
gas, a great contributor to global warming, and spoke from 
there.
    You even spoke in support of the Kyoto Protocol, which 
would talk about the CO2. Now--and I am not trying 
to re-hash things. I know it was a very awkward time as the--
last year, when the Administration--but what is the 
Administration's position on carbon dioxide? Does it want it 
regulated? And how does it want it regulated? And when does it 
want it regulated?
    Ms. Whitman. Well, Senator, first of all, let me just say 
that even as a governor, I was opposed to the Kyoto Protocol. 
The issue of carbon dioxide is something else, again. And as 
you know, last year, the President indicated, given the overall 
concerns he had about energy demands and energy self-
sufficiency for this country, he did not feel it was 
appropriate, along with the additional science that he had 
received, to mandate a cap on carbon dioxide.
    He did propose, at the same time that he proposed Clear 
Skies, a separate program to address global climate change. 
What he has done for the first time is to set a target for the 
United States of an 18-percent reduction in intensity of 
greenhouse emissions over the next 10 years. It is with a 
proviso that if the science justifies, at the end of that time, 
to not just reduce the intensity, but to stop the production of 
greenhouse gases entirely, and then to reverse the trend. But 
that is if science justifies it.
    The proposal also calls for a program of technology 
transfer to bring in some of the developing countries by 
provide a structure, such that they could continue to grow 
their economies, but not committing the same kind of mistakes 
that we did when we went through the Industrial Revolution and 
all the harm that we caused to the environment. China is the 
second largest emitter of greenhouse gases and India in the top 
five.
    We have come too far in environmental technology not to be 
able to provide them with alternatives to some of the 
development that we see occurring now. The argument has been 
that you cannot involve the developing Nations, until their 
economies reach the same plateau or are equal with the 
developed Nations. The President--and I concur, believes that 
this just does not make any sense, because for the overall 
environment, that is very harmful.
    In this program, he has provided a baseline protection for 
any company that wants to take early action to start reducing 
their greenhouse gas emissions. He has called for the 
Environmental Protection Agency to work with the Department of 
Energy to enhance their reporting model, so that companies can 
come in and report their greenhouse gas emissions. We will have 
the appropriate base and know where we are coming from; and 
companies have some kind of protection, should there be a 
regulatory change in the future that would put a cap on carbon 
dioxide.
    The program also has a great deal of money focused on 
technology and science, because there is an understanding that 
while we recognize that global climate change is occurring, the 
science is not nearly as precise as to all that goes into that 
as you would like it to be.
    What is the role of black soot? If we are going to make 
these enormous investments in addressing global climate change, 
then let us make sure we are absolutely certain of where to 
make them. But the President said, at the same time, he does 
not believe that that means we should sit back and do nothing, 
which is why he set that carbon intensity target, which links 
our greenhouse gas emission to the economy and allows for 
economic growth at the same time that we are decoupling the 
same rate of greenhouse gas emissions.
    Senator Mikulski. Well, I think that as we move on, 
eventually, to our mark-up, this is--the--the Clear Skies 
issue, the carbon dioxide issue, will be a controversial issue. 
And, again, we, as appropriators, do not want to become the 
Conflict Resolution Committee, though----
    Ms. Whitman. That is a good role.
    Senator Mikulski [continuing]. You know, we are prepared to 
do it. It is a very good role and--and so on, but, first of 
all, you--you explained the Administration's position quite 
well. I think we do need further conversation on it, but my 
time is complete.
    And I would like to turn to Senator Leahy.

          NEW SOURCE REVIEW: AGENCY RELAXATION OF ENFORCEMENT

    Senator Leahy. Thank you, Madam Chair.
    Administrator Whitman, everybody is talking about 
terrorism. And sometimes we forget that you actually have one 
of the most difficult jobs in Washington, because it is so 
important to each and every American.
    The EPA's mission to safeguard our Nation's land and air, 
water, to protect the health of our children, our citizens--
especially, our children--from environmental pollutants. And 
you have got to balance all of the major health and 
environmental issues we face today, and do it with increasingly 
limited resources.
    Now, I have appreciated the work the EPA--in my home State 
of Vermont, EPA has been instrumental in helping Vermont's 
citizens restore the health of Lake Champlain and the 
Connecticut River watersheds. You have worked with local 
communities. You made a commitment to cleaning up two Superfund 
sites, and including the Elizabeth Mine. Vermonters, over the 
years, thought of the EPA as one of our greatest protectors and 
best friends.
    So, with that as a backdrop, I have got to tell you, I do 
not know when I have been so disappointed in you or your 
Agency. I think of how vigorously the Administration has worked 
to undermine enforcement of the Clean Air Act, which was 
enacted with strong bipartisan support. My predecessor, Senator 
Bob Stafford, was actively involved in that.
    So, you have--careful balancing is required to protect 
public health, but now that balance has been unbalanced, 
because special interests have been permitted to put their 
thumb on the scales. And I am talking about the New Source 
Review regulations that the EPA is on the verge of announcing. 
And I know Senator Mikulski and others may have talked about 
this, but I look at months of meetings with the energy industry 
lobbyists, and the Administration came up with a wish list of 
items for power companies that we can--New Source Review, that 
is right at the top.
    From a cold financial perspective, I can see why power 
companies want a special interest provision that gives them 
immunity from a Federal law. They just simply look at dollars 
and cents. Of course they want that.
    The New Source Review requires the oldest and dirtiest 
power plants comply with clean air requirements, when they make 
upgrades of these facilities. It is a core provision that is 
supposed to gradually eliminate--but everybody knew there was a 
loophole in the Clean Air Act, but a loophole that was allowed, 
because it was going to be eliminated over time. A loophole 
that lets power plants emit thousands of tons of pollutants 
into our Nation's air and into our children's lungs and 
everybody else's.
    A lot of years, power companies ignored the requirement. 
Their oldest plants add controls. Your immediate predecessor, 
Administrator Browner, made it a priority to enforce, not 
undermine, the New Source Review regulations. She followed up 
on Agency investigations and found energy companies illegally 
exploiting a loophole in the Clean Air Act. She found those 
irresponsible power producers that chose to put the money back 
into the profits, rather than cleaning our air, and she said, 
``Enough is enough.'' And she went to the Department of Justice 
in November of 1999. She filed lawsuits against the facilities 
with these egregious violations.
    And guess what happened? When the violators actually 
believed somebody was going to call them on it and actually 
bring them to court on it, they started lining up, and said, 
``Okay. How do we settle all of this?''
    And the settlements, of course, meant cleaning the air of 
millions of tons of pollutants. It also meant billions of 
dollars in fines that would go into our--the coffers for--to 
help the taxpayers of this country.
    One settlement, alone, resulted in, I think, about $1 
billion in fines and reduced about 200,000 tons of pollutants. 
Another recent settlement had around $350 billion in fines and 
over 50,000 tons of pollutants.
    So, it is fulfilling EPA's mission to enforce the Clean Air 
Act, and it also said we are serious about it.
    Then the new Administration came to town. First major 
energy proposal by the Bush Administration was that the New 
Source Review enforcement should be undermined by 
administrative debt. And guess what? Two major companies who 
had previously announced agreements in principle to settle 
said, ``Oh, boy, new sheriff in town. We do not have to do it. 
We can back off.''
    Even though their settlements would have reduced pollution 
by over 750,000 tons and would have given $3 billion back to 
our Nation's taxpayers. They said, ``Heck. If we are not going 
to be enforced, you know, if it is going to be,' go ahead and 
pollute, we do not give a hoot,' that is a great symbol, and 
let us go for it.''
    And so, the pollution still goes on. The polluters do not 
pay for the crime.
    As a matter of public record, the energy companies wanted 
this relaxation of New Source Review. Many were already under 
the gun and knew that they were going to have to pay up and 
actually obey the law. But your Administration, suggest EPA, 
chose to listen to these people, actually act upon their 
request, and roll back the Clean Air Act, It just baffles me, 
because we had already proven--all you have to do is enforce 
it, and they will show up.
    A lot of us in the Northeast asked you about it. In 
January, the Department of Justice found that all current New 
Source Review cases were legally justified and the violators 
were right to be prosecuted. I mean, this is during Attorney 
General Ashcroft's Justice Department. But you continue to 
follow the requests of the energy industry.
    Two weeks ago, one of your experts of the Clean Air law 
resigned in dismay at the handling of the matter at your 
Agency. Monday, the Washington Post reports you are continuing 
to follow their requests.
    I have heard you say that the Administration's legislation 
to cut emissions from power plants, your Clear Skies Initiative 
is a replacement for the New Source Review. Well, that is not 
true at all. The New Source Review is specific to individual 
facilities. It is also mandatory.
    The Clear Skies Initiative is about voluntary lowering of 
emissions. It does nothing for the communities stuck next to a 
1950s coal-fired power plant.
    I will tell you, right now, anybody in the Justice 
Department--I see you shaking your head, but I disagree. The 
relaxation in New Source Review regulation would cover far more 
than 1,100 coal-fired power plants that are under your Clear 
Skies Initiative. New Source Review applies to more than 15,000 
industrial facilities or refineries--pulp, paper mills.
    Also, New Source Review is in the--in the law right now. 
Why not enact it right now? When I was a prosecutor, I believe 
if you had a law on the books, you enforce it. If the 
legislature or, in this case, the Congress wants to change the 
law, let them do it. But this idea of saying, ``We do not like 
that a lot. We do not want to protect the environment. We do 
not want to stop pollutants coming down into the waters and the 
streams of Vermont or anywhere else in the Northeast.''
    Heck, when you were governor of the great Garden State, you 
strongly supported the strongest clean air regulations, 
including enforcement under the New Source Review.
    I--the Administration is--if you tell people we are not 
going to enforce the law, none of these companies--I mean, they 
have already shown that when the law is being enforced, then 
they start--they pay the fines, they start cleaning up. You 
tell them the law is not going to be enforced, they say, 
``Okay. Good-bye. See you.''
    It is like having a speed limit somewhere. You have got one 
where you have got the radar----
    Senator Mikulski. Excuse me, Senator. I have to get to 
another mark-up. Do you want to continue for an extended line 
of questioning and----
    Senator Leahy. If I could.
    Senator Mikulski. I would ask you, then, to close out the 
hearing.
    Senator Leahy. Certainly.
    Senator Mikulski. It is a mark-up on the pension bill. So, 
I did not mean to interrupt your train----
    Senator Leahy. I appreciate that.
    Senator Mikulski. I am going to, then, yield the gavel to 
Senator Leahy.
    Senator Leahy. I am only going to be a few more minutes, 
anyway, but thank you.
    Senator Mikulski. And--and then, Senator--and then, 
Administrator Whitman, we look forward to working with you.
    Senator Leahy. I would have been here earlier, but we had a 
closed meeting with the intelligence agencies on another mark-
up. So, I had to be at that. Thank you.
    Senator Mikulski. Yes. And I have got to get to the 
pension----
    Senator Leahy. Thank you.
    Senator Mikulski. So, please, continue. And--and then I 
will ask you to, then, conclude the hearing.
    Senator Leahy. Yes. And--okay. I have--and that is also 
fair. Then I will give you time to respond. But, I tell you, in 
Vermont, we look at this--well, we take a bipartisan attitude 
toward the environment. And I hear it from just as many 
Republicans as I do Democrats, saying, ``What in heaven's name 
is going on at the EPA?''
    Ms. Whitman. Well, Senator, if all I did was read the 
papers, I would probably ask the same question. As a person in 
public life, and as I certainly found as a governor of the 
State of New Jersey, I learned to have a little bit of 
skepticism about everything I read in the paper. I, too, 
believe that our NSR cases are strong. We continue to urge 
companies to come to the table. In fact, one of the two 
settlements that you talked about was with, a New Jersey 
company, PSE&G, and was concluded just recently. It was part of 
the work that we have done. We have gone forward.
    We continue to enforce New Source Review. In fact, in the 
last year, we made approximately 87 information requests to 
power plants, refineries, and other facilities. We issued about 
22 notices of violation. We have concluded at least seven 
cases. We are still vigorous in our pursuit of New Source 
Review.
    Senator Leahy. Are you--are you going to prosecute 
violations of it? Are you going to----
    Ms. Whitman. We are going to continue to prosecute 
violations.
    Senator Leahy [continuing]. Prosecute as aggressively as 
the last Administration did?
    Ms. Whitman. Absolutely. We are going to continue to 
prosecute.
    What we are talking about in reform of New Source Review is 
what was proposed by the previous Administration back in 1996. 
We will make some proposals to the White House within the next 
couple of months that would be based on what was proposed by 
the Clinton Administration in 1996, subject to full public 
review.
    Any additional comments that we make, as far as how to 
streamline and make New Source Review more efficient and more 
effective, would be subject to the full public process, which 
is about a 3-year process.
    Senator Leahy. Do you have any companies that announced 
agreements in principle, who have now changed their mind?
    Ms. Whitman. We are in negotiations with a number of 
companies. And some are more active than others. We continue to 
have settlement agreements every week. But as you well know, as 
a former prosecutor, not all cases have a very smooth road to 
completion and that people go forward and they move back and 
they go forward and they move back. But we are continuing. We 
have negotiations going on for settlement every week.
    Senator Leahy. Well, did we talk about what is in the--did 
the energy companies want--did any energy companies want 
relaxation of New Source Review?
    Ms. Whitman. Oh, I am sure there are a number of them that 
would love it.
    Senator Leahy. Are there any that came to you or met with 
you and asked you to do that? You or your Agency?
    Ms. Whitman. There have been discussions of what is going 
on, but no, I have not been individually lobbied.
    Senator Leahy. No energy companies have come to the EPA and 
asked for relaxation of New Source Review?
    Ms. Whitman. No. They have asked us to look at changes and 
how we could make it more efficient. But they have not asked me 
to relax it. They have not asked me--I have not been personally 
lobbied by anyone asking me to change New Source Review.
    Senator Leahy. Are you aware--are you aware of----
    Ms. Whitman. They have certainly indicated their 
displeasure with it.
    Senator Leahy. Are you aware of anybody in the 
Administration who has been lobbied for--by any energy 
companies for relaxation of New Source Review?
    Ms. Whitman. I am not, personally. I would not be 
surprised, because, certainly, this has been something that has 
gone on for a long time. It is why the National Governors 
Association unanimously asked that the Agency look at 
streamlining New Source Review.
    Senator Leahy. But you are not aware of any energy 
companies--you are not aware.
    Ms. Whitman. Not personally. No, sir.
    Senator Leahy. Well, what do you mean, ``not personally''? 
I mean, you are either aware of it or you are not aware of it.
    Ms. Whitman. I do not know whether there have been 
meetings. I am not aware of them.
    Senator Leahy. I am not asking you about--you are not aware 
of it. Okay.
    Ms. Whitman. No.
    Senator Leahy. Would you be amazed to hear that some have 
come to the Administration to ask for that?
    Ms. Whitman. Would I be amazed if what? I am sorry.
    Senator Leahy. To hear that some have come to the 
Administration--some energy companies--asking for relaxation of 
New Source Review?
    Ms. Whitman. No. Not at all. And any meetings, by the way, 
Senator, that we have, will be part of the record.
    Senator Leahy. And no one in the Administration has asked 
you to.
    Ms. Whitman. I am sorry, Senator.
    Senator Leahy. No one in the Administration has asked you 
to relax New Source Review.
    Ms. Whitman. I have been asked, as you know, under the 
auspices of the energy policy, to conduct a review of New 
Source Review. I have had numerous meetings with energy 
companies, with environmentalists, with the States' Attorneys 
General, on the issue of New Source Review and on the issue of 
enforcement, but I have not been specifically requested by 
anyone to make any particular changes to New Source Review.
    Senator Leahy. No one has asked you to relax the issue of--
on enforcement.
    Ms. Whitman. No. They may complain, but they do not ask.

                          ENFORCEMENT PROGRAM

    Senator Leahy. Years ago, we had a predecessor--yours--who 
took the enforcement department, and about every 6 weeks she 
would reorganize it, so nobody could ever get started on 
enforcement. I mention that only because some worry that--and 
just administratively, you can have a law on the books, but 
make sure it is not being enforced.
    It is something that we--I imagine many will--many will 
watch, because, frankly, I do not see this--well, let me ask 
you this: Is EPA's enforcement budget--your proposal, is it the 
same this year as last year? More or less? What?
    Ms. Whitman. The overall request for enforcement is higher 
than last year. And, Senator, if I might, if you look at last 
year's record, when ``this new boy in town,'' as you said, or 
the new gang in town was there, our----
    Senator Leahy. I did not say ``this new boy in town.''
    Ms. Whitman. Well, I am sorry. Whatever. The new--the new 
sheriff.
    Senator Leahy. I would not be that disrespectful. I would 
not be----
    Ms. Whitman. I think you said ``new sheriff in town.''
    Senator Leahy. I would not be--I would not call any 
President----
    Ms. Whitman. I--I apologize.
    Senator Leahy [continuing]. A boy.
    Ms. Whitman. New sheriff in town. But our enforcement 
program achieved outstanding results. It was almost a record-
setting amount of penalties.
    Senator Leahy. And these are all----
    Ms. Whitman. Almost----
    Senator Leahy. These are all actions that your 
Administration began. None of them were left over from the 
past----
    Ms. Whitman. Oh, no. Some of them were left over, but we 
had to----
    Senator Leahy. Ah.
    Ms. Whitman. We had to finish enforcing them. If we were 
not interested in enforcing them, it is just as easy to walk 
away from an ongoing negotiation.
    Senator Leahy. No. It is not, actually. Actually, it is 
not, because if you had some----
    Ms. Whitman. Well----
    Senator Leahy [continuing]. Enforcement that was 
successfully going forward, the political cost would have been 
enormous to walk away from them.
    Ms. Whitman. Well, Senator, I would be very happy to give 
you a complete breakdown of all the cases that we have brought 
in this year; that we have brought----
    Senator Leahy. I would appreciate that.
    Ms. Whitman [continuing]. And all the actions that we 
concluded. And suffice it to say that maybe we would not have 
walked away from ongoing cases, but the fact that the penalties 
we got were almost record level and the time served by people 
we were able to convict, were almost record level, I believe, 
indicates a commitment to enforcement that belies some of what 
you have been reading in the press about a hidden agenda to 
walk away from what is important to this country.

                   ENFORCEMENT PROGRAM: FTE REDUCTION

    Senator Leahy. Well, and please supply that for the record, 
because I--I do not want to----
    Ms. Whitman. I would be happy to.
    [The information follows:]

          Clean Air Act/New Source Review Enforcement Activity

    EPA's enforcement activities under the Clean Air Act to address New 
Source Review (NSR) violations continue to be vigorous. Beginning with 
investigations, of which we have over 100 under way, and concluding 
with a filed case or settlement, EPA aims to reduce harmful air 
pollution caused by refineries, power plants and other industrial 
processes, such as paper mills.\1\
---------------------------------------------------------------------------
    \1\ These activities reflect EPA's approach to enforcement 
generally, which includes the following steps:
    Investigate possible violations by gathering information, e.g., 
through information. requests, citizen complaints, inspections or other 
reports;
    Review collected information to determine compliance
    Issue ``Notices of Violation'' or other formal notification to the 
violator to alert them to the violations detected and give them an 
opportunity to correct those violations
    Enter into negotiations with the violator in an attempt to reach an 
agreed upon settlement to resolve the violations
    Proceed with formal enforcement by filing a case for litigation if 
no resolution of the violations could be achieved.
---------------------------------------------------------------------------
    Our current data shows that--between January 2001 and March 2002--
EPA made 115 information requests; issued 23 Notices of Violation; 
filed and settled 15 cases, concluding 7 of them (i.e., they were 
entered by the appropriate court); and engaged in numerous other 
enforcement activities such as depositions, motion practice and on-
going settlement discussions--all to enforce the Clean Air Act's NSR 
requirements.
    Since the start of NSR initiative in 1997, EPA has, through settled 
cases alone, reduced nitrogen oxides (NOX) and sulfur 
dioxide (SO2) emissions by approximately 329,000 tons per 
year; ordered nearly $3 billion in injunctive relief aimed to rectify 
the violations; required that nearly $43 million be spent on 
environmental mitigation projects; and ordered over $57 million in 
civil penalties to be paid.
    Further pollutant reductions and reparations are expected from 
cases in which we have a settlement agreement in principle: a reduction 
in nitrogen oxides (NOX) and sulfur dioxide (SO2) 
emissions by approximately 591,000 tons per year; $3 billion in 
injunctive relief; over $35 million in environmental mitigation 
projects; and almost $14 million in civil penalties.\2\
---------------------------------------------------------------------------
    \2\ Current data as of April 19, 2002.
---------------------------------------------------------------------------
    SO2 and NOX are significant contributors to 
acid rain and fine particulates. NOX also contributes to the 
formation of ground level ozone, which is a component of smog. Fine 
particulate matter 






    Senator Leahy. I do not want you to, in any way, feel that 
you were not given a chance to answer these questions. And I 
will make sure they are part of the record. And--because, you 
know, I have a great deal of respect for you, personally. And I 
want to make sure that you have a full opportunity to answer.
    I am concerned that, as I read the EPA enforcement budget, 
I see it as a cut. The--when I have asked questions about this, 
I have been told that it was simply allocating more power to 
the States. But I find most States, especially small States, do 
not want that. They want you to do it, because they do not have 
the ability to. Is there a dichotomy that I am missing here?
    Ms. Whitman. There are two different things, here, Senator.
    Senator Leahy. Oh.
    Ms. Whitman. The fiscal year 2003 request for enforcement 
and compliance is, in fact, higher than last year's. It totals 
$482 million, which is the highest ever for the program. That 
is over $16 million higher than fiscal year 2001 and $7 million 
higher than last year's request.
    But what we are also showing as part of the overall effort 
as--one of the things that Congress requested of us a couple of 
years ago or last year was to continue to tighten our overhead. 
And so, what we are showing is a reduction of full-time 
equivalents of 100 or 113.
    We are also in a position where we have unfilled positions. 
We lapse about 120 positions a year. We anticipate hiring 100 
new people into the enforcement program in the coming year, to 
fill those that have left.
    Our program, essentially, will be pretty close to what it 
is--what it is now, in terms of bodies. About one-fifth of the 
overall personnel of the Agency resides in that office.
    And we believe, because of the success we had last year, 
that we are not going to see any kind of backing away from 
that. The $15 million program for the States is first of all, 
in recognition, that the States do 90 percent of the compliance 
and enforcement work. And we want to be able to enhance that; 
particularly at a time when States are facing tighter budgets.
    There are some States that have very sophisticated 
enforcement programs. But they may not be consistently 
sophisticated. They may--for instance, be very good at air 
monitoring and not water, and with some extra money, they would 
be able to bring it all up. They are on the ground. They know 
where the bad actors are. They know where to target the 
resources.
    And we believe that combined with the strong emphasis on 
enforcement at the Federal level, leveraging the States' 
abilities can only enhance enforcement, overall.

                 ENFORCEMENT: COMPETITIVE GRANT PROGRAM

    Senator Leahy. But this is not a case of putting unwanted 
enforcement on the--on the States. In other words, every State 
that will ask EPA for help in enforcing will still get the same 
help today that they would have a couple of years ago.
    Ms. Whitman. This would be a largely competitive program. 
Any State that would be interested in putting in a proposal to 
access these dollars, it would be done on a competitive basis.
    Senator Leahy. Enjoying the job?
    Ms. Whitman. It is a challenge.
    Senator Leahy. Do you miss being governor?
    Ms. Whitman. Oh, yes.
    Senator Leahy. The--well, you have an interesting job. I am 
curious. With all your knowledge of the politics in New Jersey, 
did Mr. Ray talk to you about running for the Senate prior to 
leaving his office?
    Ms. Whitman. He did not talk to me about running--his 
personal running. He talked about whether or not the Senate 
race--well, no. Actually, I take it back. What he did was say 
he might have an interest in it, but he did not ask for my 
support or get into any particulars as to how you would run a 
Senate race.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Leahy. Well, that is not a matter for this thing 
anyway. I was just curious.
    Thank you very much.
    Ms. Whitman. Thank you, Senator.
    Senator Leahy. And we will leave the record open for 
further questions.
    Ms. Whitman. Certainly.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

           Questions Submitted by Senator Barbara A. Mikulski

           enforcement of environmental laws: budget proposal
    Question. Once again, EPA's budget proposes a fundamental shift in 
policy. It shifts enforcement resources from the Federal to State 
governments. How does the budget proposal differ from last year's 
request?
    Answer. Last year when the President's fiscal year 2002 Budget 
proposed a $25 million enforcement grant program, EPA worked 
extensively with States and Tribes to solicit and consider their 
comments and suggestions. The design for the proposed $15 million 
program in the President's fiscal year 2003 Budget will build on the 
comments and suggestions received previously to create a program that 
is effective and responsive to State priorities.
    In terms of a shift in resources, it should be noted that the 
President's request for the enforcement office at EPA represents the 
highest funding level in that office's history. The proposed State 
grant program will help ensure that states have the resources they need 
to be effective partners with EPA in enforcing our environmental laws.
  enforcement of environmental laws: budget cuts affect on enforcing 
                           environmental laws
    Question. The budget cuts $10 million from enforcement, and 100 
environmental ``cops on the beat.'' How will this affect EPA's ability 
to carry out its responsibilities to enforce environmental laws?
    Answer. As noted, the President's request for EPA's enforcement 
office represents the highest funding level in that office's history. 
The fiscal year 2003 budget provides EPA's enforcement and compliance 
assurance program sufficient resources to carry out the appropriate 
Federal role, focusing on Federal cases involving multi-state or multi-
facility corporations, environmental programs which cannot be delegated 
to states due to statutory prohibition, or issues for which EPA can 
provide specialized expertise. The shift of some resources to the 
states tracks what has happened on a national level. ECOS has 
documented a substantial increase in programs delegated to the states 
over the last decade.''
enforcement of environmental laws: consequences of budget reduction on 
                     catching prosecuting polluters
    Question. What are the consequences of this reduction? How many 
fewer polluters will be caught and prosecuted?
    Answer. We expect performance results in the national Enforcement 
and Compliance Assurance program to remain the same, with states 
picking up an additional increment of that work. EPA and the states 
have different, but complementary roles when it comes to enforcement of 
our Nation's environmental laws. States have primary responsibility for 
implementing and enforcing most environmental programs through 
delegated authority from the EPA. In addition to ensuring a presence in 
the regulated universe, and identifying violations that need to be 
corrected, the EPA's Federal role is to implement and enforce programs 
that cannot be delegated to states, to handle more complex cases 
involving multiple states or corporations with multiple facilities, to 
deal with issues that require expertise or resources that only EPA can 
provide, and to enforce when states are unable or unwilling to. Given 
the interplay between the State and Federal programs, we believe the 
State and tribal enforcement grant program will enhance both State and 
EPA efforts to increase compliance with environmental laws.
 enforcement of environmental laws: new state grant enforcement program
    Question. The budget requests $15 million for a new State 
enforcement grant program. How does EPA plan to award the new State 
grants?
    Answer. Though details of the proposed enforcement grant program 
have not been finalized we anticipate that funds will be awarded 
through a combination of one or more of the following mechanisms: 
competitive grants available to states and tribes, base-share grants 
available to states, and a competitive set-aside available only to 
tribes. Options for allocating grant funds identified during the 
outreach process are outlined below.
    Options for Allocating Funds to States and Tribes (One or a 
combination of options may be used)
  --Competitive Awards: funds will be awarded based on the merits of 
        the proposal; not all states and tribes would receive funds.
  --Base Share Grants: each State receives a minimum amount, plus 
        additional funds are available through the competitive award 
        process.
  --Tribal Set-Aside: Recognizing that Tribal environmental programs 
        may not compete well with states, it may be necessary to set 
        aside a portion of the funds for Tribal grants.
enforcement of environmental laws: special or new authority legislation
    Question. Does EPA need special authority or new authorizing 
legislation to create a new State enforcement grant program?
    Answer. While we believe we have existing authority, we are 
proposing an expansion of that authority to accommodate the multimedia 
context in which the grants will be administered. Accordingly, 
authorizing language in the appropriations bill that funds the program 
would facilitate the administration of the grants.
  enforcement of environmental laws: gao report on state enforcement 
                               weaknesses
    Question. GAO has reported weaknesses in State enforcement 
programs. Will states with good enforcement records be given 
preference? Or will the grants go to states with poor records?
    Answer. Based on comments received, and draft guidance prepared for 
the grant program proposed in the President's 2002 budget, we 
anticipate that the grant program will have base-share and competitive 
components. Competitive grants will be awarded to those states whose 
proposals address significant environmental problems, and have the 
greatest potential for achieving measurable environmental results. 
Base-share grants will be available to all states that submit an 
acceptable proposal that implements a problem-based strategy or program 
improvement.
 enforcement of environmental laws: work with states with poor records
    Question. How will EPA work with states that have poor records?
    Answer. With respect to the proposed grant program, we expect that 
most of the base-share grants would be used by states to bolster 
existing programs, or address specific state program deficiencies. 
Implementation of competitive grant proposals will also help to improve 
State program performance.
    In general, EPA helps to improve the capacity of states, local, and 
tribal government compliance and enforcement programs through the 
delivery of training and other capacity building activities. In fiscal 
year 2001 EPA delivered 128 training courses, reaching over 4,700 
students; and conducted approximately 900 EPA assisted inspections to 
help build capacity of State, local, and tribal governments. EPA 
provides environmental management, planning, funding, and regulatory 
information to local governments through the Local Government 
Environmental Assistance Network (LGEAN). Additionally, when requested, 
EPA assists states with specific enforcement and compliance 
initiatives.
   enforcement of environmental laws: monitoring states' use of funds
    Question. How will EPA monitor states' use of these funds?
    Answer. States will be approved for grant funding only if their 
grant proposal includes specific plans to measure and report on their 
performance in achieving results. For example, states will need to 
define performance measures for determining whether they are having an 
impact on the environmental risk or noncompliance pattern they are 
addressing with the grant funds. EPA will establish required reporting 
intervals for states to provide performance information that can be 
reviewed by EPA on a regular basis.
enforcement of environmental laws: states' use of funds for enforcement 
                     activities vs other activities
    Question. Will EPA require that these funds be used solely for 
enforcement activities, or will states be able to use the grants for 
other activities?
    Answer. States and tribes will be required to use grant funds for 
enforcement and compliance assurance activities. We anticipate states 
will use the funds for general enforcement capacity building or to 
implement problem-based strategies to address a specific risk or non-
compliance pattern.
              water infrastructure: infrastructure funding
    Question. The budget cuts $138 million from the Clean Water SRF and 
$340 million in targeted water projects. What are the consequences of 
this cut? How many water projects won't be funded as a result of these 
cuts? How many jobs won't be created?
    Answer. For fiscal year 2003 the President has requested 
$1,212,000,000 for the Clean Water State Revolving Fund (CWSRF), the 
largest request since fiscal year 1997. At the $1,212,000,000 funding 
level, and without further capitalization, the CWSRF would revolve at 
an average of $2.22 billion annually between 2010 and 2035. The CWSRF 
long-term revolving level, which includes loan repayments, is the 
projected average annual amount of funds available to states for clean 
water infrastructure. Because the CWSRF has been well-capitalized over 
the years, changes in the appropriated level do not significantly 
affect the revolving level.
           water infrastructure: watery security improvement
    Question. Water utilities are facing enormous burdens in meeting 
water regulations and upgrading aging infrastructure. Now, they're also 
facing needs to improve security. What is EPA doing to help wastewater 
and drinking water utilities improve security
  --of their physical infrastructure?
  --of the chemicals they use?
    Answer. EPA is working with other Federal agencies, states, tribes 
and utilities to improve water security with the goal of ``making the 
most systems safest soonest.'' To achieve this goal, the Agency and its 
partners are working to: (1) accelerate the development and testing of 
counter terrorism tools, such as vulnerability assessment methods; (2) 
train utilities in the development of vulnerability assessments and 
emergency operations plans; (3) provide needed technical and financial 
assistance to utilities conducting vulnerability assessments and other 
security-related work; (4) identify research needs and conduct research 
on topics such as detection technologies, potential contaminants, and 
treatment effectiveness for water collection and treatment systems; and 
(5) test new technologies and disseminate information on their 
application.
    EPA currently is reviewing grant applications to conduct 
vulnerability assessments at the approximately 400 largest drinking 
water systems nationwide, and plans to award $53 million for these 
assessments by the end of July 2002. EPA also is working with its 
partners to support assessments at the Nation's small and medium-sized 
drinking water systems. Vulnerability assessments are designed not only 
to identify weaknesses in the physical infrastructure of water systems, 
but also in the protocols for safeguarding the chemicals used in water 
treatment processes. In subsequent years, EPA will revise the training 
and tools it provides to utilities based on (1) the new monitoring and 
detection technologies under development, and (2) new approaches to 
continuously improve water security as a result of utilities' 
experience conducting vulnerability assessments.
    water infrastructure: methods for detecting security violations
    Question. What is EPA doing to help water systems develop methods 
for detecting security violations like contaminants in the drinking 
water?
    Answer. Through $2 million of the fiscal year 2002 Supplemental 
Appropriation, and $500,000 in fiscal year 2002 earmarked funds, the 
Agency currently is supporting the development of water security-
related detection, monitoring and treatment tools. There are several 
initiatives underway or in the planning phase for fiscal year 2002. 
Specifically, EPA is:
    Supporting research by the University of North Carolina at 
Greensboro to research real-time detection methods for pathogens.
    Co-sponsoring a detection technologies conference at Rutgers 
University in June. This was a forum where water utilities, regulatory 
agencies and scientific researchers could discuss needs and solutions 
to issues in water safety and security related to real-time monitoring 
and modeling.
    Developing a water security technology verification and outreach 
program to verify the performance of innovative technical solutions to 
intentional contamination that threatens human health or the 
environment. This program is designed to accelerate the entrance of new 
environmental technologies into the domestic and international 
marketplace.
    homeland security: status of funding for homeland security and 
                         activities undertaken
    Question. Congress provided $176 million in the 2002 Supplemental 
for EPA Homeland Security efforts. What is the status of this funding? 
What specific activities has EPA undertaken?
    Answer. Of the $176 million EPA received the Emergency 
Supplemental, $12.5 million was for partial reimbursement for the 
Capitol Hill anthrax cleanup. An additional $5.5 million was allocated 
to establish a western branch of the Environmental Response Team in Las 
Vegas, NV improving our ability to provide timely technical expertise 
to emergency situations nationwide. $23 million has been primarily 
allocated to our ten regional emergency response centers, to provide 
response staff, equipment and contract support, with the goal of 
developing sustained response capability throughout the country. EPA 
also received $1.5 million and 2 FTE as part of the fiscal year 2002 
Emergency Supplemental for Homeland Security research. EPA has used 
these resources to: (1) evaluate the performance of drinking water 
treatment systems for their ability to cost-effectively remove inactive 
biological and chemical agents; (2) work with State and Federal 
agencies to coordinate research efforts and (3) prepare for the 
implementation of the proposed Homeland Security research in 2003.
    EPA's Office of Administration and Resources Management (OARM) is 
responsible for leading and managing physical security efforts at EPA's 
facilities nationwide. Under the President's Supplemental Counter 
Terrorism Budget, OARM is being appropriated $30 million for physical 
security improvements, including vulnerability risk assessments, guard 
services, equipment, communications systems, and window enhancements. 
OARM has obligated 6 percent of the $30 million as of May 20, 2002. 
These funds were used for conducting vulnerability risk assessments at 
EPA facilities nationwide, procuring additional security guard services 
nationwide, purchasing and installing a smart card system at EPA's 
Region 2 Office in New York City, and purchasing and installing an 
integrated emergency communications system at EPA's Federal Triangle 
Complex in Washington, DC.
    The Acute Exposure Guideline Levels (AEGL) Program was established 
to develop short-term exposure limits applicable to the general 
population for a wide range of extremely hazardous substances for 
purposes of chemical emergency response, planning, and prevention 
related to chemical terrorism and chemical accidents. EPA would use 
Supplemental Homeland Security funding to accelerate the development of 
guidelines in 2002 and beyond.
    EPA's Office of Pollution Prevention and Toxics (OPPT) is 
participating in national and international efforts to develop one 
standardized set of scientifically sound short-term exposure values. 
EPA also planning to use Supplemental Homeland Security funding to 
initiate work in concert with the International Chemical Weapons 
Convention (CWC) to identify and fill analytical gaps in the assessment 
of potential risks of chemicals potentially used in the manufacture of 
chemical weapons. EPA would offer Structure Activity Relationship 
expertise to assist in expanding the information available on CWC-
listed chemicals to include chronic toxicity and ecotoxity aspects, 
would expand its work in the Green Chemistry program to include CWC-
listed chemicals in tools (e.g., expert systems), and broaden the Green 
Chemistry Challenge program to identify alternatives to CWC-listed 
chemicals.
    $89 million in supplemental appropriations was provided for water 
infrastructure protection. It has been allocated as follows.
    $53 million for water security planning grants for the largest 
drinking water utilities that regularly serve populations over 100,000. 
Collectively, these large systems provide drinking water to nearly half 
of Americans served by public water systems. Over 380 applications from 
publicly owned drinking water utilities were received. EPA plans to 
approve all eligible grants by the end of July.
    $23 million to address the needs of small and medium-size 
utilities. EPA is working with the industry, environmental groups, and 
the states to define the best approach for providing these utility 
systems with awareness training, technical assistance, vulnerability 
assessment tools, and capacity building.
    $5 million in grants to support State, tribal, and territorial 
counter-terrorism coordination (from State/Territorial Assistance 
Grants). EPA Regions are now working with states to award these funds.
    $2 million for investigation of security-related detection, 
monitoring and treatment tools.
    $3 million for wastewater tool development, training on 
vulnerability assessments and emergency operations, technical 
assistance, and investigation of treatment and detection tools.
    Nearly $2 million for additional needs, including training of 
public health officials, local government, law enforcement, and support 
for the information sharing and analysis center.
      homeland security: progress for improving homeland security
    Question. What progress has been made in improving homeland 
security with this spending?
    Answer. The Environmental Response Team (ERT) is EPA's premier 
technical support group for emergency response operations; 
historically, the team has been based in Edison, NJ, with a small annex 
in Cincinnati. We are nearing the completion of establishing a western 
ERT branch in Las Vegas, NV, which will improve EPA's coverage of the 
western half of the country, as well as build staff capacity in 
specific technical areas, such as bio-hazard assessment and 
remediation.
    One of the lessons we learned from the 9/11 events and the anthrax 
incidents was that our response capacity was dangerously low; we were 
forced to draw on resources from all ten of our regional emergency 
response programs and curtail other time-critical response work. The 
fiscal year 2002 supplemental budget provides each region with an 
additional five response personnel and approximately $1.6 million in 
funds for equipment and contract support, increasing our overall 
response capacity by 20 percent.
    The resources received in fiscal year 2002 for Homeland Security 
research also helped EPA to prepare for the efficient use of the $75 
million requested in fiscal year 2003 for Homeland Security research. 
This preparation will allow for quicker and more effective development 
and certification of new methods as well as techniques for detecting, 
treating, disposing, and understanding how best to manage buildings 
contaminated with biological or chemical agents.
    Office of Administration and Resources Management (OARM) is in the 
process of conducting vulnerability risk assessments at EPA's 146 
facilities nationwide. These assessments will provide EPA with the 
current physical security conditions at its facilities, including 
identifying and documenting vulnerabilities and risks, assessing human 
threat, and determining the overall qualitative risks as it relates to 
perimeter security, entrance and exit security, interior security, and 
security planning. Based on the findings from the assessments, OARM 
will develop recommendations and cost estimates to mitigate the risks, 
and implement mitigation and countermeasure efforts, where appropriate.
    OARM is using a phased approach in conducting these assessments, 
where our more critical facilities are assessed first and the less 
critical facilities are assessed last. To date, we have completed site 
visits at 50 facilities and laboratories nationwide, and completed 25 
reports of findings. We are currently in the process of ranking and 
prioritizing the risks associated with our most critical facilities, 
and expect to make funding decisions in June 2002. This funding will be 
used to purchase additional guard services, equipment, and 
communications systems. OARM plans to continue this process until we 
complete the assessments and mitigate the vulnerabilities at all our 
facilities nationwide.
    EPA's Water Protection Task Force and Regional Offices, working 
with many partnering organizations, are taking actions to improve the 
security of the nation's drinking water and wastewater infrastructure. 
The actions underway:
    To date, the Task Force has:
  --Supported development of vulnerability assessment tools (developed 
        by Sandia/AWWA, and AMSA) and released emergency operations 
        planning guidance;
  --Trained thousands of water utility personnel on security planning 
        and vulnerability assessment methodologies;
  --Completed an assessment of the State of knowledge on technologies 
        to detect contaminants, monitoring protocols and techniques, 
        and treatment effectiveness.
    On-going actions include:
  --Providing technical assistance, training, and capacity building 
        tailored to the needs of small and medium drinking water, and 
        wastewater utilities;
  --Supporting information sharing between government organizations and 
        industry by funding start-up of a secure Information Sharing 
        and Analysis Center;
  --Supporting research to improve treatment and detection methods.
 homeland security: development of outcome-based measures and specific 
                             spending plans
    Question. Has EPA developed outcome-based measures and specific 
plans to assure that this spending will improve the security of our 
homeland?
    Answer. Prior to the events of last fall, EPA had undertaken a 
comprehensive review of the agency's Emergency Response Program, 
developing standards and measures to ensure a high degree of 
consistency and responsiveness in regional response operations. 
Subsequent to the terrorist responses, we took the lessons learned from 
those actions and integrated them into the overall response program 
framework. This effort will be reflected in the Agency's GPRA measures 
for the fiscal year 2003 enacted budget, as well as the fiscal year 
2004 President's Budget.
    EPA has also developed goals and measures to support all aspects of 
the draft Agency Homeland Security Strategy to help ensure efficient 
and effective spending.
    EPA's goal for water infrastructure security is to get the most 
systems as secure as possible as soon as possible. EPA works closely 
with utility organizations, the states, and security experts to 
identify the most effective approaches and tools needed to improve the 
security of the nation's critical water infrastructure.
    EPA has developed a new Annual Performance Goal in its fiscal year 
2003 President's Budget request to track development of Acute Exposure 
Guideline levels (AEGL) for additional chemicals. The measures are 
quantitative, so they will clearly identify the additional numbers of 
chemicals and guidelines developed each year. Additionally, EPA is 
continuing to review the program activities and has identified areas 
for improvement, including development of health and safety plans for 
select agent, developing occupational and medical monitoring plans, 
addressing containment issues, securing laboratory space and 
identifying and tracking samples.
                           homeland security
    Question. How does EPA plan to spend the additional $124 million 
requested in fiscal year 2003?
    Answer. EPA Superfund plans to continue to improve the emergency 
response program by insuring that the additional capacity and technical 
capability that were first funded in fiscal year 2002 will be 
maintained in fiscal year 2003 and beyond(including both the ERT-West 
operation and regional and HQ response program improvements).
    EPA requested $75 million for Homeland Security research. Work will 
focus on five main areas: detection of contaminants, containment of 
contaminants, decontamination of indoor materials, disposal of 
contaminated clean-up equipment and supplies, and risk communication 
including the transfer of improved methods to users. Before initiating 
efforts in any of these areas EPA will survey the private sector and 
other agencies and organizations to assess existing capabilities and 
where possible work to bring that technology, information or process to 
those who need it. Where others have already established a lead in a 
given area, EPA can defer to that organization. In other cases, a 
collaborative working relationship may be best suited. A leadership 
role may also be appropriate for EPA.
    EPA has requested $22 million in fiscal year 2003 for critical 
water infrastructure protection. $17 million of the request will 
support continued work to: develop tools and training for small and 
medium drinking water utilities to complete vulnerability assessments; 
develop and enhance emergency response plans, and; develop and 
disseminate detection, monitoring and treatment technologies. $5 
million of the request will be directed to states to support state-
level coordination of homeland security activities with EPA and 
drinking water utilities.
          homeland security: anthrax decontamination spending
    Question. How much did EPA spend on this effort? Did this funding 
come from the Superfund program?
    Answer. EPA has expended over $28 million for Capitol Hill response 
out of its Superfund removal program.
    In general, the USPS, other government agencies and privately owned 
facilities, such as the America Media, Inc. site in Florida, are 
funding their own cleanups. EPA is providing technical assistance from 
our On-Scene Coordinators, our Environmental Response Team, and other 
personnel. EPA estimates that it has spent approximately $2 million for 
anthrax cleanup and technical assistance at sites other than the 
Capitol Hill Complex.
    Estimated costs for OPPT in fiscal year 2002 are approximately 
$900,000. These funds were not provided from the Superfund program, 
they are being paid by the pesticides program.
     homeland security: anthrax decontamination full reimbursement
    Question. How much more does EPA need in order to be fully 
reimbursed?
    Answer. EPA has expended over $28 million for Capitol Hill response 
out of its Superfund removal program. The fiscal year 2002 Supplemental 
Appropriations bill reimbursed EPA for $12.5 million of that. The 
Administration has requested an additional $12.5 million in 
reimbursement.
homeland security: lessons learned from the anthrax decontamination at 
                           the hart building
    Question. What ``lessons learned'' can EPA provide about the 
anthrax decontamination at the Hart building?
    Answer. We verified that our basic response infrastructure and 
authorities are sound, and that our regional response programs are up 
to the task of mitigating new and unique threats to public health. We 
also learned that we need to enhance and develop our short term 
assessment and mitigation methods.
 homeland security: progress made assuring clarity of roles and safety
    Question. What progress has EPA made in assuring clarity in: Who is 
in charge?
    Answer. We believe the basic roles and responsibilities defined by 
the Federal Response Plan, the National Contingency Plan and PDDs 39 
and 62 are clear and do not need further amendment. However, the 
execution of these authorities may be compromised by inconsistent 
application in different situations; we have discussed this with the 
Office of Homeland Security and are hopeful that clarifying guidance 
will be forthcoming.
    The National Response Team has established an ad hoc committee, 
which includes EPA, CDC, OSHA, USCG and other agencies, to consolidate 
and coordinate civilian and military expertise on detecting and 
cleaning up anthrax contamination. This committee is close to 
completing an interim final technical assistance document that begins 
to address this issue for anthrax. Lessons learned by this group will 
be applied to broader efforts to address risk-based decision making in 
other scenarios involving chemical or biological terrorism. We believe 
the continuing dialogs and related improvements in cross-agency 
coordination in this area will improve our ability to make definitive 
cleanup decisions in the future.
    Question. How clean is safe?
    Answer. The risk-based response protocols established by the 
Superfund program provide a solid foundation for making site-specific 
cleanup decisions, but these decisions must be informed by improved 
government-wide understanding of the nature of biological risks. We 
believe the continuing dialogs involving EPA, CDC and other agencies 
will improve our ability to make definitive cleanup decisions in the 
future.
                 pharmaceutical pollution of waterways
    Question. A recent study by the USGS found trace pharmaceuticals in 
80 percent of streams analyzed. What is EPA's role in looking at the 
possible effects of drug wastes on the environment? Is EPA looking at 
how these contaminants affect drinking water?
    Answer. EPA has statutory responsibilities under the Clean Water 
Act and the Safe Drinking Water Act to evaluate the environmental and 
human health risks of pollutants, including pharmaceuticals and 
personal care products (PPCPs) , and to determine whether ambient water 
quality criteria or drinking water standards are needed. In response to 
this mandate, EPA is focusing on collecting and evaluating occurrence 
data in water sources to assess potential ecological and human health 
risks. Based upon the risk assessments, EPA will develop intra- and 
inter-agency research strategies for future research. EPA has been 
exploring the effect of chlorination (which is commonly used to treat 
both waste water and drinking water) on selected pharmaceuticals to 
determine if the process is effective at removing the compounds from 
the water, as well as what by-products are formed. This data was 
presented at the Society of Environmental Toxicology and Chemistry 
(SETAC) annual meeting in November 2000, and is currently being 
summarized for publication in fiscal year 2002. In addition, EPA has 
previously funded several PPCP-related research projects, including 
aquatic effects studies through the Sceince to Acheive Results (STAR) 
program. Information on these projects is available at: http://
www.epa.gov/nerlesd1/chemistry/pharma/star.htm The EPA also hosts the 
world's only web site devoted to environmental issues associated with 
PPCPs (http://www.epa.gov/nerlesd1/chemistry/pharma/index.htm.
    Question. As a result of the recent study, FDA said it would take a 
closer look at the effects on the environment. Is EPA working with FDA 
on this issue?
    Answer. EPA and FDA staff interactions have resulted from joint 
participation in organizing a scientific session devoted to PPCPs (the 
2000 American College of Toxicology Annual Meeting) and from FDA review 
of EPA PPCP-related presentation materials. EPA plans to engage FDA in 
the development of an inter-agency research strategy to establish risk-
based research priorities and opportunities for inter-agency 
collaborations.
    Question. The U.S. Geological Survey is also looking at how these 
contaminants might affect drinking water. Is EPA working with USGS?
    Answer. EPA has collaborated and co-authored published papers with 
USGS on a Neuse River Basin, North Carolina, field study to develop 
better measurement methods and to collect occurrence data for 
antibiotic and endocrine disrupting compounds near animal feeding 
operations. EPA is currently collaborating with USGS on a project using 
pharmaceuticals, as well as other chemicals found in human waste 
streams (e.g, detergents, surfactants), as tracers of human fecal 
contamination. As part of this work, samples will be taken upstream, at 
the point of discharge, and at two points downstream of waste water 
discharges. This data should provide information about the lifetime of 
pharmaceuticals in the environment (i.e, are they found one mile 
downstream from the discharge point, or are they removed/reduced due to 
effects such as photo- or bio-degradation, sedimentation, and 
dilution), which will be useful for exposure assessment. The EPA and 
USGS staff have also been collaborating by exchanging information, 
reviewing each other's documents, and collaborating on research. EPA-
USGS collaborated on the research project: ``Analytical Chemistry for 
Mapping Trends of Pharmaceutical and Personal Care Product Pollution 
from Personal Use: Some Current Research and Future Needs.''
    Question. Is EPA developing technologies for ways to remove these 
contaminants from drinking water?
    Answer. EPA is evaluating the removal of steroid hormone compounds 
by various drinking water treatment processes. In the future, a group 
of nonylphenolic compounds and additional pharmaceuticals will also be 
added. Analytical methods to identify and quantify the steroid hormones 
will be developed, and a reporter gene assay, the MVLN assay, will 
evaluate the removal of estrogenic activity from the water samples. 
Once the analytical and MVLN assays are in place, bench, pilot, and 
field-scale evaluations of various drinking water treatment processes 
will be conducted. Of special interest are technologies amenable to 
small systems. To reduce the need for treatment, EPA also is 
considering ways to minimize the occurrence of PPCPs in drinking water 
sources, such as encouraging safer disposal of discarded 
pharmaceuticals.
    Question. Is there any funding in the budget related to these 
efforts?
    Answer. In the fiscal year 2003 President's Budget, EPA requested 
approximately $1.2 million and 11 FTE for PPCP research. This includes 
work focusing on collecting and evaluating occurrence data in water 
sources to assess potential ecological and human health risks, 
developing intra- and inter-agency research strategies to determine 
risk-based priorities for future research, the effects of chlorination 
on selected pharmaceuticals to determine if the process is effective at 
removing the compounds from the water as well as evaluating the removal 
of steroid hormone compounds by various drinking water treatment 
processes.
  environmental education: rationale for elimination of approximately 
                 $10m from k-12 environmental education
    Question. The budget proposes to eliminate approximately $10 
million for K-12 environmental education. What is the rationale for 
this cut?
    Answer. The President's fiscal year 2003 budget transfers the 
Agency's Environmental Education Grant program to the National Science 
Foundation's (NSF) math and science program. The functions of the EPA's 
grant program will continue at NSF.
    Consolidation of the EPA's Environmental Education program with 
those of NSF will combine similar programs, improve the services 
delivered to environmental institutions, and reduce costs. The function 
of Environmental Education is better served by one agency and NSF is 
fully capable of administering the requirements of S. 876.
          star fellowship: rationale for shift from epa to nsf
    Question. The budget proposes to shift the STAR fellowship program 
from EPA to NSF. What is the rationale for this shift?
    Answer. The President's Budget proposes to strengthen math and 
science education in the United States by improving the quality of math 
and science education in grades K-12 and by attracting the most 
promising U. S. students into graduate level science and engineering by 
providing more competitive stipends. The President's K-12 math and 
science initiative and the higher graduate stipends are being funded 
through the National Science Foundation's (NSF) budget. NSF is noted 
for its expertise and success in funding competitive programs in math 
and science. Funding for EPA's STAR Fellowship Program was shifted to 
NSF in fiscal year 2003 as part of the Federal initiative to strengthen 
math and science programs.
    EPA will continue funding its Minority Academic Institutions (MAI) 
Fellowships program at $1.5 million in 2003. The Minority Academic 
Institution (MAI) fellowship program offers undergraduate and graduate 
fellowships in academic disciplines relating to environmental research, 
and are intended to help defray costs associated with environmentally-
oriented study leading to the bachelor's, master's or doctoral degree. 
Undergraduate fellows agree to participate for up to 12 weeks at an EPA 
laboratory/center as a summer intern. Eligible students in both the 
undergraduate and graduate programs must attend a 4-year U.S. Minority 
Academic Institution, defined as Historically Black Colleges or 
Universities (HBCUs), Hispanic Serving Institutions (HSIs), and Tribal 
Colleges (TCs).
       star fellowship: graduate students completing fellowships?
    Question. How would this affect graduate students who are 
completing their fellowships? Will their funding be canceled?
    Answer. No, the STAR fellows funding will not be canceled. EPA 
presently supports about 200 STAR fellows. The terms of those 
agreements provide funding for the next 1 or 2 years. EPA plans to 
fully fund the present fellows for the intended duration of their 
fellowships. EPA will use fiscal year 2002 resources to fund students 
presently in the STAR fellowship program through the completion of 
their fellowships.
                   star fellowship: the star program?
    Question. How does EPA propose to spend 2002 funding provided for 
the STAR fellowship program?
    Answer. EPA will use fiscal year 2002 resources to fund students 
presently in the STAR fellowship program for the duration of their 
fellowships.
                       star fellowship: citation
    Question. Please provide the citation within the NSF budget where 
this program is proposed to be funded in 2003.
    Answer. Resources for the STAR Fellowship Program, previously 
funded by EPA, were redirected to the National Science Foundation 
(NSF), though the program itself was not transferred. No funding exists 
within the NSF Budget for the STAR Fellowship program. Funding to 
graduate students pursuing studies in some of the environmental 
sciences supported by EPA is available through existing well-
established graduate research fellowship and traineeship programs in 
NSF. These programs are discussed on pages 285-286 of NSF's fiscal year 
2003 Budget Justification to Congress.
                            star fellowship
    Question. If NSF takes over this program, would it remain as a 
separate program focusing on the environmental sciences, or would it be 
folded into NSF's other science education programs?
    Answer. As mentioned above, EPA's STAR Fellowship Program was not 
transferred to NSF. However, NSF does provide financial assistance to 
graduate students across the nation studying scientific disciplines 
through existing well-established graduate research fellowship and 
traineeship programs. Graduate students pursuing degrees in a subset of 
the environmental sciences who previously sought EPA's financial 
assistance may apply to these NSF programs.
   brownfields: questions raised concerning effective use of funding
    Question. Recent reports by the House Energy and Commerce Committee 
(Nov. 2000) as well as GAO (Dec. 2000) and the EPA Inspector General 
(Sept. 2000) all raised serious questions about whether past funding 
for the program had been effectively used. Specifically, few cleanup 
loans had been made, and EPA could not demonstrate what tangible 
results had been achieved with the funding that had been provided. Have 
these past problems been corrected? If so, how?
    Answer. EPA has responded to the recommendations in numerous ways. 
EPA has clarified certain critical requirements and streamlined them. 
Currently 143 Brownfields Cleanup Revolving Loan Funds Pilots (BCRLF) 
have been selected. In addition, EPA has deobligated eleven BCRLF where 
progress has not been made by the recipient in making loans. Recent 
improvements to the BCRLF program include the development of model 
documents and a marketing guide.
    In the past year, the number of loans being made by BCRLF pilots 
has more than doubled to 17 loans with an additional three expected 
within the next quarter and more under discussion with EPA regions. We 
attribute the lag in community participation in this program to a 
number of factors, including lack of familiarity with the program 
requirements and the limited competitiveness of Federal funds that 
require recipients to comply with all Superfund requirements. Improved 
outreach on the part of the EPA Brownfields program, increased 
understanding of this program, and the increasing competitiveness of 
these funds has increased the rate of loans being made in the last 
year. We anticipate that communities will continue to find the BCRLF 
funds attractive when combined with other public and private resources.
    Most importantly however, the new legislation signed by President 
Bush on January 11, 2002, the Small Business Liability and Brownfields 
Revitalization Act, provided significant relief to the program from its 
current regulatory burdens. The new Act provides that the EPA may 
determine which specific provisions of the Superfund National 
Contingency Plan are applicable to the brownfields program and thus use 
only provisions which are needed in implementing the program. EPA's 
Legislative Implementation work group is developing a transition 
guidance to outline the requirements of the new law. This will assist 
grant recipients in determining whether to choose to take advantage of 
the new statutory provisions. We anticipate that many grant recipients 
will take advantage of the new statutory provisions and a substantial 
increase in loans and/or cleanup subgrants will result from the 
transition.
         brownfields: increase in funding for fiscal year 2003
    Question. How will the large increase in funding for fiscal year 
2003 be used effectively?
    Answer. Increased funding will be focused upon several significant 
areas. These areas include increasing the number of grants, and 
supplemental funding for existing grantees for assessment and 
brownfields cleanup revolving loan funds. New grant categories are also 
created by the legislation including direct and indirect grants for 
cleanup and funding for assessment and cleanup of petroleum-
contaminated properties. In addition, funding to the fully authorized 
ceiling has been requested for State and tribal response programs.
    roles and responsibilities of epa's regional offices: workforce 
                        analysis and projections
    Question. Different regions do their jobs in different ways, in 
terms of the levels of effort they apply to enforcement actions, 
technical compliance assistance, community outreach efforts, and so 
forth. OMB has asked all agencies, including EPA, to provide workforce 
statistics now and as they would see their workforces changing over the 
next 5 years. What is the status of EPA's workforce analysis for OMB, 
and what do the workforce projections show?
    Answer. The Agency submitted the Workforce Analysis to OMB on June 
29, 2001 in response to OMB Bulletin 01-07. Projections included in 
that report show a changing workforce in age and other demographics. By 
2005, 25.6 percent of the workforce will be eligible for voluntary, 
FERS 10-year, or Law Enforcement Officer retirement.
    roles and responsibilities of epa's regional offices: analysis 
            performed to determine size of regional offices
    Question. Has EPA performed an analysis to determine the 
appropriate size of the regional offices? If not, will such an analysis 
be done?
    Answer. The Agency has not completed an analysis to determine the 
appropriate size of regional offices, and does not plan such a specific 
study. However, EPA is undertaking an Agency study to determine the 
competencies necessary to meet mission needs in the future which may in 
turn have organizational impacts. The resultant workforce planning 
system from this study is to be available for EPA line manager's use 
second quarter of fiscal year 2004.
         roles and responsibilities of epa's regional offices:
    Question. Has or will the issue of different regional approaches to 
carrying out EPA's responsibilities be addressed?
    Answer. The Agency has not completed an analysis of various 
regional approaches. The Agency will, however, continue to examine how 
to best perform EPA's responsibilities.
                                 ______
                                 

           Questions Submitted by Senator Christopher S. Bond

    compliance assistance: list of rules for developing compliance 
                            assistance tools
    Question. List the rules currently considered economically 
significant for the purposes of developing compliance assistance tools? 
Provide the rule finalization date and the status of any tools 
development for rules finalized or to be finalized by December 2002.
    Answer. EPA develops compliance assistance tools for rules that 
have an economic impact of $100 million or more on companies and/or 
government facilities or other rules, as appropriate. EPA also develops 
compliance tools for rules that have a significant economic impact on a 
substantial number of small entities as defined under the Small 
Business Regulatory Enforcement Fairness Act.
    The potential universe of regulations for which compliance guides 
may be developed is continually changing based on changes to specific 
provisions of a regulation and subsequent economic analysis. Also, 
changes in rule finalization dates alter the compliance tool schedule. 
Extensions in developing compliance tools are allowed because of 
factors such as resource constraints, providing for greater stakeholder 
involvement, or demands of other work.
    For the purposes of this response, Attachment A contains 
information, as of May 22, 2002, on the three economically significant 
rules finalized or expected to be finalized by December 2002.

                 COMPLIANCE ASSISTANCE--LIST OF RULES FOR DEVELOPING COMPLIANCE ASSISTANCE TOOLS
----------------------------------------------------------------------------------------------------------------
                                                                    Projected/Actual
              Regulation                Projected/Actual Final      Compliance Tool        Estimated Compliance
                                           Publication Date         Completion Date             Tool Cost
----------------------------------------------------------------------------------------------------------------
Office of Air and Radiation:
    Emissions from Nonroad Spark-      September 2002.........  December 2002..........  Uncertain \1\
     Ignition Engines and Standards
     for Recreational Spark Engines
     (Contact: A. Stout, 734-214-
     4805).
Office of Prevention, Pesticides and
 Toxic Substances:
    Groundwater and Pesticides         September 2002 \2\.....  December 2002..........  Not Applicable. See
     Management and Plan Rule                                                             Note 2
     (Contact: A. Williams, 703-305-
     5239).
Office of Water:
    National Primary Drinking Water    January 2001...........  June 2002..............  $52,000
     Regulations: Arsenic and
     Clarifications to Compliance and
     New Source Containment
     Monitoring (Contact: A.
     Bielanski, 202-564-3824).
----------------------------------------------------------------------------------------------------------------
\1\ EPA will work with the regulated community to develop the appropriate compliance assistance tool. EPA
  expects to use in-house resources to complete the tool.
\2\ The Projected Final Publication date is delayed until the end of fiscal year 2002. The delay is allowing EPA
  to explore potential modifications to the proposed final regulation to address issues raised by the regulated
  community and co-regulators.

     compliance assistance: estimate of cost to develop compliance 
                            assistance tools
    Question. Provide an estimate of the cost of developing compliance 
assistance tools for each economically significant rule finalized or to 
be finalized in 2002?
    Answer. The costs associated with developing compliance assistance 
tools for economically significant rules vary significantly. Cost 
variations are based on the type of technical issues associated with 
the substantive requirements of a rule, the degree of experience that 
the regulated community has in dealing with environmental rules, and 
the diversity of the regulated community (e.g., need for bilingual 
assistance materials). In addition, cost variations arise because of 
the multiple ways in which information exchanges occur with the 
regulated community, including face-to-face training and delivery of 
information via computer-based technology. Cost variations are also 
associated with whether EPA develops a compliance guide within the 
agency or uses contractor assistance to develop the guide. Attachment A 
contains information on the cost associated with each completed 
compliance guide for economically significant rules or estimated costs 
for upcoming compliance guides.

                 COMPLIANCE ASSISTANCE--ESTIMATE OF COST TO DEVELOP COMPLIANCE ASSISTANCE TOOLS
----------------------------------------------------------------------------------------------------------------
                                                                    Projected/Actual
              Regulation                Projected/Actual Final      Compliance Tool        Estimated Compliance
                                           Publication Date         Completion Date             Tool Cost
----------------------------------------------------------------------------------------------------------------
Office of Air and Radiation:
    Emissions from Nonroad Spark-      September 2002.........  December 2002..........  Uncertain \1\
     Ignition Engines and Standards
     for Recreational Spark Engines
     (Contact: A. Stout, 734-214-
     4805).
Office of Prevention, Pesticides and
 Toxic Substances:
    Groundwater and Pesticides         September 2002.........  December 2002..........  Not Applicable. See
     Management and Plan Rule                                                             Note 2
     (Contact: A. Williams, 703-305-
     5239).
Office of Water:
    National Primary Drinking Water    January 2001...........  June 2002..............  $52,000
     Regulations: Arsenic and
     Clarifications to Compliance and
     New Source Containment
     Monitoring (Contact: A.
     Bielanski, 202-564-3824).
----------------------------------------------------------------------------------------------------------------
\1\ EPA will work with the regulated community to develop the appropriate compliance assistance tool. EPA
  expects to use in-house resources to complete the tool.
\2\ The Projected Final Publication date is delayed until the end of fiscal year 2002. The delay is allowing EPA
  to explore potential modifications to the proposed final regulation to address issues raised by the regulated
  community and co-regulators.

 compliance assistance: ranking of top ten compliance assistance needs
    Question. Provide a ranking of the top 10 compliance assistance 
needs and identify the criteria used for the ranking such as risk of 
environmental damage or susceptibility of the problem to compliance 
assistance techniques.
    Answer. EPA integrates compliance assistance as appropriate when 
addressing national enforcement and compliance assurance priorities, 
newly promulgated regulations, and special needs of specific industry 
sectors. OECA has also developed guidelines for staff to use in 
reviewing the regulatory agenda to determine whether new or upcoming 
rules would be good candidates for compliance assistance. Attachment A 
contains these guidelines for determining rules which are good 
candidates for compliance assistance.
    National priorities are environmental risks or noncompliance 
patterns that can often be addressed using compliance assistance in 
combination with compliance incentives, inspections and investigations, 
and enforcement actions. Decisions about whether to use assistance to 
address specific national priorities are based on the nature and 
complexity of the regulatory requirement, the compliance history of the 
industry sector(s) to which the requirement applies, the capacity of 
the sector to receive and utilize assistance, and whether assistance 
can be effective (by itself or in combination with other tools) in 
increasing compliance or reducing risks associated with a specific 
priority.
    Compliance assistance needs are also identified through 
consultation with industry sectors about the compliance challenges 
confronting these sectors. This consultation can result in development 
of tailored compliance guides and creation of sector-based online 
compliance assistance centers.
      guidelines for screening new rules for compliance assistance
Screening Guidance
    As you are reviewing the list of Tier I, Tier II and Tier III 
proposed rules, consider the following factors in determining whether 
the proposed regulations are good candidates for compliance assistance.
Compliance Assistance Required
    Is the rule an ``economically significant rule?'' (impact of 100M 
or more on regulated community. See RFA (Regulatory Flexibility Act)/
SBREFA tracking report in RAPIDS (Rule and policy Information 
Development System) or the Rule Tiering Forms.)
  --Compliance guide, fact sheet or expert system required by Aiming 
        for Excellence Report
    Is the rule a ``SBREFA rule?'' (rule has a significant impact on 
substantial number of small entities. See RFA/SBREFA tracking report in 
RAPIDS or Rule Tiering Forms)
  --Compliance guide required under Small Business Regulatory 
        Enforcement Fairness Act (SBREFA))
Possible Candidate for Compliance Assistance
    Does the rule impact a sector with a large number of small 
businesses who may lack the resources/ability to obtain compliance 
assistance on their own? (See RAPIDS for list of rules that impact 
small businesses but don't meet SBREFA threshold or check SBA guidance 
on definition of small business)
  --May be candidate for compliance assistance
    Does the proposed rule impact a larger number of entities with 
varying degrees of prior regulatory experience and access to compliance 
assistance resources?
  --May be candidate for compliance assistance
    Does the proposed rule embody new or novel concepts to which 
existing compliance assistance concepts or activities are inappropriate 
or ineffective?
  --May be candidate for compliance assistance
    Is the regulated community willing and able to assist EPA in 
developing compliance assistance tools?
  --May be candidate for compliance assistance
    Is the sector(s) impacted by the proposed rule on the ``emerging 
sector'' list?
  --May be a candidate for compliance assistance
    Does the rule address an Agency initiative, priority in the 
Strategic Plan or OECA or program office MOA priority?
  --May be a candidate for compliance assistance
Less Likely Candidate for Compliance Assistance
    Is the proposed rule concise and easily understood by the regulated 
community? Does it mirror existing, familiar regulatory approaches that 
apply to the same regulated community?
  --Compliance assistance may not be needed
    Does the proposed rule impact a small number of regulated entities 
that are reasonably expected to be familiar with the regulatory 
environment and/or have access to existing compliance assistance 
resources?
  --Compliance assistance may not be needed
    Does a large proportion of the industry sector(s) affected by the 
rule belong to a trade association?
  --Compliance assistance may not be needed
                  compliance assistance: activity plan
    Question. Describe how does the Compliance Assistance Activity Plan 
direct EPA actions and resources to meet these priority needs?
    Answer. The Compliance Assistance Activity Plan is helpful in 
guiding EPA toward the best opportunities for using compliance 
assistance. The Plan reflects EPA's continuing efforts to better 
identify the priority needs for compliance assistance, improve the 
process for obtaining stakeholder input, engage in dialogue on how best 
to meet the identified needs, and provide guidance on how to direct 
resources to the highest priority needs.
  compliance assistance: analysis of new regulatory requirements and 
            compliance assistance tools in fiscal year 2003
    Question. In fiscal year 2003, how will EPA comprehensively analyze 
its upcoming new regulatory requirements and determine the compliance 
assistance tools most likely to help bring about compliance with those 
requirements?
    Answer. EPA will continue to utilize the mechanisms developed in 
prior years for determining needed compliance assistance tools to 
address upcoming regulatory requirements. One mechanism EPA uses for 
continuing the compliance assistance needs discussions with its 
partners is the National Compliance Assistance Forum. Discussions and 
information provided at the Forum have been used to identify compliance 
assistance needs and provide input on EPA's National Compliance 
Assistance Activity Clearinghouse (Clearinghouse) and the Annual 
Compliance Assistance Activity Plan. Another vehicle for assessing 
compliance assistance needs comes from EPA's work with the Compliance 
Assistance Advisory Committee (CAAC) which is a component of the 
National Advisory Council for Environmental Policy and Technology 
(NACEPT). These efforts not only support the development of compliance 
assistance tools, but they also provide a forum to assess the 
effectiveness of EPA's compliance assistance efforts. Through all of 
these activities EPA is comprehensively analyzing forthcoming 
regulatory requirements to identify which are best suited to compliance 
assistance.
    Based on discussions with stakeholders, EPA has also decided to 
identify, through the rule development process, rules that have an 
``economically significant'' impact on the regulated community, defined 
as $100 million or more, and EPA may develop compliance guides for 
those rules as appropriate. Similarly, as mandated by the Small 
Business Regulatory Enforcement Fairness Act (SBREFA), based on the 
regulatory flexibility analysis conducted early in the rule development 
process, EPA develops plain English compliance assistance guides for 
all SBREFA rules. OECA has also developed guidelines for staff to use 
in reviewing the Regulatory Agenda to assess whether regulations would 
be good candidates for compliance assistance. Attachment A contains 
these guidelines for identifying compliance assistance candidates.
      guidelines for screening new rules for compliance assistance
Screening Guidance
    As you are reviewing the list of Tier I, Tier II and Tier III 
proposed rules, consider the following factors in determining whether 
the proposed regulations are good candidates for compliance assistance.
Compliance Assistance Required
    Is the rule an ``economically significant rule?'' (impact of 100M 
or more on regulated community. See RFA (Regulatory Flexibility Act)/
SBREFA tracking report in RAPIDS (Rule and policy Information 
Development System) or the Rule Tiering Forms.)
  --Compliance guide, fact sheet or expert system required by Aiming 
        for Excellence Report
    Is the rule a ``SBREFA rule?'' (rule has a significant impact on 
substantial number of small entities. See RFA/SBREFA tracking report in 
RAPIDS or Rule Tiering Forms)
  --Compliance guide required under Small Business Regulatory 
        Enforcement Fairness Act (SBREFA))
Possible Candidate for Compliance Assistance
    Does the rule impact a sector with a large number of small 
businesses who may lack the resources/ability to obtain compliance 
assistance on their own? (See RAPIDS for list of rules that impact 
small businesses but don't meet SBREFA threshold or check SBA guidance 
on definition of small business)
  --May be candidate for compliance assistance
    Does the proposed rule impact a larger number of entities with 
varying degrees of prior regulatory experience and access to compliance 
assistance resources?
  --May be candidate for compliance assistance
    Does the proposed rule embody new or novel concepts to which 
existing compliance assistance concepts or activities are inappropriate 
or ineffective?
  --May be candidate for compliance assistance
    Is the regulated community willing and able to assist EPA in 
developing compliance assistance tools?
  --May be candidate for compliance assistance
    Is the sector(s) impacted by the proposed rule on the ``emerging 
sector'' list?
  --May be a candidate for compliance assistance
    Does the rule address an Agency initiative, priority in the 
Strategic Plan or OECA or program office MOA priority?
  --May be a candidate for compliance assistance
Less Likely Candidate for Compliance Assistance
    Is the proposed rule concise and easily understood by the regulated 
community? Does it mirror existing, familiar regulatory approaches that 
apply to the same regulated community?
  --Compliance assistance may not be needed
    Does the proposed rule impact a small number of regulated entities 
that are reasonably expected to be familiar with the regulatory 
environment and/or have access to existing compliance assistance 
resources?
  --Compliance assistance may not be needed
    Does a large proportion of the industry sector(s) affected by the 
rule belong to a trade association?
  --Compliance assistance may not be needed
 compliance assistance: analysis of prospective enforcement activities 
                          in fiscal year 2003
    Question. In fiscal year 2003, how will EPA analyze its prospective 
enforcement activities to determine where compliance assistance might 
fill the gaps where the enforcement program does not currently reach?
    Answer. EPA will continue to use a problem-solving approach that 
applies integrated strategies tailored to address specific 
environmental risks and noncompliance patterns. For some of these 
problems a period of assistance designed to increase compliance is the 
best approach. For other problems, assistance combined with incentives 
for self-policing works best. In other instances, bringing enforcement 
actions can be used as a tool with compliance assistance. Assistance 
will be used with inspections, incentive policies, and enforcement 
actions in combinations appropriate to the problem.
    compliance assistance: documenting and measuring environmental 
                              improvements
    Question. How is EPA documenting and measuring environmental 
improvements from compliance assistance activities? Provide the results 
of these efforts.
    Answer. EPA is advancing management of environmental improvements 
from its compliance assistance activities through tracking of outcomes 
from specific compliance assistance initiatives, surveys of compliance 
assistance recipients, and by providing grants to states for 
measurement of assistance outcomes. Beginning in fiscal year 2003, all 
regional offices are being required to report on the outcomes of 
compliance assistance projects. These results will be compiled in a 
national database and analyzed to learn more about the results of 
assistance. The database will capture outcome measures in three broad 
areas: (1) understanding of regulatory requirements; (2) changes within 
the regulatory community to improve environmental performance; and, (3) 
direct reduction of emissions/discharges.
    In 2001, the Compliance Assistance Centers conducted a survey of 
their users. Ninety percent of the regulated survey respondents 
reported the Centers helped them understand applicable environmental 
requirements. Survey respondents indicate that Center information is 
well used. In fact, 73 percent of the regulated entity respondents took 
one or more actions as a result of Center use. Actions ranged from 
contacting a regulatory agency, changing a process or practice, to 
conducting a self audit. Additionally, 69 percent of the survey 
respondents indicated a cost savings from actions taken as a result of 
using a Center. Furthermore, 85 percent of respondents indicated an 
environmental improvement from actions taken as a result of using a 
Center. In addition to the survey results, annual usage of the Centers 
by the target audience has increased three fold since 1998.
    To encourage State programs to measure compliance assistance 
outcomes EPA has awarded approximately $2.3 million in grants to states 
in the last 2 years. A limited amount of funds are available in fiscal 
year 2002 for this purpose.
compliance assistance: status of total resources devoted to compliance 
                               assistance
    Question. What is the status of EPA's efforts to determine total 
resources devoted across the agency to compliance assistance 
activities?
    Answer. EPA has completed its efforts to determine total resources 
devoted across the agency to compliance assistance programs. A 
Compliance Assistance key program was created to track planned 
resources and FTE for this activity across the Agency.
   compliance assistance: compliance assistance analysis in analytic 
           blueprint for new regulations in fiscal year 2003
    Question. In fiscal year 2003, how will EPA ensure that the 
analytic blueprint for each new regulation includes a compliance 
assistance analysis?
    Answer. Pursuant to the Small Business Regulatory Enforcement 
Fairness Act (SBREFA), EPA has committed to develop compliance guides 
for Federal regulations that have a ``significant economic impact on a 
substantial number of small entities.'' The Agency also develops either 
a compliance guide or a self-audit checklist for Federal regulations 
with an ``economically significant'' impact of $100 million or more on 
companies and/or government facilities. As of April 5, 2002, there are 
seven rules for which EPA expects to develop a guide or checklist in 
calendar year 2002.
    Further, Agency guidance requires program offices responsible for 
``Tier 1 and Tier 2'' regulatory actions (i.e., those that require 
participation of the Administrator's office and those that need cross-
media or Assistant Administrator-level involvement) to develop an 
``analytic blueprint'' as an initial step in the regulatory development 
process. An analytic blueprint is a plan for development of the rule. 
It identifies the significant issues in the rule and discusses the 
methodologies that will be used to resolve them. This includes the 
economic, scientific, technical and intergovernmental information that 
will be developed; the analyses that are required by law and Executive 
Order; and, the significant policy issues, including implementation 
issues, that need to be addressed.
    An Agency-wide Task Force on the EPA Regulatory Development Process 
has reaffirmed the importance of preparing an analytic blueprint. EPA 
is updating its internal guidance on the preparation of an analytic 
blueprint, a process which is scheduled to be completed this year. The 
revised guidance will address implementation issues such as whether the 
proposed rule will likely require the preparation of a compliance guide 
or whether other types of compliance assistance tools should be 
developed.
    The analytic blueprint is prepared by the lead Program Office for 
the rule. As a result of the Task Force recommendations, EPA's Office 
of Enforcement and Compliance Assurance (OECA) now has the opportunity 
to review blueprints for, among other things, the analysis of 
compliance assistance opportunities.
compliance assistance: resources for implementation and performance and 
                              assessments
    Question. In fiscal year 2003, how will EPA ensure that each 
rulemaking working group performs an assessment of the compliance 
assistance needs associated with the various regulatory options, 
including an assessment of the resources needed for implementation?
    Answer. EPA examines the need for compliance assistance through 
several different mechanisms throughout the rule development process. 
The Small Business Regulatory Enforcement Fairness Act (SBREFA) 
requires EPA to develop compliance guides for Federal regulations that 
have a ``significant economic impact on a substantial number of small 
entities.'' The Agency also has decided to prepare either a compliance 
guide or a self-audit checklist for Federal regulations with an 
``economically significant'' impact of $100M or more on companies and/
or government facilities. The Agency's ``1999 Revised Interim Guidance 
for EPA Rulewriters: Regulatory Flexibility Act as Amended by the Small 
Business Regulatory Enforcement Fairness Act,'' directs regulatory 
workgroups to begin developing compliance assistance guides as early in 
the process as there is enough information to do so, with a goal to 
publish the guides within 2 months of promulgation of the rules. This 
helps ensure timely consideration of resources necessary to implement 
the guide. The guidance further states that ``[i]t remains EPA policy 
that program offices should assess the direct impact of every rule on 
small entities and minimize any adverse impact to the extent feasible, 
regardless of the magnitude of the impact or number of small entities 
affected.''
    In addition, the recent Agency-wide Task Force report on the EPA 
Regulatory Development Process mandates that EPA improve consideration 
of implementation issues, including the provision of compliance guides, 
throughout the regulatory development process. This report reaffirms 
the importance of preparing an analytic blueprint for ``Tier 1 and Tier 
2'' regulatory actions (i.e., those that require participation of the 
Administrator's office and those that need cross-media or Assistant 
Administrator-level involvement). An analytic blueprint is a plan for 
development of the rule. It identifies the significant issues in the 
rule and discusses the methodologies that will be used to resolve them. 
This includes the economic, scientific, technical and intergovernmental 
information that will be developed; the analyses that are required by 
law and Executive Order; and, the significant policy issues, including 
implementation issues, that need to be addressed. Revised Agency 
guidance on the analytic blueprint is scheduled for completion this 
year. The revised guidance will address implementation issues such as 
whether the proposed rule will likely require the preparation of a 
compliance guide or whether other types of compliance assistance tools 
should be developed and the resources necessary to provide that 
assistance.
       compliance assistance: targeting compliance assistance to 
                   constituencies in fiscal year 2003
    Question. In fiscal year 2003, how will EPA better target 
compliance assistance to constituencies which have not traditionally 
participated in compliance assistance activities?
    Answer. EPA is taking numerous steps to draw more diverse 
constituents into compliance assistance activities. In particular, EPA 
is soliciting more input from our stakeholders. The Office of 
Enforcement and Compliance Assurance (OECA) sponsors the Compliance 
Assistance Advisory Committee (CAAC), a multi-stakeholder working group 
of the National Advisory Council for Environmental Policy and 
Technology to provide input and guidance into the national compliance 
assistance program. OECA also broadly solicits input into its 
compliance assurance priorities by holding stakeholder meetings and 
issuing a Federal Register Notice prior to its selection of priorities. 
EPA also seeks out new constituents through the annual Compliance 
Assistance Providers Forum which brings together an array of compliance 
and environmental assistance providers and industry to collaborate and 
identify compliance assistance priorities.
   compliance assistance: dollars and fte for compliance assistance 
                 activities within and outside of oeca
    Question. Provide the dollars and FTE for compliance assistance 
activities, within and outside OECA. In meeting this request, provide 
resource levels from the fiscal year 2002 enacted, fiscal year 2002 
actuals, and fiscal year 2003 request. Organize the information by 
Appropriation, Office or Region, and Activity.
    Answer. Provided below are resource and FTE for Agency-wide 
compliance assistance activities from the enacted fiscal year 2002 
operating plan and the fiscal year 2003 President's request by 
Appropriation and Office. The Agency does not track key programs, 
including Compliance Assistance, by Activity or by actual obligations.

----------------------------------------------------------------------------------------------------------------
                                                                                   Fiscal year
                     Appropriation/Office                      -------------------------------------------------
                                                                  2002 Enacted Op Plan   2003 President's Budget
----------------------------------------------------------------------------------------------------------------
EPM...........................................................      $60,376.3/465.9 FTE      $60,579.2/455.1 FTE
    Office of Air and Radiation...............................          1,003.4/5.2 FTE          1,005.6/5.2 FTE
    Office of Water...........................................       23,940.7/161.2 FTE       24,684.8/162.3 FTE
    Office and Pesticides & Toxic Sub.........................          1,257.2/0.0 FTE          1,257.0/0.0 FTE
    Office of Solid Waste/Emerg. Resp.........................         7,168.3/75.0 FTE         7,168.3/75.0 FTE
    Office of Enforcement & Compliance Assistance.............       25,706.7/206.1 FTE       25,103.5/194.2 FTE
    Office of the Administrator...............................         1,300.0/18.4 FTE         1,300.0/18.4 FTE
S & T.........................................................        $5,340.6/54.0 FTE        $6,315.0/54.0 FTE
    Office of Air and Radiation...............................         5,340.6/54.0 FTE         6,315.0/54.0 FTE
STAG..........................................................         $2,459.3/0.0 FTE         $2,459.3/0.0 FTE
    Office and Pesticides & Toxic Sub.........................            250.0/0.0 FTE            250.0/0.0 FTE
    Office of Enforcement and Compliance Assurance............          2,209.3/0.0 FTE          2,209.3/0.0 FTE
LUST..........................................................           $670.0/5.5 FTE           $689.8/5.5 FTE
    Office of Enforcement and Compliance Assurance............            670.0/5.5 FTE            689.8/5.5 FTE
OIL...........................................................           $264.8/1.8 FTE           $271.4/1.8 FTE
    Office of Enforcement and Compliance Assurance............            264.8/1.8 FTE            271.4/1.8 FTE
                                                               -------------------------------------------------
      TOTAL...................................................       69,111.0/527.2 FTE       70,314.7/516.4 FTE
----------------------------------------------------------------------------------------------------------------

 compliance assistance: cuts proposed by fiscal year 2003--president's 
        budget for compliance assistance and centers key program
    Question. Provide a detailed explanation of the cuts proposed in 
the fiscal year 2003 President's Budget for the Compliance Assistance 
and Centers key program.
    Answer. In fiscal year 2003, EPA is requesting a total of 
$26,067,900 and 201.5 workyears for the Compliance Assistance and 
Centers key program. This represents a total reduction of 11.9 
workyears and $602,300 from fiscal year 2002. This reduction is part of 
the Agency's efforts to redirect resources from Federal to State 
enforcement and compliance programs. The Office of Enforcement and 
Compliance Assurance (OECA) will reduce development of guidance and 
policies, and assistance tools by about 3 FTE. The remaining 9 FTE 
reduces general assistance provided to the regulated community. We 
expect that the states will use their increased funding to increase the 
assistance provided to the regulated community on the environmental 
programs delegated to their states.
 enforcement: fte ceiling and on-board levels as of october 1, january 
                    1, march 1, and july 1 for oeca
    Question. Provide the FTE ceiling and on-board levels as of October 
1, January 1, March 1, and July 1 in each of the last 3 years for OECA, 
the Office of Regulatory Enforcement, the Office of Compliance, and the 
Office of Criminal Enforcement, Forensics, and Training.
    Answer. The following tables provide the FTE and on-board levels 
for the Office of Enforcement and Compliance Assurance (OECA), Office 
of Regulatory Enforcement, Office of Compliance, and the Office of 
Criminal Enforcement, Forensics, and Training. The workyear ceiling is 
allocated at the beginning of the fiscal year and did not change during 
the year. The on-board levels reflect the total number of full and part 
time employees at the beginning of the pay period close to the dates 
listed below. It is important to note that the Office of Regulatory 
Enforcement, Office of Compliance, and the Office of Criminal 
Enforcement, Forensics, and Training include headquarters FTE only. 
Regional and headquarters FTE are included in the OECA chart.

                              OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE (OECA)
----------------------------------------------------------------------------------------------------------------
                                                                        On-Board Employees
           Fiscal year                  FTE      ---------------------------------------------------------------
                                                       Oct 1           Jan 1          March 1         July 1
----------------------------------------------------------------------------------------------------------------
1999............................         3,645.6           3,060           3,380           3,368           3,463
2000............................         3,565.0           3,505           3,449           3,459           3,463
2001............................         3,536.8           3,404           3,411           3,401           3,420
2002............................     \1\ 3,456.8           3,383           3,304           3,303           3,335
                                                                                                        (May 17)
2003............................        3,311.3
----------------------------------------------------------------------------------------------------------------
\1\ Fiscal year 2002 includes 50.0 FTE from the emergency supplemental for Homeland Security.


                                     OFFICE OF REGULATORY ENFORCEMENT (ORE)
----------------------------------------------------------------------------------------------------------------
                                                                        On-Board Employees
           Fiscal year                  FTE      ---------------------------------------------------------------
                                                       Oct 1           Jan 1          March 1         July 1
----------------------------------------------------------------------------------------------------------------
1999............................           148.1             150             151             151             148
2000............................           138.9             147             146             145             142
2001............................           143.5             141             140             143             145
2002............................           136.8             144             144             144             145
                                                                                                        (May 17)
2003............................           127.8
----------------------------------------------------------------------------------------------------------------


                                            OFFICE OF COMPLIANCE (OC)
----------------------------------------------------------------------------------------------------------------
                                                                        On-Board Employees
           Fiscal year                  FTE      ---------------------------------------------------------------
                                                       Oct 1           Jan 1          March 1         July 1
----------------------------------------------------------------------------------------------------------------
1999............................           168.0             169             167             170             173
2000............................           158.7             171             170             166             158
2001............................           155.9             158             151             148             144
2002............................           145.5             145             145             146             148
                                                                                                        (May 17)
2003............................           135.5
----------------------------------------------------------------------------------------------------------------


                         OFFICE OF CRIMINAL ENFORCEMENT, FORENSICS, AND TRAINING (OCEFT)
----------------------------------------------------------------------------------------------------------------
                                                                        On-Board Employees
           Fiscal year                  FTE      ---------------------------------------------------------------
                                                       Oct 1           Jan 1          March 1         July 1
----------------------------------------------------------------------------------------------------------------
1999............................           394.4             404             401             399             399
2000............................           386.1             390             384             379             370
2001............................           385.8             364             360             361             360
2002............................       \1\ 454.3             361             363             367             397
                                                                                                        (May 17)
2003............................          399.8
----------------------------------------------------------------------------------------------------------------
\1\ Includes 50.0 FTE from emergency supplemental for Homeland Security.

 enforcement: federal inspections to areas that pose greatest risk to 
          human health or the environment in fiscal year 2003
    Question. In fiscal year 2003, how will EPA target Federal 
inspections to the areas that pose the greatest risk to human health or 
the environment? Discuss the technical tools as well as management 
attention necessary to ensure inspections focus on the greatest risks 
to human health or the environment.
    Answer. EPA targets Federal inspections for three elements of the 
national enforcement and compliance assurance program: national 
priorities, core program areas, and special initiatives.
    National priorities are selected as a result of reviewing Agency 
compliance data systems, feedback from field inspectors, discussions 
with EPA program offices and State environmental agencies, and comments 
from external stakeholders. Through this process EPA selects the most 
important environmental risks and noncompliance patterns. In developing 
strategies for each of these priorities EPA determines the need for 
inspections and investigations that will help reduce risks and improve 
compliance. The priorities for fiscal year 2003 are:
  --Clean Water Act--Wet Weather
  --Safe Drinking Water ActMicrobial Rules
  --Clean Air Act--New Source Review/Prevention of Significant
  --Deterioration
  --Clean Air Act--Air Toxics
  --Resource Conservation and Recovery Act (RCRA)--Permit Evaders
  --Petroleum Refining
    Core program areas under the 14 Federal laws for which EPA has 
enforcement authority also receive inspection coverage as part of EPA's 
national enforcement and compliance assurance program. For example, EPA 
conducts inspections under the Clean Air Act and Clean Water Act to 
ensure an appropriate level of compliance monitoring for basic 
provisions of these laws.
    Inspections are also conducted as part of special initiatives that 
EPA develops to address specific risks or noncompliance patterns 
associated with economic sectors, geographic areas, pollutants, or 
particular regulatory requirements. These initiatives are sometimes 
developed using tools such as the On-line Targeting System (OTIS), a 
multi-media database that contains information on approximately one 
million facilities nationwide. This internal database contains 
information such as basic facility and permit data, Federal and State 
enforcement and compliance data (inspections, enforcement actions, 
significant violations), environmental justice data, and pollutant 
release information. The data base can be accessed by EPA and State 
employees, and it helps inspectors identify facilities that 
consistently pose a threat to human health and the environment by 
allowing them to review patterns of noncompliance and pollutant 
emissions by industry sector and geographic location.
   enforcement: civil enforcement activities to areas that pose the 
  greatest risk to human health or the environment in fiscal year 2003
    Question. In fiscal year 2003, how will EPA target its civil 
enforcement activities to areas that pose the greatest risk to human 
health or the environment? Discuss specifically the role of OECA 
management in ensuring that OECA civil enforcement efforts remain 
focused on the greatest risks to human health or the environment.
    Answer. For fiscal year 2002/2003, OECA management collaborated 
with the Headquarters' Program Offices, Regional offices, and State and 
Tribal agencies in developing national priorities, as delineated in the 
Office of Enforcement and Compliance Assurance's Memorandum of 
Agreement (MOA) 2002/2003 guidance. National priorities are selected 
for a two year cycle. In selecting the national priorities for fiscal 
year 2002/2003, stakeholders were asked to consider three criteria in 
their decision making. These three criteria were: (1) risk reduction--
program areas or sectors where significant reductions in risks to human 
health or the environment may be made through concerted Federal 
attention; (2) noncompliance--consistent patterns of noncompliance in 
particular programs or sectors where concentrated Federal effort will 
result in improvement; and, (3) EPA responsibility--identified problem 
areas or programs that can better be addressed by EPA nationally due to 
a lack of delegation or State capacity/performance issues.
    The six priorities that the Agency selected for the fiscal year 
2002/2003 MOA cycle are:
  --Clean Water Act--Wet Weather
  --Safe Drinking Water Act--Microbial Rules
  --Clean Air Act--New Source Review/Prevention of Significant
  --Deterioration
  --Clean Air Act--Air Toxics
  --Resource Conservation and Recovery Act (RCRA)--Permit Evaders
  --Petroleum Refining
    In addition, much of the Agency's core enforcement and compliance 
program focuses resources, through long standing enforcement response 
policies and program guidance, on those violations that present the 
greatest risk to the environment and human health. As directed by the 
OECA MOA guidance, each Region develops and submits their MOA work plan 
each Fall to OECA. OECA management and staff review the activities in 
each of the Regional work plans to ensure that Regional work supports 
the national priorities, thereby ensuring that the work of the Regions 
is focused on the greatest risks to human health or the environment. 
Division Directors in OECA must concur on each Region's final MOA 
workplan.
enforcement: epa's inherent conflict between desire to meet inspection 
            and case output performance goals and strategies
    Question. Given that in certain circumstances or sectors regulatory 
or non-enforcement initiatives or incentives may produce greater 
benefits to the environment or reductions in pollution than traditional 
enforcement actions, how will OECA avoid the inherent conflict between 
its desire to meet inspection and case output performance goals and 
strategies which may prove more beneficial to the environment?
    Answer. EPA takes a problem-solving approach to identifying 
environmental problems and devising the best strategies to deal with 
them, focusing on the most effective and efficient ways to use our 
resources to achieve the best possible environmental results. EPA uses 
an integrated approach to strategically mix our available tools 
incentives, compliance assistance, inspections, investigations, 
settlements in a manner targeted and tailored to particular problems 
and situations, to produce the most benefit to the public and the 
environment.
    One example of a recent successful integrated approach is the 
Federal Lead Paint Program, in which EPA identified the significant 
environmental and public health problem of childhood lead poisoning (48 
million homes contain lead-based paint and nearly 890,000 children have 
elevated lead levels) and partnered with states and HUD to implement a 
solution in cities across the nation. The strategy uses a mix of tools 
including dedicated compliance assistance, audit incentives, and 
focused enforcement to combat the problem.
    Specifically, EPA has partnered with State and local agencies to 
deliver compliance assistance by providing members of the real estate 
community with compliance assistance packages, sample disclosure forms 
and information on how to achieve compliance. We have conducted 
seminars for local State and real estate associations and provided 
mailings and TV/radio public service announcements. EPA and HUD have 
taken advantage of the existing framework of EPA's Audit Policy, which 
allows the disclosure and correction of violations at a substantially 
reduced penalty, to reach out to landlords in 11 cities across the 
nation and return them to compliance. EPA, HUD and the Department of 
Justice have focused their enforcement actions in four major cities Los 
Angeles, Chicago, New York, and the District of Columbia on large 
management companies responsible for buildings which were covered by 
the disclosure rule and had multiple incidents of children with 
elevated blood levels.
    EPA sets annual performance goals for inspections, but not for 
cases. By setting an annual goal for inspections EPA ensures a presence 
in the regulated universe, and identifies violations that need to be 
corrected. There are no performance goals set for cases, as this would 
establish a quota that might lead to less serious cases taken for the 
sake of meeting an annual target.
   enforcement: process used to choose and employ the most effective 
                            regulatory tool
    Question. In fiscal year 2003, what process will EPA management use 
to choose and employ the most effective regulatory tool in a given 
sector or circumstance--albeit traditional enforcement by OECA, or 
other approach by OECA or another EPA office including regulatory 
flexibility, compliance assistance or incentive--to produce the 
greatest benefit to health of the environment?
    Answer. The Office of Enforcement and Compliance Assurance (OECA) 
uses a problem-solving approach to identify and address environmental 
risks and noncompliance patterns, and to devise the best ways to deal 
with them. OECA strategically combines our available tools compliance 
assistance, inspections and investigations, enforcement and innovative 
settlements using Supplemental Environmental Projects, and incentives 
provided by the Agency's self disclosure policies to achieve the 
desired environmental results. OECA works with other EPA Program and 
Regional offices, states, the regulated community and public interest 
groups, as appropriate, to identify and analyze the cause of compliance 
problems and develop strategies integrating use of all appropriate 
compliance and enforcement tools to address problems.
    OECA currently has four efforts underway to improve and refine 
identification of environmental problems and development of strategies 
to address them. First, a pilot project is underway that has 
established a problem identification and analysis team to review data 
bases and other information sources for noncompliance patterns. Second, 
an analysis of industry sectors is being conducted to determine whether 
there are particular sectors with new or emerging compliance problems. 
Third, a mechanism for gathering feedback more systematically from 
field inspectors is being developed to ensure that their experience 
informs the selection of national priorities and initiatives. Fourth, a 
work group of senior managers is currently reviewing ways to improve 
the development and implementation of strategies that integrate 
assistance, inspections, incentives, and enforcement.
 enforcement: appropriate balance, roles, and responsibilities between 
                 state and federal enforcement agencies
    Question. What is the appropriate balance, roles and 
responsibilities between State and Federal enforcement agencies?
    Answer. Enforcement of environmental programs is done in 
cooperation with states and Indian tribes. States have the primary 
authority for implementing and enforcing most environmental programs 
through authorization or delegated authority from the EPA. The EPA's 
Federal role is to implement and enforce programs that cannot be 
delegated to States and Indian tribes, to handle more complex cases 
involving multiple states or corporations with multiple facilities, to 
deal with issues that require expertise or resources which only EPA can 
provide, and to enforce when states are unable or unwilling to do so.
  enforcement: impact of reduction of enforcement ftes and additional 
           state enforcement resources on enforcement output
    Question. How will the proposed reduction of enforcement FTE and 
additional State enforcement resources impact enforcement outputs--
Federal, State and total?
    Answer. We expect performance results in the national Enforcement 
and Compliance Assurance program to remain the same, with states 
picking up an additional increment of that work. EPA and the states 
have different, but complementary roles when it comes to enforcement of 
our Nation's environmental laws. States have primary responsibility for 
implementing and enforcing most environmental programs through 
delegated authority from the EPA. The EPA's Federal role is to 
implement and enforce programs that cannot be delegated to states, to 
handle more complex cases involving multiple states or corporations 
with multiple facilities, to deal with issues that require expertise or 
resources that only EPA can provide, and to enforce when states are 
unable or unwilling to. Given the interplay between the State and 
Federal programs, we believe the State and tribal enforcement grant 
program will enhance both State and EPA efforts to increase compliance 
with environmental laws.
    States will be approved for grant funding only if their grant 
proposal includes specific plans to measure and report on their 
performance in achieving results. For example, for environmental risks 
or noncompliance patterns they are addressing with the grant funds, 
states will need to define performance measures for determining whether 
they are having an impact (e.g., pollution reductions, improved 
environmental practices at facilities or within an industry, increased 
compliance rates). EPA will establish required reporting intervals for 
states to provide performance information which can be reviewed on a 
regular basis by EPA.
  enforcement: impact of reduction of enforcement ftes and additional 
    state enforcement resources on national environmental indicators
    Question. How will the proposed reduction of Federal enforcement 
FTE and additional State enforcement resources impact national 
environmental indicators, such as clean air and clean water?
    Answer. National environmental indicators such as clean air and 
clean water are affected by a number of factors such as land usage, 
stress from population, economic and financial considerations, 
compliance rates, and the severity of violations. We expect that the 
proposed resource shift will result in a national level of enforcement 
activity that is equal to or greater than baseline levels.
     enforcement: geographic areas subject to decrease in federal 
    enforcement fte realize increase in state enforcement resources
    Question. How will EPA ensure that geographic areas subject to a 
decrease in Federal enforcement FTE personnel realize an increase in 
State enforcement resources?
    Answer. The President's fiscal year 2003 budget proposes a 
reduction of 100 workyears from EPA's enforcement and compliance 
assurance program to help fund the proposed State and tribal 
enforcement grant program. states will use the grant funds to address 
important environmental risks and noncompliance patterns. In addition, 
the fiscal year 2003 budget provides EPA's enforcement and compliance 
assurance program sufficient resources to carry out the appropriate 
Federal role, focusing on more complex cases involving multi-state or 
multi-facility corporations, dealing with issues that require expertise 
or resources that only EPA can provide, ensuring compliance with 
environmental programs that cannot be delegated to states due to 
statutory prohibition, and to enforce when states are unable or 
unwilling to do so.
   enforcement: acceptance of multiple proposals from states for new 
                           enforcement grants
    Question. Will EPA accept multiple proposals from states for the 
$15 million in new enforcement grants and thereby reward states which 
have the resources to submit numerous high quality proposals?
    Answer. Based on feedback from states and tribes EPA will likely 
require a lead agency within a State or tribe to submit a single, 
consolidated proposal. Agencies other than the lead agency will remain 
eligible to receive grants funds if they are included in the proposal.
 enforcement: new enforcement grant program grants award to states and/
                             or used by epa
    Question. Will states receive the entire $15 million from the new 
enforcement grant program or will EPA use some of that money?
    Answer. EPA will distribute the entire $15 million to states, 
tribes, and other eligible entities.
  enforcement: information obtained from states measuring outputs or 
             outcomes from usage of new enforcement grants
    Question. How will EPA obtain information from states measuring 
their outputs and outcomes from usage of the new $15 million?
    Answer. States will be approved for grant funding only if their 
grant proposal includes specific plans to measure and report on their 
performance in achieving results. For example, states will need to 
define performance measures for determining whether they are having an 
impact on the environmental risk or noncompliance pattern they are 
addressing with the grant funds. EPA will establish required reporting 
intervals for states to provide performance information that can be 
reviewed by EPA on a regular basis.
enforcement: determining impact on environment by enforcement fte cuts 
                      from information from states
    Question. Will the information EPA obtains from states on their use 
of the $15 million be sufficient for EPA to determine whether the 
environment was hurt by the enforcement FTE cuts?
    Answer. Information gathered from states and tribes on their use of 
grant funds will allow the Agency determine the impact they are having 
on the environmental problems they chose to address. In addition, EPA 
will continue oversight of State enforcement programs, reviewing not 
just what is being achieved with grant funds, but the overall 
performance of the enforcement program of each State.
    EPA will continue to collect and analyze performance information 
about its own programmatic outputs and outcomes to ensure we are 
focusing on important problems, and achieving the right results and 
outcomes. By monitoring the use of the grant funds, providing oversight 
of State programs, and analyzing the performance of the Federal 
enforcement effort, EPA believes it can provide a credible deterrent to 
pollution while maximizing compliance.
enforcement: verification and validation of actual accomplishments from 
                         enforcement activities
    Question. In fiscal year 2003, how will EPA verify and validate 
that actual accomplishments resulted from EPA activities?
    Answer. EPA's attorneys and technical staff analyze completed 
enforcement actions and report an estimated, predicted outcome in terms 
of reduced emissions, preventive management of potential pollutants, 
treatment of contaminated materials, and industrial modifications. 
These estimates are produced using technical guidance EPA revised and 
issued in fiscal year 2001. The guidance was developed in consultation 
with engineers, environmental management practitioners, and experienced 
environmental attorneys and administrators. EPA is currently completing 
detailed training on this guidance in all of its regional offices and 
in headquarters, for hundreds of EPA staff. As a result of the guidance 
and training, EPA expects that there will be an improvement in the 
quality of the estimates, and an increase in the number of concluded 
enforcement actions that report such estimates.
    The Agency can and does, in conjunction with the Department of 
Justice and under the supervision of the Courts, confirm that the terms 
of court imposed settlement agreements are adhered to by Defendants. 
Additionally, in a memorandum dated February 8, 2001, EPA's Office of 
Regulatory Enforcement and Office of Site Remediation and Enforcement, 
in response to recommendations from the EPA's Inspector General, 
reemphasized to regional offices that progress towards meeting the 
terms of compliance in Federal judicial settlements must be monitored, 
documented and tracked in a data system from which reports can be 
issued quarterly. This will help ensure that EPA will monitor, and take 
further action if necessary, to ensure required steps are taken to 
achieve the environmental progress required for compliance in orders 
and settlements.
   grants: number of non-profit recipients of non-construction grant 
                       awards in last three years
    Question. How many different non-profit recipients received non-
construction grant awards in each of the last 3 years?
    Answer. EPA awarded grants to 846 different non-profit recipients 
in fiscal year 1999, 759 in fiscal year 2000, and 772 in fiscal year 
2001.
  grants: dollars of non-profit recipients of non-construction grant 
                       awards in last three years
    Question. How many dollars did the Agency award to non-profit 
recipients in non-construction grants in each of the last 3 years?
    Answer. EPA awarded $249,983,517 to non-profit recipients in fiscal 
year 1999, $264,898,545 in fiscal year 2000, and $349,978,246 in fiscal 
year 2001.
 grants: top twenty non-profit grant recipients by number of awards in 
                            fiscal year 2002
    Question. List the top twenty non-profit EPA grant recipients by 
number of awards in fiscal year 2002. Provide also the number of awards 
and total dollar amount awarded.
    Answer.

    FISCAL YEAR 2001--TOP 20 NON-PROFIT GRANTEES BY NUMBER OF AWARDS
------------------------------------------------------------------------
                                             Number of
                                              awards          Amount
------------------------------------------------------------------------
NATIONAL OLDER WORKER CAREER CENTER,                  75     $20,805,037
 WASHINGTON, DC.........................
NATIONAL CAUCUS & CENTER ON BLACK AGED,               74      10,285,948
 WASHINGTON, DC.........................
NATIONAL SENIOR CITIZENS ED & RSCH CTR,               61      11,544,270
 SILVER SPRING, MD......................
NATL ASIAN PACIFIC CENTER FOR AGING,                  48       6,330,332
 SEATTLE, WA............................
NATIONAL ACADEMY OF SCIENCE, WASHINGTON,              36       6,816,253
 DC.....................................
THE ENVIRONMENTAL CAREERS ORGANIZATION,               30       5,833,801
 BOSTON, MA.............................
NATIONAL COUNCIL ON AGING, WASHINGTON,                28       4,415,772
 DC.....................................
NATIONAL ASSOCIATION FOR HISPANIC ELDE,               24       5,700,429
 PASADENA, CA...........................
INTERNATIONAL CITY/COUNTY MGMT. ASSOC.,               16       2,716,184
 WASHINGTON, DC.........................
NORTHEAST STATES FOR COORDINATED AIR U,               10       3,313,275
 BOSTON, MA.............................
NATL CONFERENCE OF STATE LEGISLATURES,                 9         749,532
 DENVER, CO.............................
ENVIRONMENTAL LAW INSTITUTE, WASHINGTON,               8         689,272
 DC.....................................
CENTER FOR CLEAN AIR POLICY, WASHINGTON,               8       1,055,224
 DC.....................................
NATIONAL ASSOCIATION OF COUNTIES,                      8         870,300
 WASHINGTON, DC.........................
INTER TRIBAL COUNCIL OF ARIZONA INC.,                  8       1,352,277
 PHOENIX, AZ............................
ENVIRONMENTAL COUNCIL OF THE STATES,                   7         805,488
 WASHINGTON, DC.........................
NATIONAL CENTER FOR MANUFACTURING SCIE,                7       1,319,615
 ANN ARBOR, MI..........................
WV UNIVERSITY RESEARCH CORPORATION,                    7       5,515,808
 MORGANTOWN, WV.........................
RESEARCH TRIANGLE INSTITUTE RESEARCH,                  7       2,354,288
 TRIANGLE, NC...........................
WESTERN GOVERNORS' ASSOCIATION, DENVER,                7       3,200,806
 CO.....................................
------------------------------------------------------------------------
This data is for fiscal year 2001. Fiscal year 2002 data can be provided
  at end of fiscal year.

grants: top twenty non-profit grant recipients by total amount of funds 
                      awarded in fiscal year 2002
    Question. List the top twenty non-profit EPA grant recipients by 
total amount of funds awarded in fiscal year 2002. Provide also the 
number of awards and total dollar amount awarded.
    Answer:

     FISCAL YEAR 2001--TOP 20 NON-PROFIT GRANTEES BY DOLLARS AWARDED
------------------------------------------------------------------------
                                             Number of
                                              awards          Amount
------------------------------------------------------------------------
NORTH AMERICAN DEVELOPMENT BANK, SAN                   1     $84,000,000
 ANTONIO, TX............................
NATIONAL OLDER WORKER CAREER CENTER,                  75      20,805,037
 WASHINGTON, DC.........................
NATIONAL SENIOR CITIZENS ED & RSCH CTR,               61      11,544,270
 SILVER SPRING, MD......................
NATIONAL RURAL WATER ASSOCIATION,                      5      10,631,100
 DUNCAN, OK.............................
NATIONAL CAUCUS & CENTER ON BLACK AGED,               74      10,285,948
 WASHINGTON, DC.........................
BORDER ENVIRONMENTAL COOPERATION COMM.,                5       8,192,000
 EL PASO, TX............................
HEALTH EFFECTS INSTITUTE, CAMBRIDGE, MA.               2       7,500,000
NATIONAL ACADEMY OF SCIENCE, WASHINGTON,              36       6,816,253
 DC.....................................
NATL ASIAN PACIFIC CENTER FOR AGING,                  48       6,330,332
 SEATTLE, WA............................
THE ENVIRONMENTAL CAREERS ORGANIZATION,               30       5,833,801
 BOSTON, MA.............................
NATIONAL ASSOCIATION FOR HISPANIC ELDE,               24       5,700,429
 PASADENA, CA...........................
WV UNIVERSITY RESEARCH CORPORATION,                    7       5,515,808
 MORGANTOWN, WV.........................
AMERICA'S CLEAN WATER FOUNDATION,                      3       5,080,000
 WASHINGTON, DC.........................
GAS TECHNOLOGY INSTITUTE, DES PLAINES,                 1       4,989,000
 IL.....................................
THREE RIVERS WET WEATHER INC.,                         1       4,845,000
 PITTSBURGH, PA.........................
NATIONAL COUNCIL ON AGING, WASHINGTON,                28       4,415,772
 DC.....................................
CANAAN VALLEY INSTITUTE, DAVIS, WV......               4       4,194,800
WATER ENVIRONMENT RESEARCH FOUNDATION,                 2       3,966,400
 ALEXANDRIA, VA.........................
NORTHEAST STATES FOR COORDINATED AIR U,               10       3,313,275
 BOSTON, MA.............................
WESTERN GOVERNORS' ASSOCIATION, DENVER,                7      3,200,806
 CO.....................................
------------------------------------------------------------------------
This data is for fiscal year 2001. Fiscal year 2002 data can be provided
  at end of fiscal year.

      grants: number of bench reviews conducted of non-profit non-
  construction grantees from fiscal year 2000 to fiscal year 2002--by 
                                 region
    Question. How many bench reviews did EPA conduct of non-profit non-
construction grantees in fiscal year 2000, fiscal year 2001 and fiscal 
year 2002? List by Region.
    Answer.


----------------------------------------------------------------------------------------------------------------
                                                                        Bench Reviews Fiscal Year
                                                        --------------------------------------------------------
           Regional Grants Management Office                                                    2002 as of 5/25/
                                                                2000               2001               2002
----------------------------------------------------------------------------------------------------------------
I......................................................                  0                  0                  0
II.....................................................                  0                  2                  1
III....................................................                  3                  0                  0
IV.....................................................                  0                 22                 18
V......................................................                  0                  0                  0
VI.....................................................                  2                  4                  4
VII....................................................                  0                  0                  1
VIII...................................................                  0                  2                 10
IX.....................................................                  0                  0                  0
X......................................................                  0                  0                  1
HQ.....................................................                 15                 21                 10
                                                        --------------------------------------------------------
      Total............................................                 20                 51                 45
----------------------------------------------------------------------------------------------------------------

     grants: number of on-site reviews conducted of non-profit non-
construction grantees in fiscal year 2000 to fiscal year 2002 by region
    Question. How many on-site reviews did EPA conduct of non-profit 
non-construction grantees in fiscal year 2000, fiscal year 2001 and 
fiscal year 2002? List by Region.
    Answer.

----------------------------------------------------------------------------------------------------------------
                                                                       On Site Reviewz Fiscal Year
                                                        --------------------------------------------------------
           Regional Grants Management Offices                                                   2002 as of 5/25/
                                                                2000               2001          2002 (to date)
----------------------------------------------------------------------------------------------------------------
I......................................................                  2                  1                  0
II.....................................................                  3                  3                  4
III....................................................                  1                  2                  2
IV.....................................................                  0                  0                  0
V......................................................                  2                  2                  1
VI.....................................................                  0                  0                  0
VII....................................................                  0                  1                  1
VIII...................................................                  0                  2                  0
IX.....................................................                  5                  3                  1
X......................................................                  0                  0                  2
HQ.....................................................                 13                 22                 23
                                                        --------------------------------------------------------
      Total............................................                 26                 36                 34
----------------------------------------------------------------------------------------------------------------

   grants: number of ftes and on-board personnel conducting on-site 
      reviews of grantees in fiscal year 2002 and fiscal year 2003
    Question. How many FTEs and on-board personnel are and will be 
devoted to conducting on-site reviews of grantees in fiscal year 2002 
and fiscal year 2003?
    Answer. To date, Headquarters and Regional Grants Management 
Offices devoted approximately 4 FTEs to conducting on-site reviews in 
fiscal year 2002. In addition, EPA awarded three contracts to perform 
eleven evaluative on-site reviews of non-profit grantees.
    In fiscal year 2003, EPA plans to devote a minimum of 4 FTEs to 
conducting on-site reviews and continue to procure additional 
contractor support to perform reviews of non-profit grantees.
   grants: number of hours of paperwork burden imposed on businesses
    Question. How many hours of paperwork burden did EPA impose on 
businesses in the last reporting year and each of the previous 3 years?
    Answer. Total EPA burden hours (including both business and State 
burden) at the end of each of the last four fiscal years are listed 
below:

                              [In millions]

        Fiscal year                                         Burden hours
2001..............................................................   131
2000..............................................................   129
1999..............................................................   119
1998..............................................................   115
   grants: number of hours of paperwork burden imposed on businesses
    Question. In fiscal year 2003, how will EPA reduce the paperwork 
burden it imposes on businesses?
    Answer. Many EPA programs are taking the initiative to reduce 
reporting and record-keeping burden. Although EPA does not have 
quantified burden reductions estimates for these initiatives, these 
efforts include:
    Resource Conservation and Recovery Act (RCRA) Burden Reduction 
Initiative (Office of Solid Waste and Emergency Response), a broad-
based initiative aimed at streamlining paperwork and regulations 
associated with RCRA .
    Reg-in-a-Box Expert Advisors (Office of Prevention, Pesticides, and 
Toxic Substances), an expert software system which can aid the public 
in understanding if and how regulations affect them.
    Toxic Release Inventory (TRI) Made Easy (Office of Environmental 
Information), an expert software system that assists facilities in 
reporting their TRI data.
    Central Data Exchange (CDX) (Office of Environmental Information), 
a single Agency portal enabling the submission of data via the Internet 
and aimed at improving the collection, management, and sharing of 
environmental information among the states, Tribes, and EPA.
    Performance Track (Office of Policy, Economics, and Innovation), an 
initiative designed to motivate and reward top environmental performers 
that take a systematic approach to managing environmental 
responsibilities and are leading the way to environmental excellence 
while saving money and improving productivity.
  grants: oei work with program offices to tailor new rules to impose 
                         less paperwork burden
    Question. In fiscal year 2003, how is the Office of Environmental 
Information working with program offices to tailor new rules to impose 
less paperwork burden?
    Answer. The Office of Environmental Information (OEI) is working on 
the following initiatives which are aimed at helping program offices 
decrease the amount of paperwork burden imposed on the public.
Guidelines on Minimizing Burden and Ensuring Sound Burden Estimates
    OEI is working on several guidelines to assist program offices in 
developing information collections which minimize the burden imposed on 
regulated entities. These guidelines highlight examples of successful 
streamlining efforts in program offices and offers numerous suggestions 
for areas where burden may potentially be decreased. The guidelines 
currently under development are:
  --Guidelines on Streamlining Existing Collections
  --Guidelines on Streamlining New Collections
  --Guidelines for Estimating the Burden Impacts of Electronic 
        Reporting
  --Guidelines for Preparing Sound Burden Estimates
Effort to Increase Electronic Reporting and the Integration of 
        Information
    The National Environmental Information Exchange Network (Network) 
is a partnership program with the states and Tribes aimed at developing 
an integrated, electronic environmental data exchange. It includes 
efforts to: build a single point of exchange for electronic reporting 
through EPA's CDX portal; propose alegal framework for electronic 
reporting; and apply specific data standards across information 
systems. CDX currently offers electronic reporting options in four 
program areas, and is testing two new programs for implementation by 
the end of fiscal year 2002. As EPA's point of exchange or ``Node'' on 
the Network, CDX completed the first Node test with six states in early 
fiscal year 2002 and plans to expand Node testing this year.
                      standardizing data elements
    EPA has a very active environmental data standards program and has 
finalized seven standards in cooperation with states and tribes. Three 
additional standards are near completion and are anticipated to be 
adopted within fiscal year 2002. Three others are being considered; 
most of these more fully define program specific information that 
complements existing standards. One of the benefits of expanding 
environmental data standards is that programs are better able to 
compare the content of various information systems, thereby reducing 
duplicative applications. This, in turn, results in the elimination of 
some sub-applications and an increase in savings to the states, Tribes, 
and EPA. Yet another benefit of promoting environmental data standards 
is the identification of similar data shared by multiple programs. This 
provides an opportunity to develop registries that contain commonly 
used data that programs can rely on as an authoritative source, which 
can result in the removal of duplicative requests for information 
collection. One example of this is the reliance on facility 
identification information from the Facility Registry System by OSWER, 
rather than requesting the collection of this information continually 
from the facilities.
  grants: program offices review of current paperwork requirements to 
            reduce burden on businesses in fiscal year 2002
    Question. In fiscal year 2003, how will the program offices, either 
with or without the help of OEI, review current paperwork requirements 
to reduce their burden on businesses?
    Answer. EPA will reduce burden on businesses in the following ways:
    Program Initiated Efforts.--Several programs have taken the 
initiative to reduce burden by throughly analyzing their collections to 
identify requirements which can be streamlined. For example, in fiscal 
year 2003, the Office of Solid Waste (OSW) will publish a final rule 
that incorporates many burden reduction components into RCRA 
requirements. OSW initiated a two-phase burden reduction initiative 
that first examines reporting requirements and then proposed a rule 
that will streamline the collection. To reduce reporting burdens to 
facilities, OSW first evaluated all of EPA's current RCRA reporting 
requirements. As a result, OSW drafted a proposed rule that was 
published in February 2002 in the Federal Register. OSW estimates that 
this proposed rule will eliminate nearly 1 million burden hours from 
the total RCRA paperwork burden (which is currently nearly 8 million 
hours). This is a 12 percent reduction from current burden hours. The 
proposed rule is also estimated to have annual cost savings of $120 
million, mostly from the Land Disposal Restrictions changes. In fiscal 
year 2003, OSW will continue work on a second phase of the Burden 
Reduction Initiative (BRI), which focuses on the RCRA Biennial Report. 
Currently, all large quantity generators of hazardous waste and all 
treatment, storage, and disposal facilities have to complete a Biennial 
Report. The second phase of the BRI will propose alternatives such as 
conducting a survey of facilities rather than requiring the completion 
of a report by every facility. OSW will publish their findings in a 
Notice of Data Availability in fiscal year 2003.
    Supporting Environmental Performance.--The Office of Policy, 
Economics, and Innovation continues to develop and expand the 
Performance Track program to motivate and reward facilities that 
achieve better environmental performance than is required under 
existing regulations. This program enhances the current regulatory 
system by offering recognition and other incentives to facilities that 
have shown a commitment to going beyond basic compliance with 
environmental regulations. EPA is developing a rule to propose specific 
regulatory changes as incentives for participation in Performance 
Track. These incentives would offer a reduction in the reporting and 
other operating costs of the current regulatory system and would be 
implemented nationally.
    Encouraging Non-Traditional Burden Reduction Efforts.--EPA 
continues to encourage a number of innovative activities which are not 
typically counted in burden reduction estimates. These include web-
based Compliance Assistance Centers, the promotion of internal facility 
audit policies to detect violations, and options for regulatory 
compliance such as emissions trading. EPA continues to implement easier 
to understand regulatory language and continues providing reporting and 
compliance assistance to small businesses through the Office of the 
Small Business Ombudsman.
    Supporting Streamlining Collections.--Preparers of new regulations, 
as well as those involved in the development of Information Collection 
Requests are required to verify that no other similar collections exist 
as part of the development process entailed in these activities. OEI 
will also be working to make the newly developed streamlining 
guidelines available to the rest of the Agency, which provide step-by-
step guidance on how to reduce burden in both new and existing 
collections, in addition to estimating burden reductions associated 
with the use of electronic reporting. Finally, OEI held a ``Burden 
Reduction Workshop'' in the Fall of 2001, highlighting seven major 
efforts to decrease burden through streamlining existing collections, 
consolidating collections, and using innovative technologies. OEI is 
committed to continuing to recognize and promote these types of program 
efforts which are aimed at decreasing burden, in both traditional and 
non-traditional ways.
 npdes permitting: status of efforts to reduce federal and state npdes 
                            permits backlog
    Question. What is the status of EPA's efforts to reduce the backlog 
of Federal and State NPDES permits? Provide a breakdown by region and 
state.
    Answer. Although EPA did not meet the 2001 target of 10 percent 
backlog for major permits, EPA has made substantial progress in 
reducing the NPDES permit backlog. Currently, EPA's backlog of major 
permits is 16 percent, down from about 48 percent in January 2000. EPA 
is continuing its effort to reduce this backlog of major permits, while 
also focusing on the 2004 goal of 10 percent backlog for all permits. 
EPA currently has a significant backlog of minor permits (67 percent 
expired) and is addressing it through a streamlining effort and the 
release of several permitting tools.
    The authorized states, as a whole, have shown improvement in 
reducing their backlog. Currently, the major permits backlog for 
authorized states is 19 percent, down from about 26 percent in January 
2000. Authorized states are making strides through both permit issuance 
and data clean-up and are on target to meet the 2004 backlog reduction 
goal of 10 percent backlog for all permits.
    The attached charts provide data on state and Regional progress 
toward meeting backlog reduction goals.

                                                             BACKLOG STATUS REPORT FOR MINORS (INDIVIDUALS PERMITS ONLY)--APRIL 2002
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          August 2000                                                Actual for April 2002
                                       ------------------------------------------------ Goal for April ------------------------------------------------     On target to meet     Permit Deficit
                                             Total                          Backlog          2002            Total                          Backlog      December 2004 Goal \2\         \3\
                                          facilities      Expired \1\      (percent)                      facilities      Expired \1\      (percent)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
EPA Region 1:
    CT................................             129              98            76.0            50.6              97              43            44.3  YES.....................               0
    GB \4\............................              14              14           100.0            65.4         ( \5\ )         ( \5\ )         ( \5\ )  ( \5\ ).................         ( \5\ )
    MA \4\............................             521             423            81.2            53.8             439             357            81.3  Unlikely................          120.78
    ME................................             261             182            69.7            46.8             258             140            54.3  Possible................           19.36
    NH \4\............................             186             161            86.6            57.1             121             100            82.6  Unlikely................           30.89
    RI................................             109              87            79.8            53.0             103              87            84.5  Unlikely................           32.45
    VT................................             108              20            18.5            15.2             115              12            10.4  YES.....................               0
                                       =========================================================================================================================================================
EPA Issued............................             982             780            79.4            52.7             560             457            81.6  Unlikely................          161.73
State Issued..........................             346             205            59.2            40.3             573             282            49.2  Possible................           51.04
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
      Region Total....................           1,328             985            74.2            49.5           1,133             739            65.2  Unlikely................          178.28
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
EPA Region 2:
    AT \4\............................               6               6           100.0            65.4               7               7           100.0  Possible................            2.42
    NJ................................           2,664             263             9.9             9.9           2,755             353            12.8  Possible................           81.02
    NY................................           1,761             305            17.3            14.5           1,449              61             4.2  YES.....................               0
    PR \4\............................             197             100            50.8            35.1             200             109            54.5  Unlikely................           38.83
    VI................................              77              44            57.1            39.0              80              46            57.5  Unlikely................           14.79
                                       =========================================================================================================================================================
EPA Issued............................             203             106            52.2            36.0             207             116            56.0  Unlikely................           41.52
State Issued..........................           4,502             612            13.6            12.2           4,284             460            10.7  YES.....................               0
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
      Region Total....................           4,705             718            15.3            13.2           4,491             576            12.8  YES.....................               0
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
EPA Region 3:
    DC \4\............................              12               3            25.0            19.2              12               3            25.0  Possible................            0.69
    DE................................              41               2             4.9             4.9              39               3             7.7  YES \6\.................               0
    MD................................             564             229            40.6            28.8             499             215            43.1  Unlikely................           71.13
    PA................................           3,952             508            12.9            11.8           4,008             595            14.8  Possible................          123.80
    VA................................           2,835           1,943            68.5            46.0           1,119              61             5.5  YES.....................               0
    WV................................           1,459             647            44.3            31.1           1,189             455            38.3  Possible................           84.80
                                       =========================================================================================================================================================
EPA Issued............................              12               3            25.0            19.2              12               3            25.0  Possible................             .69
State Issued..........................           8,851           3,329            37.6            27.0           6,854           1,329            19.4  YES.....................               0
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
      Region Total....................           8,863           3,332            37.6            27.0           6,866           1,332            19.4  YES.....................               0
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
EPA Region 4:
    AL................................           1,385             140            10.1            10.1           1,388              61             4.4  YES.....................               0
    FL................................             348              69            19.8            16.0             300              25             8.3  YES.....................               0
    GA................................             784               0             0.0             0.0             658               0             0.0  YES.....................               0
    KY................................           1,860              84             4.5             4.5           1,788              78             4.4  YES.....................               0
    MS................................           1,841             326            17.7            14.7           1,788             404            22.6  Possible................          140.39
    NC................................           1,344             192            14.3            12.6           1,237             166            13.4  Possible................            9.68
    SC................................             495              73            14.7            12.9             450              71            15.8  Possible................           12.85
    TN................................           1,321             224            17.0            14.3           1,295              45             3.5  YES.....................               0
                                       =========================================================================================================================================================
EPA Issued............................              NA              NA              NA              NA              NA              NA              NA  NA......................              NA
State Issued..........................           9,378           1,108            11.8            11.1           8,904             850             9.5  YES.....................               0
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
      Region Total....................           9,378           1,108            11.8            11.1           8,904             850             9.5  YES.....................               0
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
EPA Region 5:
    IL................................           1,787             373            20.9            16.7           1,774             460            25.9  Possible................          163.90
    IN................................           1,174             150            12.8            11.7           1,140              78             6.8  YES.....................               0
    MI................................             532              57            10.7            10.4             500              53            10.6  YES.....................               0
    MN................................           1,019             509            50.0            34.6           1,010             419            41.5  Possible................           69.69
OH....................................           2,571             680            26.4            20.1           2,716             417            15.4  YES.....................               0
    WI................................             859             165            19.2            15.7             798              77             9.6  YES.....................               0
                                       =========================================================================================================================================================
EPA Issued............................              NA              NA              NA              NA              NA              NA              NA  NA......................              NA
State Issued..........................           7,942           1,934            24.4            18.8           7,938           1,504            18.9  Possible................            9.14
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
      Region Total....................           7,942           1,934            24.4            18.8           7,938           1,504            18.9  Possible................            9.14
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
EPA Region 6:
    AR................................             729              56             7.7             7.7             721              31             4.3  YES.....................               0
    LA................................           3,640           2,910            79.9            53.0           3,476           2,507            72.1  Unlikely................          663.22
    NM \4\............................             221             203            91.9            60.4             111              44            39.6  YES.....................               0
    OK................................             560             176            31.4            23.2             476              96            20.2  YES.....................               0
    TX................................           2,666             719            27.0            20.4           2,567             400            15.6  YES.....................               0
                                       =========================================================================================================================================================
EPA Issued............................             221             203            91.9            60.4             111              44            39.6  YES.....................               0
State Issued..........................           7,595           3,861            50.8            35.1           7,240           3,034            41.9  Possible................          490.60
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
      Region Total....................           7,816           4,064            52.0            35.8           7,351           3,078            41.9  Possible................          443.13
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
EPA Region 7:
    IA................................           1,660             568            34.2            24.9           1,342             199            14.8  YES.....................               0
    KS................................           1,161             753            64.9            43.8           1,171             129            11.0  YES.....................               0
    MO................................           3,015             972            32.2            23.7           3,139             826            26.3  Possible................           82.51
    NE................................           1,184             806            68.1            45.7             835             422            50.5  Possible................           40.09
                                       =========================================================================================================================================================
EPA Issued............................              NA              NA              NA              NA              NA              NA              NA  NA......................              NA
State Issued..........................           7,020           3,099            44.1            31.0           6,487           1,576            24.3  YES.....................               0
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
      Region Total....................           7,020           3,099            44.1            31.0           6,487           1,576            24.3  YES.....................               0
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
EPA Region 8:
    CO................................             418             212            50.7            35.1             378             180            47.6  Unlikely................           47.48
    MT................................             147              45            30.6            22.7             149              62            41.6  Unlikely................           28.20
    ND................................             127              16            12.6            11.6             116               1              .9  YES.....................               0
    SD................................             380              82            21.6            17.1             377              99            26.3  Possible................           34.44
    UT................................              84               4             4.8             4.8              84               3             3.6  YES.....................               0
    WY................................           1,149              87             7.6             7.6           1,325              51             3.8  YES.....................               0
                                       =========================================================================================================================================================
EPA Issued............................              NA              NA              NA              NA              NA              NA              NA  NA......................              NA
State Issued..........................           2,305             446            19.3            15.8           2,429             396            16.3  Possible................           13.35
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
      Region Total....................           2,305             446            19.3            15.8           2,429             396            16.3  Possible................           13.35
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
EPA Region 9:
    AS \4\............................               3               0             0.0             0.0               3               0             0.0  YES.....................               0
    AZ \4\............................             144              49            34.0            24.8             143              29            20.3  YES.....................               0
    CA................................             686             245            35.7            25.8             652             245            37.6  Unlikely................           76.63
    GU \4\............................              11               5            45.5            31.8              14               1             7.1  YES.....................               0
    HI................................              40               7            17.5            14.6              42               2             4.8  YES.....................               0
    JA \4\............................               1               0             0.0             0.0               1               0             0.0  YES.....................               0
    MW \4\............................               1               1           100.0            65.4         ( \5\ )         ( \5\ )         ( \5\ )  ( \5\ ).................         ( \5\ )
    NI \4\............................               3               3           100.0            65.4         ( \5\ )         ( \5\ )         ( \5\ )  ( \5\ ).................         ( \5\ )
    NV................................              70              18            25.7            19.7              70              25            35.7  Unlikely................           11.23
                                       =========================================================================================================================================================
EPA Issued............................             163              58            35.6            25.7             161              30            18.6  YES.....................               0
State Issued..........................             796             270            33.9            24.7             764             272            35.6  Unlikely................           83.14
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
      Region Total....................             959             328            34.2            24.9             925             302            32.6  Possible................           71.73
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
EPA Region 10:
    AK \4\............................             282             262            92.9            61.0             159             143            89.9  Unlikely................           45.98
    ID \4\............................             277             262            94.6            62.1             174             138            79.3  Unlikely................           30.03
    OR................................             283             180            63.6            43.0             301             219            72.8  Unlikely................           89.61
    WA................................             654             519            79.4            52.7             618             476            77.0  Unlikely................          150.43
EPA Issued............................             559             524            93.7            61.5             333             281            84.4  Unlikely................           76.10
                                       =========================================================================================================================================================
State Issued..........................             937             699            74.6            49.8             919             695            75.6  Unlikely................          237.76
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
      Region Total....................           1,496           1,223            81.8            54.2           1,252             976            78.0  Unlikely................          297.98
                                       ---------------------------------------------------------------------------------------------------------------------------------------------------------
All Minors............................          51,812          17,237            33.3            24.3          47,776          11,329            23.7  YES.....................               0
EPA Issued............................           2,140           1,674            78.2            52.0           1,384             931            67.3  Unlikely................          211.54
State Issued..........................          49,672          15,563            31.3            23.1          46,392          10,398            22.4  YES.....................               0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes no date facilities.
\2\ Possible indicates that permit deficit is within 10of the monthly target to meet the 2004 goal or is of 5 permits or less.
\3\ The number of permits that needed to be issued through the reporting period to remain on target to meet the December 2004 goal.
\4\ Indicates EPA is the permitting authority.
\5\ Based on 9/30/2000 download, there are no individually permitted facilities in the Midway Islands. Based on 1/31/2001 download, there are no individually permitted minor facilities in the
  Northern Mariannas. Based on 3/31/2001 download, there are no individually permitted minor facilities in the Georges Banks.
\6\ Although the State is below the 10 percent goal, the State's backlog is beginning to trend upwards.


                                                      BACKLOG STATUS REPORT FOR MAJORS--APRIL 2002
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Actual For April 2002
                                                    --------------------------------     Backlog     At 10 percent Goal?   3-Month Trend  Permit Deficit
                                   Backlog Percent        Total                          Percent             \2\                \3\             \4\
                                                       Facilities      Expired \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
EPA Region 1:
    CT..........................               10.0             113              14            12.4  NO \6\.............               +            1.68
    MA \5\......................               10.0             138              33            23.9  NO.................               +           17.96
    ME..........................               10.0              87              23            26.4  NO.................               +           13.52
    NH \5\......................               10.0              60               8            13.3  NO \6\.............               -            1.46
    RI..........................               10.0              25               2             8.0  YES................               0            0.00
    VT..........................               10.0              33               0             0.0  YES................               -            0.00
                                 =======================================================================================================================
EPA Issued......................               10.0             198              41            20.7  NO.................               -           19.42
State Issued....................               10.0             258              39            15.1  NO.................               +           10.88
                                 -----------------------------------------------------------------------------------------------------------------------
      Region Total..............               10.0             456              80            17.5  NO.................               +           30.30
                                 -----------------------------------------------------------------------------------------------------------------------
EPA Region 2:
    NJ..........................               10.0             160              48            30.0  NO.................               -           30.56
    NY..........................               10.0             355              11             3.1  YES................               0            0.00
    PR \5\......................               10.0              84              27            32.1  NO.................               -           17.84
    VI..........................               10.0               6               4            66.7  NO.................               +            3.35
                                 =======================================================================================================================
EPA Issued......................               10.0              84              27            32.1  NO.................               -           17.84
State Issued....................               10.0             521              63            12.1  NO \6\.............               -            6.21
                                 -----------------------------------------------------------------------------------------------------------------------
      Region Total..............               10.0             605              90            14.9  NO \6\.............               -           24.06
                                 -----------------------------------------------------------------------------------------------------------------------
EPA Region 3:
    DC \5\......................               10.0               4               2            50.0  NO.................               0            1.56
    DE..........................               10.0              23               6            26.1  NO.................               0            3.49
    MD..........................               10.0              97              12            12.4  NO \6\.............               -            1.43
    PA..........................               10.0             382              76            19.9  NO.................               +           34.36
    VA..........................               10.0             140              19            13.6  NO \6\.............               -            3.74
    WV..........................               10.0              93              28            30.1  NO.................               -           17.86
                                 =======================================================================================================================
EPA Issued......................               10.0               4               2            50.0  NO.................               0            1.56
State Issued....................               10.0             735             141            19.2  NO.................               +           60.89
                                 -----------------------------------------------------------------------------------------------------------------------
      Region Total..............               10.0             739             143            19.4  NO.................               +           62.45
                                 -----------------------------------------------------------------------------------------------------------------------
EPA Region 4:
    AL..........................               10.0             194               6             3.1  YES................               -            0.00
    FL..........................               10.0             255              28            11.0  YES................               +            0.21
    GA..........................               10.0             171               1             0.6  YES................               -            0.00
    KY..........................               10.0             132               2             1.5  YES................               +            0.00
    MS..........................               10.0              98              10            10.2  YES................               +            0.00
    NC..........................               10.0             231              68            29.4  NO.................               +           42.82
    SC..........................               10.0             185              45            24.3  NO.................               +           24.84
    TN..........................               10.0             156               9             5.8  YES................               -            0.00
                                 =======================================================================================================================
EPA Issued......................  .................              NA              NA              NA  NA.................              NA              NA
State Issued....................               10.0           1,422             169            11.9  NO \6\.............               +           14.00
                                 -----------------------------------------------------------------------------------------------------------------------
      Region Total..............               10.0           1,422             169            11.9  NO \6\.............               +           14.00
                                 -----------------------------------------------------------------------------------------------------------------------
EPA Region 5:
    IL..........................               10.0             278              36            12.9  NO \6\.............               0            5.70
    IN..........................               10.0             185              78            42.2  NO.................               +           57.84
    MI..........................               10.0             184              25            13.6  NO \6\.............               +            4.94
    MN..........................               10.0              86              40            46.5  NO.................               +           30.63
    OH..........................               10.0             294              73            24.8  NO.................               +           40.95
    WI..........................               10.0             134              10             7.5  YES................               -            0.00
                                 =======================================================================================================================
EPA Issued......................  .................              NA              NA              NA  NA.................              NA              NA
State Issued....................               10.0           1,161             262            22.6  NO.................               +          135.45
                                 -----------------------------------------------------------------------------------------------------------------------
      Region Total..............               10.0           1,161             262            22.6  NO.................               +          135.45
                                 -----------------------------------------------------------------------------------------------------------------------
EPA Region 6:
    AR..........................               10.0             109              13            11.9  NO \6\.............               -            1.12
    LA..........................               10.0             250             119            47.6  NO.................               -           91.75
    NM \2\......................               10.0              35               3             8.6  YES................               0            0.00
    OK..........................               10.0              95               5             5.3  YES................               0            0.00
    TX..........................               10.0             565              96            17.0  NO.................               -           34.42
                                 =======================================================================================================================
EPA Issued......................               10.0              35               3             8.6  YES................               0            0.00
State Issued....................               10.0           1,019             233            22.9  NO.................               -          121.93
                                 -----------------------------------------------------------------------------------------------------------------------
      Region Total..............               10.0           1,054             236            22.4  NO.................               -          121.11
                                 -----------------------------------------------------------------------------------------------------------------------
EPA Region 7:
    IA..........................               10.0             129              18            14.0  NO \6\.............               +            3.94
    KS..........................               10.0              58               0             0.0  YES................               -            0.00
    MO..........................               10.0             148              40            27.0  NO.................               +           23.87
    NE..........................               10.0              55              30            54.5  NO.................               +           24.01
                                 =======================================================================================================================
EPA Issued......................  .................              NA              NA              NA  NA.................              NA              NA
State Issued....................               10.0             390              88            22.6  NO.................               +           45.49
                                 -----------------------------------------------------------------------------------------------------------------------
      Region Total..............               10.0             390              88            22.6  NO.................               +           45.49
                                 -----------------------------------------------------------------------------------------------------------------------
EPA Region 8:
    CO..........................               10.0             112              33            29.5  NO.................               +           20.79
    MT..........................               10.0              43              16            37.2  NO.................               +           11.31
    ND..........................               10.0              26               0             0.0  YES................               0            0.00
    SD..........................               10.0              29               4            13.8  YES................               +            0.84
    UT..........................               10.0              33               0             0.0  YES................               0            0.00
    WY..........................               10.0              26               0             0.0  YES................               -            0.00
                                 =======================================================================================================================
EPA Issued......................  .................              NA              NA              NA  NA.................              NA              NA
State Issued....................               10.0             269              53            19.7  NO.................               +           23.68
                                 -----------------------------------------------------------------------------------------------------------------------
      Region Total..............               10.0             269              53            19.7  NO.................               +           23.68
                                 -----------------------------------------------------------------------------------------------------------------------
EPA Region 9:
    AS \5\......................               10.0               4               0             0.0  YES................               0            0.00
    AZ \5\......................               10.0              50               0             0.0  YES................               0            0.00
    CA..........................               10.0             239              48            20.1  NO.................               +           21.95
    GU \5\......................               10.0               6               2            33.3  NO.................               0            1.35
    HI..........................               10.0              22               2             9.1  YES................               -            0.00
    NI \5\......................               10.0              20             0.0             YES  0..................            0.00
    NV..........................               10.0              10               2            20.0  YES................               -            0.91
                                 =======================================================================================================================
EPA Issued......................               10.0              62               2             3.2  YES................               0            0.00
State Issued....................               10.0             271              52            19.2  NO.................               -           22.46
                                 -----------------------------------------------------------------------------------------------------------------------
      Region Total..............               10.0             333              54            16.2  NO.................               -           17.70
                                 -----------------------------------------------------------------------------------------------------------------------
EPA Region 10:
    AK \5\......................               10.0              75               4             5.3  YES................               -            0.00
    ID \5\......................               10.0              57               5             8.8  YES................               0            0.00
    OR..........................               10.0              78              51            65.4  NO.................               0           42.50
    WA..........................               10.0              86              33            38.4  NO.................               -           23.63
                                 =======================================================================================================================
EPA Issued......................               10.0             132               9             6.8  YES................               -            0.00
State Issued....................               10.0             164              84            51.2  NO.................               -           66.12
                                 -----------------------------------------------------------------------------------------------------------------------
      Region Total..............               10.0             296              93            31.4  NO.................               -           60.74
All Majors......................               10.0           6,725           1,268            18.9  NO.................               +          534.98
EPA Issued......................               10.0             515              84            16.3  NO.................               -           27.87
State Issued....................               10.0           6,210           1,184            19.1  NO.................               +          507.11
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes no data facilities.
\2\ YES indicates that the State is meeting or has met the December 31, 2001 backlog reduction goal of 10 OR is within 1 permit.
\3\ - indicates that the backlog percent has gone down over the last 3 months (since January 31, 2002) + It has gone up; 0 Stayed the same.
\4\ The number of permits that needed to be issued (in addition to ones that will be expiring) to achieve a 10 percent backlog reduction.
\5\ Indicates EPA is the permitting authority.
\6\ A NO indicates that the State is within 5 percent of the backlog reduction goal.

 npdes permitting: level of resources devoted to reduce npdes backlog 
           from fiscal year 2002 and fiscal year 2003 request
    Question. Provide the level of resources EPA is devoting to reduce 
the NPDES backlog from fiscal year 2002 and in the fiscal year 2003 
request.
    Answer. Both EPA and state permitting agencies have developed 
strategies that affirm permit issuance as a high priority task and in 
many cases, have reorganized staff to reduce permit backlog.
    NPDES permit issuance is a substantial undertaking in EPA Regional 
Water Divisions and in state water pollution control agencies. To help 
reverse the trend in rising backlogged permits, EPA is devoting about 
$300,000 for permit issuance in fiscal year 2002, and we anticipate 
making the same level of assistance available in fiscal year 2003. 
Additionally, in fiscal year 2002, EPA is spending approximately 
$340,000 to help reduce the backlog by tracking the NPDES permit 
backlog and developing tools, such as an electronic permit application 
and an electronic water quality based permit writing tool. A similar 
level of spending is anticipated for fiscal year 2003.
    In fiscal year 2002, EPA established Blanket Purchase Agreements 
(BPAs) under GSA contracts. These agreements will support the 
permitting efforts of EPA as well as the states, if they so request, 
through in-kind assistance, as part of their Section 106 grant. A user 
guidance web page is being developed also. This will assist states with 
permit issuance, data clean up, and other water program work that will 
lead to appropriate permits being issued. States have begun to use this 
support, and EPA anticipates continuing this process in fiscal year 
2003.
         reinvention: status of review of reinvention programs
    Question. What is the status of EPA's review of its reinvention 
programs?
    Answer. On April 10, 2001, Administrator Whitman issued a 
memorandum charging EPA's Innovation Action Council (IAC) to formulate 
recommendations for updating EPA's innovation strategy. In considering 
strategic application of innovation, the IAC looked at both the 
challenges (environmental, regulatory or programmatic) facing the 
Agency, and the innovative approaches and tools needed to meet those 
challenges. The IAC consulted with state environmental commissioners 
and key stakeholders (e.g., states, industry, and the NGO's) as it 
developed its recommendations.
    On April 24, 2002, Administrator Whitman released EPA's new 
innovation strategy, Innovating for Better Environmental Results: A 
Strategy to Guide the Next Generation of Innovation at EPA at the 2002 
ECOS meeting. The strategy provides a framework for using innovation to 
move the Agency toward a system of environmental protection in which 
we:
  --focus on environmental performance and results;
  --emphasize comprehensive environmental responsibility, not just 
        pollution control;
  --integrate environmental management across facilities, problems and 
        media;
  --use market-based incentives and the full range of available tools 
        to achieve ambitious environmental goals; and
  --foster partnerships with others who can contribute to environmental 
        solutions.
    The strategy presents four ways we plan to move toward results-
based environmental protection through innovation: (1) strengthen our 
innovation partnerships with states and Tribes; (2) focus our 
innovation efforts on priority environmental problems B reducing 
greenhouse gases and smog, improving water quality, and reducing the 
cost of water and wastewater infrastructure; (3) make fuller use of a 
diverse range of tools such as information and environmental 
technology, market-based incentives, environmental management systems, 
and measurable performance goals; and (4) make EPA's culture and 
management systems more Ainnovation friendly.
    We are currently moving into the implementation phase of the 
strategy, promoting innovation in all parts of EPA. We have drafted an 
implementation plan that represents an initial set of activities that 
will support our innovations work through both ongoing projects and 
some Presidential 2003 budget initiatives. Along with the four 
mentioned above, these key actions also include:
  --expanding Brownfields economic redevelopment,
  --forging stronger partnerships with the agriculture community,
  --promoting better environmental information,
  --promoting innovative technology, using incentives,
  --expanding use of environmental management systems,
  --testing, evaluating and deploying innovative approaches,
  --ensuring support for innovation through planning and budgeting, and
  --fostering a more innovation friendly culture within EPA.
    A synopsis of these activities are located on our website, http://
www.epa.gov/opei/strategy.
   reinvention: spreading the culture of reinvention by limiting its 
                              application
    Question. While EPA states a desire to spread the culture of 
reinvention efforts to all program areas, the agency is currently 
limiting reinvention activities to a few specific activities. Please 
explain how EPA will spread the culture of reinvention by limiting its 
application?
    Answer. EPA's new innovation strategy draws on our experience and 
the experience of our business, state and NGO partners and numerous 
policy and academic cementers who have been working together for over a 
decade to foster innovation in environmental protection. A critical 
lesson communicated across the spectrum is that one of the keys to 
unleashing innovation on a broad scale is to set clear and ambitious 
goals for solving important problems. That is what EPA's new innovation 
strategy does. By focusing innovation on key problems, we will make the 
most progress toward the most important goals.
    While EPA is focusing its Agency-wide innovation efforts, it is not 
limiting innovation in other areas. In fact, the Office of Solid Waste 
and Emergency Response is supporting an intensive focus on innovation 
in several areas not mentioned in the strategy, but which are important 
to improving waste management and disposal systems.
    While a key to the strategy's effectiveness is its clear focus, EPA 
will draw on and foster the broadest possible participation in 
innovating to solve these problems. Within EPA, every program and 
region will be undertaking significant actions toward these goals. EPA 
has also made it a top priority to strengthen the burgeoning innovation 
partnerships with states and tribes by aligning goals and actions 
through partnership agreements.
    EPA's innovation strategy also commits to fostering innovation at 
the very core of EPA's culture through actions that address both 
cultural and administrative barriers to innovation.
 reinvention: examples of directing program offices and oeca to reduce 
 barriers, transaction costs and approval time for reinvention projects
    Question. Provide examples of how EPA is directing the program 
offices and OECA to reduce barriers, transaction costs and approval 
time for reinvention projects?
    Answer. In the development of regulatory flexibility agreements and 
supporting legal documents, EPA program offices and OECA provide 
valuable expertise that ensures the viability of the agreement if 
challenged. However, EPA is continuing to explore ways to reduce 
transaction costs and approval time and, in particular, EPA will 
continue to streamline internal review and decision-making where 
appropriate.
    For its programs that rely on voluntary participation in exchange 
for flexibility or recognition, EPA has continually worked to reduce 
the transaction costs. For example, in a mid-course re-engineering, the 
XL program cut approval and negotiation times significantly. We were 
able to do so by clarifying program elements, helping sponsors develop 
better projects and proposals, improving stakeholder involvement 
processes, and streamlining internal review and decision-making. EPA 
will continue to place a high priority on reducing transaction costs 
for participants, co-regulators, stakeholders and itself. Because the 
innovations agenda may affect some of these programs, specific actions 
cannot be initiated until the innovations agenda is established.
    The program offices and OECA are significantly involved in 
expanding the application of successful innovations tested under 
reinvention projects. For example, the Environmental Results Program 
(ERP) was designed by the Massachusetts Department of Environmental 
Protection. ERP is a self-certification program that replaces 
individual facility permits for small sources with a set of multi-media 
industry-wide performance standards and a facility-derived annual 
certification of compliance. Using a combination of compliance 
assurance tools, ERP has improved performance for small business 
sectors and resulted in savings for these businesses, thereby allowing 
regulators to focus resources on more pressing environmental problems.
    EPA, in partnership with the State of Massachusetts, is working to 
disseminate the successful elements of ERP to other states facing 
environmental issues in small business sectors. EPA program offices and 
OECA are providing technical and financial assistance to identify areas 
and problems that ERP could solve to the District of Columbia, Florida 
and Maryland.
   reinvention: environmental benefits of regulatory flexibility vs. 
                     status quo regulatory schemes
    Question. Describe the ways EPA can further articulate the 
environmental benefits of regulatory flexibility v. status quo 
regulatory schemes.
    Answer. EPA is at an important juncture in the cycle of testing and 
broadening the application of innovative approaches. EPA has recently 
issued its first Innovation Strategy, which explicitly charges the 
Agency to establish a system to move innovative approaches from testing 
to broader application. Critical to this system is the evaluation of 
new approaches to establish their effectiveness relative to the status 
quo regulatory system. EPA recognizes this and has been collecting the 
data necessary for those analyses as it implements its innovations 
programs.
    EPA routinely measures and makes public the environmental benefits 
of the regulatory flexibility granted in its innovations programs. In 
developing the flexibility in a pilot project, EPA establishes the 
expected environmental performance baseline of the status quo and also 
characterizes the expected environmental benefits of the new approach. 
Second, EPA tracks and measures the environmental results of the pilot 
and reports results against the baseline annually.
    The goal of these assessments is to identify new ideas and 
approaches that work and then put them to use on a broader scale so 
that the environment, industry, and communities can benefit. As these 
projects have had time to demonstrate whether the approaches are 
effective or not, EPA will evaluate their appropriateness for further 
application. For example, significant data were collected from early 
tests of the Environmental Results Program, a program developed by the 
State of Massachusetts and tested by EPA, that clearly demonstrate the 
environmental benefits of the self-certification approach for small 
businesses. Based on that information, EPA is working with 
Massachusetts to demonstrate the value of the approach to other states. 
This approach has been very successful with several states in the 
process of adopting the approach.
    As part of managing the full cycle of the innovations process, EPA 
will regularly review innovations being tested for their potential for 
broader application. Those that are will be evaluated for their 
environmental benefits relative to the status quo regulatory system.
  small business: examples of program offices tailoring analysis and 
     regulatory proposals to realities of given industrial sectors
    Question. Provide examples of how incorporation of small business 
concerns are enabling program offices to more closely tailor their 
analysis and regulatory proposals to the realties of given industrial 
sectors?
    Answer. The impact of the Small Business Regulatory Enforcement 
Fairness Act on EPA's regulatory analysis and proposals has been far-
reaching, and consideration of small-business concerns is now prominent 
in many sectoral actions. For example, when regulating engine 
emissions, the Office of Transportation and Air Quality typically 
considers modified requirements or even exclusions for certain engine 
families or a set quantity of units in order to reduce burden on small-
quantity manufacturers. When issuing Maximum Attainable Control 
Technology standards for a given industry under the Clean Air Act, the 
Office of Air Quality Planning and Standards typically excludes area 
sources or low-capacity sources defined otherwise to reduce the number 
of small businesses likely to be subject to technology requirements. 
Likewise, the Office of Science and Technology in the Office of Water 
typically writes Effluent Limitation Guidelines by excluding low-flow 
systems in order to avoid regulatory costs for small businesses that 
typically operate under low-flow conditions. By its nature, the Safe 
Drinking Water Act governs the water-supply sector, and EPA typically 
accommodates small systems by granting delayed implementation 
schedules, reduced monitoring requirements, and alternative 
technologies. We are also investing in alternatives to regulations, 
such as Environmental Management Systems and the Environmental Results 
Program. Mechanisms such as these hold high promise of relieving small 
businesses of costly requirements.
small business: increase knowledge of impact of regulatory requirements 
                          in fiscal year 2003
    Question. In fiscal year 2003, how will EPA further increase its 
knowledge of the impacts of its regulatory requirements on small 
business?
    Answer. It continues the Agency's policy that program offices 
should assess the direct impact of every rule on small entities and 
minimize any impact to the extent feasible, regardless of the magnitude 
of the impact or number of small entities affected. This ``any-any'' 
policy, which goes beyond the requirements of the Regulatory 
Flexibility Act, has been the Agency's policy since before the 
inception of the Small Business Regulatory Enforcement Fairness Act and 
will continue to be so in the future. To build upon this important 
policy, the Agency will increase its knowledge of its regulatory 
requirements on small business by:
    Greater Utilization of the Small Business Division (SBD).--EPA's 
SBD assists the program offices by helping identify and characterize 
small businesses affected by Agency actions, sharing insights on 
regulatory impacts, and encouraging innovative approaches to regulatory 
development. In fiscal year 2003, the SBD will enhance its outreach 
efforts with the program offices by recommending small businesses for 
consultation activities, participating on workgroups to provide early 
guidance on rules, and developing training materials to promote better 
understanding of small business issues during the rulemaking process.
    Training.--The Agency's Regulatory Steering Committee (RSC) is 
currently developing a training curriculum to implement the Agency's 
2001 EPA Task Force on Regulatory Development recommendations. The 
initial training will be for Assistant Administrators; however, the 
goal is to eventually provide training for all decision-makers and rule 
writers. The initial training for Assistant Administrators will include 
an overview of the importance and necessity of small business outreach 
to understand and mitigate adverse impacts. The training will include 
guidance on how to address this important responsibility.
    Guidance.--The RSC is also revising its ``Analytical Blueprint'' 
(Blueprint) guidance. The Blueprint is a planning document that is 
developed early in the process to guide the analytic support developed 
for priority regulations. The guidance will include small business 
considerations so that potential impacts may be analyzed, as 
appropriate.
    Outreach.--Program offices are encouraged to attend briefings, 
interact with stakeholders, and participate in conferences and other 
events to help increase knowledge of the impacts of its regulatory 
requirements on small businesses. One such example is the annual Small 
Business Ombudsman (SBO)/Small Business Assistance Program (SBAP) 
National Conference. This year's conference is hosted by the Illinois 
Department of Commerce and Community Affairs and will be held in 
Chicago on June 29-July 3. These conferences provide an opportunity for 
the state small business programs and EPA to share information about 
small business needs across the country. The conference provides 
training and interactive opportunities for all that attend. Each year, 
representatives from EPA program offices and regions participate and 
learn about small business characteristics, impacts, and needs. In 
addition, the Agency will continue to facilitate meetings between the 
Deputy Administrator and small business groups to ensure that small 
businesses have an opportunity to share their issues and concerns with 
the Agency's senior management. Finally, the Agency's Small Business 
Advocacy Chair will continue to work with the Small Business 
Administration, the Office of Management and Budget, and small business 
stakeholders, as appropriate.
    Improved Access.--The Agency is providing better ways for small 
businesses to share their views on proposed regulations and policies. 
The Agency has created EDOCKET, an electronic public docket and on-line 
comment system designed to expand access to documents in EPA's major 
dockets. EDOCKET will enable small businesses to participate in the 
rule-making process and access electronic docket materials more easily 
and more efficiently by using the Internet. This system was developed 
to process and manage public information, including rule making 
documents, supporting documentation, and Federal Register notices. It 
will also help small businesses view, retrieve, and submit comments 
online. Such improved access will help the Agency increase its 
knowledge of the impacts of its regulatory requirements on small 
businesses.
    Innovative Approaches.--In April, the Agency released its 
Innovation Strategy. This strategy reflects EPA's commitment to explore 
new and creative ways of achieving cleaner air, purer water, and better 
protected land. The strategy provides the Agency with a practical 
framework for encouraging innovative solutions to environmental 
challenges. Key actions in this framework include strengthening 
environmental partnerships, targeting priorities, expanding the current 
collection of tools, and creating a more innovative culture to 
effectively address challenging problems. Small businesses will be an 
integral component of the Agency's innovative approach.
 small business: increase knowledge of impact of rulemaking in fiscal 
                               year 2003
    Question. In fiscal year 2003, how will EPA increase its knowledge 
of the impacts on small business of rulemakings under consideration?
    Answer. Understanding the impacts on small business is a critical 
component of the Agency's rulemaking process. In fiscal year 2003, the 
Agency will continue to implement recommendations from the Task Force 
on Regulatory Development to strengthen the analysis of policy issues, 
including the impact on small businesses. Small business considerations 
will be specifically addressed in the Analytic Blueprints for priority 
actions. In addition, the Agency will continue to solicit the input of 
small businesses during public comment periods for proposed rules, as 
well as outreach to small business stakeholders under the Agency's 
``any/any'' policy. Finally, the Agency's Small Business Advocacy Chair 
will continue to work with the Small Business Administration, the 
Office of Management and Budget, and small business stakeholders, as 
appropriate.
    In fiscal year 2003, the Agency's Small Business Division will 
continue to work with the program offices to ensure that rulemakings 
that are under consideration adequately address small business issues. 
Such activities include participating on current workgroups, as well as 
helping program offices identify and consult with affected small 
business sectors. The Agency will increase its knowledge of impacts on 
small business by:
    Greater Utilization of the Small Business Division (SBD).--EPA's 
SBD assists the program offices by helping identify and characterize 
small businesses affected by Agency actions, sharing insights on 
regulatory impacts, and encouraging innovative approaches to regulatory 
development. In fiscal year 2003, the SBD will enhance its outreach 
efforts with the program offices by recommending small businesses for 
consultation activities, participating on workgroups to provide early 
guidance on rules, and developing training materials to promote better 
understanding of small business issues during the rulemaking process.
    Training.--The Agency's Regulatory Steering Committee (RSC) is 
currently developing a training curriculum to implement the Agency's 
2001 EPA Task Force on Regulatory Development recommendations. The 
initial training will be for Assistant Administrators; however, the 
goal is to eventually provide training for all decision-makers and rule 
writers. The initial training for Assistant Administrators will include 
an overview of the importance and necessity of small business outreach 
to understand and mitigate adverse impacts. The training will include 
guidance on how to address this important responsibility.
    Guidance.--The RSC is also revising its ``Analytical Blueprint'' 
(Blueprint) guidance. The Blueprint is a planning document that is 
developed early in the process to guide the analytic support developed 
for priority regulations. The guidance will include small business 
considerations so that potential impacts may be analyzed, as 
appropriate.
    Outreach.--Program offices are encouraged to attend briefings, 
interact with stakeholders, and participate in conferences and other 
events to help increase knowledge of the impacts of its regulatory 
requirements on small businesses. One such example is the annual Small 
Business Ombudsman (SBO)/Small Business Assistance Program (SBAP) 
National Conference. This year's conference is hosted by the Illinois 
Department of Commerce and Community Affairs and will be held in 
Chicago on June 29-July 3. These conferences provide an opportunity for 
the state small business programs and EPA to share information about 
small business needs across the country. The conference provides 
training and interactive opportunities for all that attend. Each year, 
representatives from EPA program offices and regions participate and 
learn about small business characteristics, impacts, and needs. In 
addition, the Agency will continue to facilitate meetings between the 
Deputy Administrator and small business groups to ensure that small 
businesses have an opportunity to share their issues and concerns with 
the Agency's senior management. Finally, the Agency's Small Business 
Advocacy Chair will continue to work with the Small Business 
Administration, the Office of Management and Budget, and small business 
stakeholders, as appropriate.
    Improved Access.--The Agency is providing better ways for small 
businesses to share their views on proposed regulations and policies. 
The Agency has created EDOCKET, an electronic public docket and on-line 
comment system designed to expand access to documents in EPA's major 
dockets. EDOCKET will enable small businesses to participate in the 
rule-making process and access electronic docket materials more easily 
and more efficiently by using the Internet. This system was developed 
to process and manage public information, including rule making 
documents, supporting documentation, and Federal Register notices. It 
will also help small businesses view, retrieve, and submit comments 
online. Such improved access will help the Agency increase its 
knowledge of the impacts of its regulatory requirements on small 
businesses.
    Innovative Approaches.--In April, the Agency released its 
Innovation Strategy. This strategy reflects EPA's commitment to explore 
new and creative ways of achieving cleaner air, purer water, and better 
protected land. The strategy provides the Agency with a practical 
framework for encouraging innovative solutions to environmental 
challenges. Key actions in this framework include strengthening 
environmental partnerships, targeting priorities, expanding the current 
collection of tools, and creating a more innovative culture to 
effectively address challenging problems. Small businesses will be an 
integral component of the Agency's innovative approach.
  small business: increase knowledge of delivery of information about 
              regulatory requirements in fiscal year 2003
    Question. In fiscal year 2003, how will EPA increase delivery of 
information about its regulatory requirements to small businesses?
    Answer. The Agency is committed to working with small businesses to 
ensure that they are aware of, and understand, their environmental 
regulatory responsibilities. While the Agency has made great strides to 
reach out to small businesses, it continues to look for new 
opportunities to address this key component of the regulatory system. 
In fiscal year 2003, the Agency will build upon its progress by:
    Greater Utilization of the Small Business Division (SBD).--The SBD 
hosts a toll-free hotline to answer small businesses' questions about 
environmental regulations. The hotline receives over 1,000 calls a 
month. The hotline will continue to be promoted as it provides one-
stop' assistance to help America's small businesses find answers to 
their environmental questions. In addition, program offices will 
continue to use the SBD's vast network of small business contacts to 
distribute notices, announcements and other relevant compliance 
information to small business groups. The SBD will continue to publish 
a newsletter twice a year that reports on important Agency activities. 
In addition, the new Small Business Environmental Assistance Providers 
Directory will be distributed to small business groups. The directory 
is an easy-to-use quick reference of the key Federal, State and private 
programs that can address small business environmental compliance, 
pollution prevention and other related questions and concerns. It 
provides all of the relevant environmental contacts a small business 
needs in one convenient location. The SBD will continue to keep the 
small business community updated on Agency regulatory activities by 
distributing EPA's weekly press releases and the Small Business 
Quarterly Alert to its comprehensive e-mail network.
    Outreach.--The Agency will continue to support access to regulatory 
assistance via comprehensive websites. These resources include the EPA 
websites targeting small businesses (www.epa.gov/smallbusiness; 
www.epa/sbrefa; the small business regulatory library (http://
yosemite1.epa.gov/OPEI/smallbus/nsf)) and EPA-supported sites such as 
one dedicated to small business issues (www.smallbiz-enviroweb.org). In 
addition, the Agency has initiated over 100 activities designed to help 
small businesses fulfill their environmental responsibilities.
    In fiscal year 2003, the Agency will continue to build upon these 
activities, including promoting the successful compliance assistance 
centers (http://www.epa.gov/compliance/assistance/centers/index.html) 
and sector resources, developing expert systems to help specific 
industries address compliance questions, holding workshops in the 
regions to educate small businesses on new rules, and developing fact 
sheets to help simplify small business obligations. Lastly, the Agency 
will continue to work with small business stakeholders throughout the 
rulemaking process to identify effective approaches to deliver 
information to small businesses. Specific examples include Small 
Business Advisory Chair outreach, early consultation with small 
business representatives, Small Business Regulatory Enforcement 
Fairness Act (SBREFA) panels, and SBREFA Compliance Guides, as 
appropriate.
    Partnerships.--The Agency will continue to work with the regions, 
states, and compliance assistance providers such as the State Small 
Business Assistance Program to deliver information to small businesses. 
Partnering with these stakeholders will help amplify EPA's message and 
ensure that information is reaching the small business community.
  small business: program offices considering rulemakings determining 
         impact on potential small business in fiscal year 2003
    Question. In fiscal year 2003, how will EPA further ensure that 
program offices considering rulemakings determine potential small 
business impacts in areas which they may not already be aware?
    Answer. For Agency rules to be effective, the rule writers must 
understand the industry being regulated. EPA's current regulatory 
process requires rule writers to identify rules that will affect small 
businesses and investigate options that could minimize adverse burden. 
EPA will continue to support this important step in the regulatory 
process. In fiscal year 2003, the program offices will continue to work 
with the Small Business Advocacy Chair, the Small Business Regulatory 
Enforcement Fairness Act (SBREFA) Team, and the Small Business Division 
to identify and consult with affected small business entities. With 
additional emphasis on Analytic Blueprints and on early planning, 
consideration of small business issues should improve. To further 
support these efforts, EPA is improving the guidance and training 
associated with its Action Development Process, as well as maintaining 
information on its SBREFA website (www.epa.gov/sbrefa).
    Furthermore, the Agency will complete the revision to its Small 
Business Strategy in fiscal year 2003. Significant research has been 
conducted to investigate what is working at the Agency and what 
activities need to amended to effectively address small business 
issues. The intent of the strategy will be to better integrate Agency 
activities that support small businesses, including technical 
assistance and outreach, regulations that minimize burden, and 
participation in EPA's voluntary programs. A primary goal of the 
strategy will be to ensure that program offices have the tools and 
information needed to understand the small business sector and, thus, 
appropriately regulate the selected industry. The Agency will determine 
potential small business impacts by:
    Greater Utilization of the Small Business Division (SBD).--EPA's 
SBD assists the program offices by helping identify and characterize 
small businesses affected by Agency actions, sharing insights on 
regulatory impacts, and encouraging innovative approaches to regulatory 
development. In fiscal year 2003, the SBD will enhance its outreach 
efforts with the program offices by recommending small businesses for 
consultation activities, participating on workgroups to provide early 
guidance on rules, and developing training materials to promote better 
understanding of small business issues during the rulemaking process.
    Training.--The Agency's Regulatory Steering Committee (RSC) is 
currently developing a training curriculum to implement the Agency's 
2001 EPA Task Force on Regulatory Development recommendations. The 
initial training will be for Assistant Administrators; however, the 
goal is to eventually provide training for all decision-makers and rule 
writers. The initial training for Assistant Administrators will include 
an overview of the importance and necessity of small business outreach 
to understand and mitigate adverse impacts. The training will include 
guidance on how to address this important responsibility.
    Guidance.--The RSC is also revising its ``Analytical Blueprint'' 
(Blueprint) guidance. The Blueprint is a planning document that is 
developed early in the process to guide the analytic support developed 
for priority regulations. The guidance will include small business 
considerations so that potential impacts may be analyzed, as 
appropriate.
    Outreach.--Program offices are encouraged to attend briefings, 
interact with stakeholders, and participate in conferences and other 
events to help increase knowledge of the impacts of its regulatory 
requirements on small businesses. One such example is the annual Small 
Business Ombudsman (SBO)/Small Business Assistance Program (SBAP) 
National Conference. This year's conference is hosted by the Illinois 
Department of Commerce and Community Affairs and will be held in 
Chicago on June 29-July 3 These conferences provide an opportunity for 
the state small business programs and EPA to share information about 
small business needs across the country. The conference provides 
training and interactive opportunities for all that attend. Each year, 
representatives from EPA program offices and regions participate and 
learn about small business characteristics, impacts, and needs. In 
addition, the Agency will continue to facilitate meetings between the 
Deputy Administrator and small business groups to ensure that small 
businesses have an opportunity to share their issues and concerns with 
the Agency's senior management. Finally, the Agency's Small Business 
Advocacy Chair will continue to work with the Small Business 
Administration, the Office of Management and Budget, and small business 
stakeholders, as appropriate.
    Improved Access.--The Agency is providing better ways for small 
businesses to share their views on proposed regulations and policies. 
The Agency has created EDOCKET, an electronic public docket and on-line 
comment system designed to expand access to documents in EPA's major 
dockets. EDOCKET will enable small businesses to participate in the 
rule-making process and access electronic docket materials more easily 
and more efficiently by using the Internet. This system was developed 
to process and manage public information, including rule making 
documents, supporting documentation, and Federal Register notices. It 
will also help small businesses view, retrieve, and submit comments 
online. Such improved access will help the Agency increase its 
knowledge of the impacts of its regulatory requirements on small 
businesses.
    Innovative Approaches.--In April, the Agency released its 
Innovation Strategy. This strategy reflects EPA's commitment to explore 
new and creative ways of achieving cleaner air, purer water, and better 
protected land. The strategy provides the Agency with a practical 
framework for encouraging innovative solutions to environmental 
challenges. Key actions in this framework include strengthening 
environmental partnerships, targeting priorities, expanding the current 
collection of tools, and creating a more innovative culture to 
effectively address challenging problems. Small businesses will be an 
integral component of the Agency's innovative approach.
  small business: ensure program offices' economic analysis of small 
  business impacts do not omit small business or industry sectors in 
                            fiscal year 2003
    Question. In fiscal year 2003, how will EPA further ensure that 
program office economic analysis of small business impacts do not omit 
small businesses or industry sectors it believes may be impacted by the 
rulemaking but on which the agency does not currently possess impact 
information?
    Answer. The Agency will continue to stress the importance of 
outreach to small business sectors to ensure that its rules accurately 
represent the industry that is being regulated. Mechanisms for ensuring 
consideration of small business issues include: attention during the 
analytic blueprint development stage; continued implementation of the 
Agency's ``any/any'' policy; RFA/SBREFA guidance, including assistance 
to rule writers on completing Initial Regulatory Flexibility Analysis 
(IRFA) and Final Regulatory Flexibility Analysis (FRFA); and 
implementation of the Agency's Guidelines for Preparing Economic 
Analyses, which includes a section on addressing small businesses.
    In fiscal year 2003, the Agency will also continue to improve 
communications with small business groups and trade associations by 
preparing newsletters for small business stakeholders and holding 
meetings with trade association representatives. Such activity will 
help educate the small business community about upcoming regulations 
and provide opportunities for small businesses to participate in the 
process.
    Furthermore, EPA will continue to publish and distribute, via 
mechanisms including the Small Business Division (SBD), the semi-annual 
Regulatory Agenda to small business contacts, which serves as an 
effective alert on upcoming regulatory actions. The SBD will continue 
to be the lead conduit to receive information from small business 
groups on upcoming rules, and is charged with alerting the program 
offices accordingly.
                           new source review
    Question. There are roughly 20,000 sources in this country subject 
to the Clean Air Act, and EPA may take the position that any repair or 
replacement work at these sources (other than minor maintenance that 
occurs frequently at an individual facility) triggers an analysis under 
the new sources review (NSR) modification rule. How many NSR 
applicability determinations do you estimate will be required annually 
for those 20,000 sources? Has this question been part of your review of 
NSR?
    Answer. The impact of EPA's ``routine maintenance'' policies is a 
question that we examined during the NSR review. Many commenters 
expressed concern about the potential impact of EPA's policy. 
Commenters did not provide sufficient data to estimate the number of 
NSR applicability determinations undertaken annually. EPA does not 
consider routine maintenance, repair or replacement work to trigger NSR 
rules.
    Question. A nationwide census of coal-fired boilers indicates that 
each existing coal-fired boiler, on average, repairs or replaces the 
types of equipment that EPA has identified in its NSR enforcement 
actions at least once per year. Assuming that this is correct, how many 
additional NSR permits would such repair and replacement activity 
entail each year?
    Answer. EPA's enforcement records do not support the assumption 
presented by this question. If a utility undertakes non-routine types 
of changes on an annual basis, which would be uncommon, only those 
changes that result in significant net emissions increases would 
trigger NSR. Simply performing a non-routine repair or replacement does 
not necessarily lead to NSR.
    As to the number of NSR permits needed, EPA's records indicate that 
utility companies have about 1,100 coal-fired boilers currently in use, 
but we would need more specific information about the types of changes 
and their effect on emissions increases before determining which ones 
may require permits.
    Question. An EPA NSR expert has testified that, if a motor in a 
factory broke down and had to be replaced, the factory could not reopen 
for up to 2 years while the company processed paperwork and obtained an 
NSR permit. Even then, the facility could not resume operations until 
it retrofit new sources control technologies. Is this correct? Have you 
performed an analysis of what this means for the nation's energy 
supply?
    Answer. We are unable to ascertain whether this is a correct 
interpretation of testimony provided by an EPA expert. It is important 
to note that only non-routine changes that significantly increase 
emissions are required to undergo major NSR permitting. The 
determination of whether a change is routine, and if not, its effect on 
emissions, are based on case-specific facts, and the question does not 
provide enough information to draw a conclusion for the case described. 
In cases where unexpected equipment failure has occurred in the past, 
the Agency has consistently worked with industry and state and local 
permitting authorities to allow the facility to get the unit back in 
operation quickly. Moreover, it is unlikely that the replacement of a 
minor factory component would require major NSR permitting.
    EPA reviewed the impacts of NSR on investment in new utility and 
refinery generation capacity, energy efficiency, and environmental 
protection, as recommended in the National Energy Policy. The report 
examined among other things, the impact of delays associated with NSR. 
We reported to the President on our findings on June 13, 2002.
    Question. Over the last 30 years, EPA's regulations and practices 
have excluded from NSR all ``routine maintenance, repair and 
replacement'' and that EPA's regulations specifically exclude any 
increases in emissions associated with operating a facility more hours, 
unless such an increase is prohibited by a federally enforceable permit 
condition. So if all of this is correct, then how can it be explained 
that emissions are down under the CAA?
    Answer. Under the Clean Air Act, NSR is only one tool to manage and 
reduce emissions. In addition, there are several other significant 
Clean Air Act programs working to provide substantial emissions 
reductions. For example, the Title IV Acid Rain Program has reduced 
SO2 emissions from the electric utility industry by more 
than 7 million tons per year. The Tier 2 motor vehicle emissions 
standards and gasoline sulfur control requirements will ultimately 
achieve NOX reductions of 2.8 million tons per year. 
Standards for highway heavy-duty vehicles and engines will reduce 
NOX emissions by 2.6 million tons per year. Standards for 
non-road diesel engines are anticipated to reduce NOX 
emissions by about 1.5 million tons per year. The NOX ``SIP 
Call'' will reduce NOX emissions by over 1 million tons per 
year. These reductions, together with NSR's minimization of increases 
from new sources and modifications that increase emissions, have worked 
together to ensure that emissions have continued to decrease as the 
economy has grown.
    Question. Owners of electric generating units may be able to avoid 
NSR by surrendering voluntarily available capacity through ``minor 
source'' permit proceedings. Under these procedures capacity, whose 
construction states have authorized and which ratepayers have paid for, 
could not be used. What are the potential impacts on the national and 
state economies of this potential loss of generation capacity?
    Answer. The NSR program does not require a utility making a change 
that results in an emissions increase potentially subject to NSR to 
surrender generation capacity in order to avoid major NSR permitting. 
In the limited cases where NSR potentially applies, the source has 
options for how to assure that its emissions do not increase as a 
result of the change. While some options may involve limiting operation 
to historic levels, others include reducing the emissions rate at the 
unit or at other units at the plant. Nevertheless, the EPA examined the 
extent to which generation capacity may be affected by NSR as part of 
its review and reported to the President on June 13, 2002.
    Question. As the summer electric peak season draws near, the 
operators of our nation's electric generating fleet are still waiting 
for published guidelines on how your agency will view maintenance and 
repair under the NSR program. These guidelines have been promised for 
months. Without these EPA guidelines for plant operators to follow, 
this reliability and the ability to meet the summer peak demands could 
be threatened. When will these guidelines be published?
    Answer. As noted previously, the EPA has been looking closely at 
this question as part of its review of NSR and is proceeding as 
expeditiously as possible to determine how best to respond to concerns 
raised by operators of electric generators and other stakeholders. We 
reported to the President on June 13, 2002 on our review of the NSR 
program. In that report, EPA proposed to initiate a rulemaking and 
public comment process on routine maintenance, repair and replacement. 
As has been done in the past, EPA will continue to work closely with 
generators and regulators alike to ensure that electric generation 
needs are met in harmony with the nation's clean air goals.
      toxics release inventory (tri) program and the tri lead rule
    Question. The newly enacted Information Quality Act requires 
agencies to ensure and maximize the quality, objectivity, utility, and 
integrity of data disseminated by the agencies. How does EPA plan to 
meet these goals with regard to the reporting data generated under the 
TRI lead rule?
    Answer. Section 313 of the Emergency Planning and Community Right-
to-Know Act (EPCRA) of 1986 and section 6607 of the Pollution 
Prevention Act (PPA) of 1990 requires EPA to annually collect releases 
and other waste management quantities of listed toxic chemicals from 
covered facilities. EPCRA section 313 also requires EPA to make this 
information available to the Federal, State, and local governments, 
researchers, and the public. EPCRA section 313 is very clear that EPA 
should not require facilities to conduct any additional monitoring or 
testing to comply, but that facilities should use readily available 
information, such as monitoring data collected pursuant to other laws, 
or make a reasonable estimate of their release information. Therefore, 
the quality of the TRI data is dependent upon the information submitted 
by each facility.
    To assist facilities in developing their release and other waste 
management estimates, the TRI Program provides extensive compliance 
assistance, such as:
  --industry-specific or chemical-specific guidance documents;
  --annual industry training workshops;
  --user-friendly software such as the TRI Made Easy (TRI-ME). TRI-ME 
        is an interactive, intelligent software tool that guides 
        facilities through the TRI reporting experience;
  --annual updates of the Reporting Forms and Instructions;
  --TRI User Support: a mechanism by which individuals with questions 
        or need assistance can contact EPA's TRI Program directly to 
        the EPA headquarters TRI staff;
  --EPCRA Call Center is a toll free number industry may call to obtain 
        answers and guidance to questions about completing the TRI 
        (EPCRA section 313) forms. The EPCRA Call Center number is 
        (800) 424-9346. For callers in the Washington, DC area the 
        number is (703) 412-9810. The TDD is (800) 553-7672; and
  --facilities are also encouraged to write to the TRI Program 
        directly, asking site specific questions relating to TRI 
        reporting requirements. The TRI program will respond directly 
        to the facility in writing.
    In addition to the above compliance assistance activities, the TRI 
Program has a number of procedures in place to ensure the quality of 
the data. Below are some examples of the types of procedures 
implemented by the program:
    EPA's Data Entry Process is virtually (99.9 percent) error free. A 
key component of this process is double key entry.
    Once a facility's data is entered into the EPA database, EPA prints 
out the entered data in a ``facility data profile'' (FDP) that is sent 
back to the facility to check. The FDP automatically checks for data 
errors and notes those on the FDP that is sent back to the facility. 
Facilities can then make revisions to their data if needed.
    Independent of the ``FDP process,'' EPA has a process for 
facilities to revise or withdraw their chemical reports if they 
discover they have made an error in reporting. For the 2000 reporting 
year, EPA evaluated approximately 350 such requests from facilities to 
withdraw reported data from the TRI database and about 10,000 requests 
for revisions to data.
    EPA sends each state a list of all the facilities that submitted a 
TRI report to EPA and all the chemicals that they reported so that the 
states can check this against the TRI reports they directly receive.
    EPA sends each state a list of the 100 facilities with the largest 
releases in that state. EPA asks the state to make sure that there are 
no facilities included or excluded that should not be. EPA follows up 
with telephone calls to the states.
    Once all the data has been entered into the TRI database, EPA calls 
facilities that may have an error in reporting, e.g., those facilities 
that reported very large increases or decreases in their releases from 
1 year to the next and facilities with very large quantities of 
releases and total production-related waste. EPA called more than 200 
facilities this year that met that criteria. Approximately 27 of the 
facilities called had significant errors that needed to be corrected.
    This year, for the newly-reported persistent bioaccumulative and 
toxic (PBT) data, EPA identified 560 facilities to be called regarding 
their PBT chemical reports. As a result of these calls, approximately 
130 facilities revised their reported release and other waste 
management data for PBT chemicals. For example, facilities revised 
their total release quantity of dioxin and dioxin-like compounds to 
95,910 grams from the 750,226 grams originally reported.
    Lastly, with regard to the Information Quality Guidelines, EPA is 
developing Information Quality Guidelines to be issued by October 1, 
2002, as specified in the guidelines published by the Office of 
Management and Budget (OMB). EPA's guidelines will build upon ongoing 
efforts to improve the quality of the information used to support 
Agency policy and regulatory decisions. Given existing Agency-wide 
systems and procedures and the TRI Program methods, EPA is confident 
that the TRI Program will be consistent with OMB's Information Quality 
Guidelines.
          agency's response to incorrect data in tri database
    Question. How does EPA plan to identify information contained in 
the database that does not meet the data quality standards, to correct 
or remove it, and educate citizens that the TRI database contains such 
information?
    Answer. EPA currently provides information to the public on its 
website that explains the benefits and limitations of the TRI data. In 
a document called ``The Toxics Release Inventory (TRI) and Factors to 
Consider When Using the TRI Data'' EPA explains that facilities may 
report estimated data to the TRI Program and that the program does not 
require them to conduct additional monitoring. This document also 
explains that various estimation techniques may be used by facilities 
when monitoring data are not available. EPA intends to continue to make 
this type of information available to TRI data users and provide 
context about the TRI data.
    EPA is currently in the process of drafting its Information Quality 
Guidelines. As part of this effort, EPA is reviewing its existing 
procedures for correcting information the Agency disseminates to the 
public. EPA's guidelines, which are due to be issued October 1, 2002, 
will address the identification and correction of information that does 
not comply with the guidelines.
                       tri lead rule data quality
    Question. What measures has EPA instituted to ensure that data 
collected under the rule requiring TRI reporting for lead and lead 
compounds are of high quality?
    Answer. EPA does not require facilities to conduct any monitoring 
or testing solely for the purpose of TRI reporting. The TRI data 
reported by facilities represent facility estimates based on monitoring 
data required by other provisions of law, or if not available, on the 
best available information. Therefore, the quality of the TRI data is 
dependent upon each facility.
    The Agency has been very active in publicizing the new EPCRA 
section 313 reporting requirements for lead and lead compounds, and in 
providing compliance assistance. A primary purpose of EPA's compliance 
assistance is to help those facilities that may need to comply with the 
new TRI reporting requirements make more accurate threshold 
determinations and more accurate estimates of releases and other waste 
management quantities of lead and lead compounds.
           small business concerns with data tri data quality
    Question. In view of concerns raised by small business associations 
in their February 21, 2002, letter to EPA Administrator Whitman about 
implementation problems with this rule, how confident is the Agency in 
the quality of the data that it will receive in the first reporting 
cycle under the lowered thresholds for lead and lead compounds?
    Answer. The Agency has been very active in publicizing the new 
EPCRA section 313 reporting requirements for lead and lead compounds, 
and in providing compliance assistance. A primary purpose of EPA's 
compliance assistance is to help those facilities that may need to 
comply with the new TRI reporting requirements make more accurate 
threshold determinations and more accurate estimates of releases and 
other waste management quantities of lead and lead compounds. The TRI 
Program has a number of procedures in place to improve the quality of 
the data. The TRI Program believes that, collectively, these practices 
plus the compliance assistance activities help to ensure the quality of 
the TRI data. The Agency recognizes that the first year data is 
inevitably for many a trial year and, therefore, not as reliable as 
subsequent years. However, it believes that the data will not be any 
worse than would normally be expected in a first reporting year.
   identification of business required to report under tri lead rule
    Question. How will EPA identify the businesses required to report 
under the TRI lead rule, especially the numerous small businesses that 
are newly subject to TRI reporting requirements under the rule? What 
outreach efforts has EPA made to ensure that each of them is aware of 
the new reporting requirements?
    Answer. EPA has been very active with outreach efforts during the 
entire development of the lead rule. This includes three public 
meetings that EPA conducted with special emphasis on potential small 
business impacts of the lead rule in Los Angeles, Chicago, and 
Washington, DC. The notices announcing the meeting were reviewed by the 
Small Business Association (SBA). The meeting was also announced in a 
targeted mailing. EPA has been very active in announcing the final TRI 
lead rule, and informing those who may have to comply with the new 
reporting requirements for lead and lead compounds. In addition to the 
Federal Register notice (April 17, 2002) and subsequent press releases, 
and extensive media coverage announcing the final lead rule, EPA's TRI 
Program has conducted extensive outreach efforts to inform those who 
may need to comply with the TRI lead rule of the new reporting 
requirements, and to provide compliance assistance, especially to those 
who are not familiar with TRI reporting. These outreach efforts are 
described briefly below.
    Fact Sheet.--In August of 2001, the TRI Program developed a ``Fact 
Sheet'' that announces: 1) the new TRI lead rule; 2) the development of 
a guidance document to provide technical assistance for complying with 
the lead rule; and 3) compliance assistance workshops. This Fact Sheet 
was distributed electronically by EPA's Small Business Office to many 
individuals and organizations (i.e., businesses, including small 
businesses and trade associations) that may be affected by the new 
rule.
    Guidance Document.--The TRI Program developed a technical guidance 
document through a public notice and comment process. A draft version 
was released on September 10, 2001, within 5 months after the lead rule 
became effective. A public (stakeholder) meeting was held on September 
24, 2001, to discuss the draft version. A final version was released at 
the beginning of January 2002.
    Lead Rule Training Workshops.--The TRI Program conducted nine lead 
rule workshops that were held throughout the various regions of the 
country in the fall of 2001. Approximately 730 people registered for 
the fall 2001 workshops. In general, the feedback received by the TRI 
Program from the participants was positive.
    EPA's Small Business Ombudsman Office sent out e-mail announcements 
to trade organizations and interested parties, including the SBA, 
announcing the lead rule workshops.
    EPA published a Federal Register notice announcing the lead rule 
workshops and sent flyers directly to interested parties via e-mail.
    EPA spoke at conferences, attended meetings, and assisted in the 
development of outreach materials for trade associations upon the 
request.
    EPA posted announcements of all of these efforts on the TRI 
Program's internet homepage, and EPA Regional offices sent out mass 
mailing announcements to regulated entities and states.
    In addition to the above-mentioned special assistance for the lead 
rule, the TRI Program has established an extensive compliance 
assistance program to all those who need to comply with TRI reporting 
requirements (including the lead rule), including those in small 
businesses. The TRI Program provides this assistance through the:
  --TRI hotline;
  --TRI Industry Workshops.--TRI Program sponsors compliance assistance 
        workshops which are offered every spring in each EPA Region 
        (approximately 3,000 attendees for the spring 2001 workshops). 
        Currently, the TRI Program is conducting forty-two workshops 
        across the country. These workshops cover the new reporting 
        requirements for lead and lead compounds (the training 
        materials for the 2002 spring workshops are available from the 
        TRI Program's internet homepage);
  --TRI User Support.--A mechanism by which individuals with questions 
        who need assistance can contact EPA's TRI Program; and
  --TRI-ME: TRI-ME is an interactive, intelligent, user-friendly 
        software tool that guides facilities through the TRI reporting 
        requirements.
    EPA believes that its outreach efforts to reach small businesses 
have been effective; this is supported by the fact that every year TRI-
training workshops are well attended, and that the Agency has received 
many compliance-related questions from individuals from different types 
of facilities, sizes, and industry sectors. Also, during the public 
comment period of the proposed lead rule (published August 3, 1999), 
the Agency received many comments from small and large businesses and 
trade associations that represent diverse industry sectors. In 
addition, since promulgation of the final rule, the Agency has received 
many inquiries from: trade associations that represent small businesses 
and large businesses; the SBA; and individuals (e.g., presidents, CEOs) 
from businesses.
            small business unaware of reporting requirements
    Question. Are there still small businesses that are unaware of 
their reporting requirements, and if so, how will EPA educate them and 
require them to submit reports?
    Answer. EPA does not have a listing of the number of small 
businesses that are unaware of and not in compliance with the new 
reporting requirements. EPA will continue with its compliance 
assistance and outreach efforts and work with trade associations to 
assist businesses in complying with the TRI lead rule.
  general awareness of reporting requirements among those required to 
                                 report
    Question. How confident is EPA that the entire population of those 
required to report under the new TRI lead rule are aware that they must 
report? What steps is EPA taking to ensure that all those who must 
report have received reporting forms, including those who will be 
reporting for the first time?
    Answer. EPA is confident that those facilities who may have to 
comply with the new TRI lead should be aware of it by now. This 
confidence is based on: (1) the attention that this rule has drawn from 
businesses and other entities during the public comment period of the 
proposed rule, and after the rule became final; (2) the mass 
announcements of the rule and new reporting requirements, training 
workshops, and a technical guidance document made by EPA via Federal 
Register notices, electronic mailings, flyers, and postings on the TRI 
Program's internet site; (3) notifications sent to the trade 
associations of activities related to the workshops and guidance 
documents; (4) attendance at the fall and spring training workshops; 
and (5) the many inquiries received by EPA from small and large 
businesses; trade associations; the SBA; and others regarding the new 
rule.
    EPA announces the availability and how to obtain the TRI reporting 
forms and instructions through a variety of mechanisms. These include: 
the TRI internet home page, the technical guidance manual for lead and 
lead compounds; the training workshops and the materials distributed at 
the workshops; TRI User Support (a mechanism by which individuals with 
questions or need assistance can contact EPA's TRI Program; and the TRI 
Hotline. Businesses may also obtain details regarding TRI Reporting 
forms from their trade associations.
   president's directive for technical assistance to small business 
                        regarding tri lead rule
    Question. In his press release dated April 17, 2001, the President 
asked Administrator Whitman to provide technical assistance to affected 
small businesses to help them prepare their first reports under the TRI 
lead rule. What has been done to meet the President's directive? Have 
these efforts been adequate to ensure that these small businesses can 
provide high quality data?
    Answer. Subsequent to the decision to move forward with the final 
lead rule, the President specifically directed the EPA to provide 
compliance assistance to affected businesses, especially small 
businesses, to help them prepare their first release reports which are 
due by July 1, 2002.
    EPA has worked hard to provide this assistance. The Agency issued a 
technical guidance document on how to comply with the new lead rule and 
held nine workshops throughout the country last fall on the new rule. 
More than 700 individuals attended the workshops. These workshops and 
the availability of the draft and final versions of the guidance 
document were extensively publicized. This information was made 
available through announcements and notices published in the Federal 
Register, the Agency's TRI web page, and e-mail announcements sent out 
by EPA's Small Business Ombudsman Office to trade organizations and 
interested parties, including the SBA. In addition, TRI user support 
and access to TRI experts have been available through the TRI web page 
and interactive software link, as well as through the Agency's TRI 
telephone hotline.
    The Agency continues to work hard to provide compliance assistance. 
More than forty EPA workshops on compliance with the TRI reporting 
requirements are being held this spring in various areas of the 
country, and these workshops will be especially helpful to those who 
will be responsible for reporting lead and lead compounds for the first 
time. Also, the training materials used at these workshops are 
available on the Internet through the TRI web page.
    EPA's outreach to the small business community and compliance 
assistance efforts to help small businesses comply with the new lead 
reporting requirements have been unusually extensive and robust. The 
Agency will continue to be diligent in its contacts with affected 
businesses to give them the assistance necessary to comply with the new 
regulation.
    While EPA has been diligent in providing assistance to small 
businesses, the quality of the data is dependent on facilities because 
they have the best knowledge of their processes and the quantities of 
the chemicals that they use or manufacture.
     assistance to small business with compliance to tri lead rule
    Question. In my March 7, 2002 letter to Administrator Whitman, I 
raised concerns over EPA's failure to assist small businesses with 
compliance on the TRI lead rule. Does EPA plan to enforce the reporting 
requirements of the TRI lead rule during this first year when small 
businesses still have not received adequate guidance to assist in their 
compliance?
    Answer. As with any new TRI rule, EPA emphasizes compliance 
assistance during the first year of implementation rather than 
enforcement. In fact, the compliance assistance provided by the TRI 
Program regarding the new reporting requirements for lead and lead 
compounds has been unusually extensive and robust, and we believe 
sufficient to achieve compliance for the 2001 reporting year. EPA 
intends to continue promoting compliance by providing assistance with 
lead and lead compound reporting to TRI. Should a small business 
discover a violation after taking advantage of compliance assistance, 
either that provided by EPA or by another compliance assistance 
provider, it may be eligible for the Agency's Small Business Compliance 
Policy. This policy provides for the elimination or significant 
reduction of penalties for small businesses (those with 100 or fewer 
employees) if the company discovers, discloses, and promptly corrects 
the violations. Those businesses with greater than 100 employees may be 
eligible for similar penalty elimination or reduction through the 
Agency's Incentives for Self-Policing: Discovery, Disclosure, 
Correction and Prevention of Violations.
                      small business tri reporting
    Question. What materials are EPA making available to educate small 
businesses on how to report accurately under the TRI lead rule?
    Answer. The Agency's outreach to the small business community and 
compliance assistance efforts to help small businesses comply with the 
new lead reporting requirements have been unusually extensive and 
robust. A primary purpose of EPA's compliance assistance is to help 
those facilities that may need to comply with the new TRI reporting 
requirements make more accurate threshold determinations and estimates 
of releases and other waste management quantities for lead and lead 
compounds. One example of a product the Agency has made available to 
educate small businesses on how to report accurately is the lead 
guidance document, which is a technical document that offers assistance 
in complying with the new rule. In addition, TRI user support (a 
mechanism by which individuals with questions or need assistance can 
contact EPA's TRI Program and access to TRI experts are available 
through the TRI web page and interactive software link, as well as 
through the Agency's TRI telephone hotline). The training materials 
used at the spring 2002 training workshops are available on the 
Internet through the TRI web page. The TRI Program has recently 
developed TRI-ME: TRI-ME is an interactive, intelligent, user-friendly 
software tool that guides facilities through the TRI reporting 
requirements.
             small business tri reporting without computers
    Question. How does EPA intend to educate small businesses required 
to report under the rule that do not have access to a computer or the 
Internet?
    Answer. There are many means (other than the internet) by which 
anyone can obtain information on how to comply with any TRI-related 
regulation, including the lead rule. One example includes the TRI 
Program's annual training workshops. These workshops are publicized in 
several different ways, such as through mailing announcements and 
Federal Register Notices. EPA has also established various other 
mechanisms for facilities to receive information or assistance. For 
example, facilities can contact the TRI Program directly by submitting 
written questions about site specific questions, and the TRI Program 
will respond in writing. Also, questions about the implementation of 
the TRI reporting requirements may be directed to the TRI User Support 
telephone line at 202-566-0250. Calls received will be forwarded 
directly to TRI Program staff. Upon request, the TRI Program will send 
out hard copies of the lead rule guidance document. The TRI Program has 
also established a hotline, the EPCRA Call Center, which is a toll-free 
number facilities may call to obtain answers and guidance to questions 
about completing the TRI Form R reporting form. The EPCRA Call Center 
number is (800) 424-9346. Callers in the Washington, DC area should 
call (703) 412-9810. The TDD is (800) 553-7672. This contact 
information is available through a variety of EPA publications. In 
addition, many trade associations have this information. EPA plans to 
continue these and other outreach and assistance efforts.
   tri: how has the guidance document received by the small business 
                               community
    Question. How has the guidance document for the rule, which is over 
200 pages and was not finalized until after the first reporting period 
was complete, been received by the small business community? To the 
extent concerns have been raised, how does EPA plan to address them?
    Answer. The TRI Program developed the guidance document through a 
public notice and comment process. A draft version was released on 
September 10, 2001 (which is within 5 months after the lead rule became 
effective). A public (stakeholder) meeting was held on September 24, 
2001. This meeting provided the TRI Program with the opportunity to 
discuss the draft version with stakeholders, and listen to comments 
offered by stakeholders. The final version of the document was 
developed from consideration of the comments submitted to EPA in 
writing during the public comment period, and comments raised at the 
public meeting. The final version was released at the beginning of 
January 2002: nearly 7 months before the deadline for submitting the 
first year release reports.
    The actual body of the lead rule guidance document is only 65 pages 
long. The remaining sections are appendices. The appendices contain 
extensive and valuable information such as emission factors, thereby 
minimizing the time for facilities to search for this information 
elsewhere (e.g., saves facilities time from having to search for the 
factors on the Internet or elsewhere). The guidance document is well 
organized and easy to use: it contains a table of contents, a list of 
figures, a list of tables, and an index. The guidance document contains 
many real-world examples of scenarios likely to be encountered at 
facilities. Detailed explanations are provided on how facilities should 
deal with these scenarios with regard to the new reporting requirements 
for lead and lead compounds. In addition, Appendix B of the document 
``Selected Questions and Answers,'' provides EPA's answers to commonly 
asked questions regarding the new reporting requirements for lead and 
lead compounds.
    The TRI Program has a policy for revising its guidance documents. 
Guidance documents will be revised as appropriate, based on changes in 
information, rules, or TRI Program policies and practices. The TRI 
Program always welcomes comments and additional information for all of 
its guidance documents, from all stakeholders. The Agency may choose to 
revise the lead guidance document at a future date if the Agency 
believes that such revision is needed based on constructive comments 
received.
               tri: unusual aspects of the tri lead rule
    Question. Because the TRI lead rule has aspects that are unique or 
unusual, such as the retroactive reporting obligation and the 
elimination of the de minimis reporting exemption, what specific 
guidance has the Agency developed to address these issues?
    Answer. The TRI lead rule does not impose a retroactive reporting 
obligation because it does not alter the past legal consequences of 
past actions. This rule does not affect a facility's liability for past 
conduct.
    In addition, no reporting obligation was placed on affected 
facilities prior to the rule's effective date. Reports are not required 
to be filed until July 1, 2002. Nor does the rule require facilities to 
have developed or kept records for any period predating the effective 
date of the rule; facilities are not required to conduct any testing or 
monitoring in order to report. EPCRA section 313(g)(2) only requires 
facilities to use ``readily available data'' or to make reasonable 
estimates based on whatever information they have, to develop their 
report.
    EPA's 1999 persistent, PBT chemicals rule eliminated the de minimis 
exemption for TRI reporting of PBT chemicals. In the TRI lead rule, EPA 
determined that lead and lead compounds are PBT chemicals. EPA has 
provided facilities with guidance in the lead guidance document, as 
well as in the training workshops, to aid facilities in meeting their 
reporting obligations in the absence of the de minimis exemption.
                   tri: assistance to small companies
    Question. Will EPA assist small companies in dealing with the 
retroactive effect of the rule by allowing them to estimate their lead 
usage during the months of January through April by extrapolating from 
data concerning their lead usage after the rule was made effective?
    Answer. EPCRA only requires facilities to use ``readily available 
data (including monitoring data) collected pursuant to other provisions 
of law, or, where such data are not readily available, reasonable 
estimates of the amounts involved.'' The lead rule does not alter this 
requirement. Thus, if facilities only have information concerning their 
lead use and/or ``releases'' after April 17, 2001 (the date the rule 
became effective) they may extrapolate from that to make reasonable 
estimates of the amount of lead ``released'' during the reporting year. 
However, to the extent that facilities have records of their use and 
releases of lead and lead compounds for other reasons, such as to 
demonstrate compliance with air or water permits, or for tax purposes, 
they would be required to consider that information in developing their 
threshold and release calculations.
            tri: small business and the 100-pound threshold
    Question. With regard to the deletion of the de minimis exemption, 
how are small businesses to determine if they meet the 100-pound 
threshold for reporting under the rule?
    Answer. EPCRA section 313 is very clear that EPA should not require 
facilities to conduct any additional monitoring or testing to comply, 
but that facilities should use readily available information, such as 
monitoring data collected pursuant to other laws, or make a reasonable 
estimate of their release information. Guidance for determining whether 
a facility exceeds the 100-pound threshold for manufacturing, 
processing, or otherwise using lead or lead compounds is presented: in 
the lead guidance document; at the training workshops; in materials 
distributed at the workshops and currently available from the TRI 
Program's internet home page (http://www.epa.gov/tri/report/training/
index.htm); and directly from the TRI Program.
   tri: small business reporting responsibility in the case of ``no 
                              knowledge''
    Question. What responsibility does a small business have for 
reporting under the TRI lead rule if it has no knowledge that it 
manufactures, processes, or otherwise uses lead above 100 pounds per 
year?
    Answer. If a small business has no actual or constructive knowledge 
that it manufacturers, processes, or otherwise uses lead above the 
threshold (100 pounds per year), then it has no reporting 
responsibility for lead under the TRI lead rule.
             tri: knowledge in the context of tri reporting
    Question. What constitutes knowledge in the context of TRI 
reporting?
    Answer. In this context, knowledge concerns both knowledge of the 
facts at a facility and knowledge of the law. It has been EPA's 
experience that facilities have knowledge, at a minimum, of the 
following: the facility's processes, EPA reporting instructions, EPA 
guidance documents, supplier notifications, trade association 
documents, the facility's air and water permits, and hazardous waste 
manifests. Regarding the issue of what constitutes a business' 
knowledge of the law, courts have long held that everyone possesses 
constructive knowledge of the laws passed by Congress and implementing 
rules and regulations published in the Federal Register.\1\
---------------------------------------------------------------------------
    \1\ See, e.g., U.S.C. 41507; Federal Crop Ins. Corp. v. 
Merrill, 332 U.S. 380 (1947).
---------------------------------------------------------------------------
    However, EPA has engaged in outreach efforts to promote awareness 
among those required to report, including a robust compliance 
assistance program. These efforts include: a technical guidance 
document devoted specifically to assisting businesses to comply with 
the lead rule (developed through public notice and comment), and nine 
lead rule workshops that were held throughout the various regions of 
the country in the fall of 2001. EPA estimates that more than 700 
individuals participated in the fall 2001 workshops. The Agency 
announced these workshops through several channels, including: e-mail 
announcements to trade organizations and interested parties, including 
the SBA; a Federal Register notice; flyers sent directly to interested 
parties via e-mail; announcements posted on the TRI Program's internet 
homepage; and mass mailings conducted to states and regulated entities.
    In addition to this special assistance for the lead rule, EPA has 
an extensive compliance assistance program for all those subject to 
basic TRI reporting requirements. The TRI Program provides ongoing 
assistance through: a toll-free hotline staffed with individuals 
trained to answer TRI-related questions; workshops which are offered 
every spring in each EPA Region (approximately 3000 attendees for the 
spring 2001 workshops); TRI User Support, which is a mechanism by which 
individuals can directly contact EPA headquarters TRI staff; and TRI-
ME, an interactive, intelligent, user-friendly software tool that 
guides facilities through the TRI reporting requirements.
distinction between ``having no knowledge'' and ``not reporting'' under 
                             tri lead rule
    Question. What is the difference between ``having no knowledge'' 
and ``not reporting'' under the TRI Lead rule?
    Answer. Knowledge raises the issue of whether an entity has an 
obligation to report. ``Reporting'' or ``not reporting'' is a solely an 
issue of whether an entity subject to the requirements has submitted 
reports or not. An entity ``having no knowledge'' would not report, but 
``not reporting'' does not imply that a TRI reporting threshold has not 
been exceeded.
                tri: knowledge in an enforcement context
    Question. What is the difference in an enforcement context?
    Answer. The extent of an entity's knowledge about a regulatory 
obligation is one factor in determining the level and type of 
enforcement response.
             tri: burden of proof in an enforcement context
    Question. Who has the burden of proof in an enforcement context?
    Answer. In enforcement proceedings, the EPA has the burden of proof 
that the violation occurred as set forth in a complaint. Following 
EPA's presentation of a prima facie case, a respondent has the burden 
of proof as to any defenses.
                     iris/residual risk rulemaking
    Question. In fiscal year 2002, the Committee provided an additional 
$5,000,000 above the budgeted request to accelerate the development of 
new and update current Integrated Risk Information System (IRIS) 
values. The Committee continues to be concerned that EPA is not meeting 
its goals and, more importantly, is not making the systemic 
improvements in its IRIS program to achieve the primary goals of A) 
updating existing risk values to reflect the current best available 
science and B) generating new values to meet growing demands by state, 
Federal, and even international users of IRIS. What plan is ORD 
following in spending the $5M?
    Answer. The new funds are available for extramural support to EPA's 
program offices through the Environmental Program Management (EPM) 
account. This support will be directed towards the scientific 
development and peer review of IRIS assessments. The Administrator has 
stated that developing options for the updating and improvement of IRIS 
is a key function of ORD's Assistant Administrator in his new capacity 
as EPA Science Advisor. ORD has convened an intra-Agency group and is 
coordinating development of a plan among the program offices for 
spending the $5M designated by Congress in fiscal year 2002 for 
updating and adding assessments to IRIS.
    Question. What systemic improvements will ORD achieve through its 
expenditures that will (A) lead to a steady, sustainable update of 
existing IRIS values, and (B) lead to a quicker rate of throughput for 
new IRIS risk values?
    Answer. EPA has a system in place for the generation and review of 
IRIS assessments across the Agency. ORD is coordinating a plan by which 
EPA program offices will expend the fiscal year 2002 additional funds. 
The new extramural funds will help in the scientific development and 
peer review of IRIS assessments during fiscal year 2002-2003, thereby 
increasing both the number of existing IRIS values that are up-to-date 
and the number of new assessments added to the database.
    Question. How is ORD working with external experts toward achieving 
the primary IRIS improvement goals for which the Committee provided 
additional funding?
    Answer. ORD recognizes that significant expertise exists outside of 
EPA that can assist in developing and peer reviewing IRIS assessments. 
This expertise can contribute to the primary improvement goals of 
updating IRIS and adding new assessments. ORD is coordinating a plan by 
which EPA program offices will expend the fiscal year 2002 additional 
funds by engaging external experts in IRIS improvement through 
contractual mechanisms. The funds will be used to access EPA 
contractors to help with the scientific development and peer review of 
IRIS assessments.
    Question. The Agency is now facing a series of deadlines to 
promulgate residual risk standards under Section 112(f) of the Clean 
Air Act. An important element of this process is the selection of 
health benchmark values that represent for each major air toxic the 
best available, updated information on potential health effects. 
Unfortunately, IRIS includes many values for which new, more accurate 
data is available. How many IRIS updates does the Agency expect to 
complete in fiscal year 2002? How many do you plan to complete in 
fiscal year 2003?
    Answer. EPA is aware of the requirements to promulgate residual 
risk standards under the Clean Air Act. The Agency has identified 53 
air toxics that are important to early residual risk assessments. 
Twenty-seven of these air toxics were determined to be highest priority 
for assessment or reassessment and are in progress in the IRIS program. 
Four assessments of the high priority air toxic chemicals will be 
completed in fiscal year 2002 and seventeen are scheduled for 
completion in fiscal year 2003.
    Question. What criteria did the Agency use to determine the values 
that would be updated in fiscal year 2002 and fiscal year 2003?
    Answer. For fiscal year 2002, EPA's approach to developing the 
annual IRIS agenda was to compile nominations for priority chemicals 
for new assessments and reassessments, and to apply a general set of 
criteria to determine which to undertake. The criteria were, (1) Agency 
statutory, regulatory, or program implementation need; (2) the 
availability of new scientific information or methodology that might 
significantly change current IRIS information; (3) interest to other 
levels of government or the public; (4) completion of most of the 
scientific assessment work while meeting other Agency requirements such 
that only a modest additional effort is needed to complete the review 
and documentation for IRIS. The priorities that emerged from the 
application of these criteria were then considered in light of 
available Agency staff to manage assessments and available extramural 
resources. Application of these criteria are standard practice for the 
IRIS program. Similar or identical criteria will be applied to develop 
the agenda for fiscal year 2003.
    Question. What is the process for incorporating the 2002 and 2003 
updates into the 112(f) rules, which are due beginning in 2003, or 
alternatively, what process will be employed to incorporate these 
values into the residual risk rule if IRIS updates are not completed?
    Answer. OAR has identified those substances which it believes will 
play a significant role in the early 112(f) assessments and thus 
require updated assessments via the IRIS process. These are under 
development for completion in 2002 and 2003. As these IRIS assessments 
are available, they will be relied upon in risk assessments completed 
under 112(f). As information is available regarding pending changes to 
IRIS assessments, it will be used to supplement 112(f) risk assessments 
and to inform 112(f) rule development as feasible and where 
scientifically appropriate. Our general policy is that any dose-
response (or health) assessment that would significantly affect a 
regulatory decision should be peer reviewed prior to finalization of 
that decision.
    Question. In response to questions submitted last year on your 
fiscal year 2002 budget proposal, EPA stated that the primary 
determinant of how many new assessments can be undertaken in fiscal 
year 2002 is the ``availability of scientific staff to lead or oversee 
the work.'' Please provide the number of scientific staff EPA dedicated 
to IRIS updates over the past four fiscal years and the Agency's plans 
for fiscal year 2003.
    Answer. Availability of scientific staff to lead or oversee 
assessment development and review is key to the IRIS process of 
generating Agency consensus documents. Over the past 4 years, an 
average of 40 ``IRIS chemical managers'' have been involved across the 
Agency. In addition, 16 ``consensus reviewers'' and many other internal 
peer reviewers have contributed to the scientific process. Most have 
multiple responsibilities in addition to participating in the IRIS 
program. A central IRIS staff also contributes to scientific quality 
assurance. In fiscal year 2003, EPA staffing is likely to continue at 
approximately the same level.
    Question. One way to accelerate IRIS updates is to make greater use 
of external entities in helping to conduct risk assessments, subject to 
EPA review and approval. In response to questions on your fiscal year 
2002 budget submittal, your Agency stated that it has 6 pilot 
assessments underway which involve collaborative efforts to develop 
assessments with other Agencies and the private sector, and ``that the 
Agency will have sufficient experience with these efforts to evaluate 
them in terms of quality and timeliness of products in fiscal year 
2002.'' What were the results of this review and what are the Agency's 
plans to expand the use of outside entities?
    Answer. EPA has been interested in the possibilities for 
accelerating IRIS updates by making greater use of health assessments 
generated by external entities. The Agency undertook six pilot 
assessments in fiscal year 2000 whereby EPA could engage in a dialogue 
with and provide feedback to external parties developing health 
assessments which could then be used as supporting documents for EPA's 
IRIS assessments. Other IRIS assessments in progress also engage 
external entities in various aspects of data or model development and 
review, but the aforementioned pilots test whether a full health 
assessment generated externally can be useful for EPA. Two of these 
pilots have since been discontinued, and the remaining four are still 
in progress. The need for sustained engagement of EPA chemical managers 
to interact with external entities is one important aspect of ensuring 
usable, timely products. Expansion of this effort to engage external 
entities in the development of assessments useful to EPA for IRIS will 
depend in part on availability of staff and evaluation of the four 
remaining pilot assessments when they are completed.
    Question. As noted in previous correspondence to the Agency, EPA 
committed in an August 26, 1994, Air Office Guidance on the Use of 
integrated Risk Information System to incorporate new toxicological 
information during rulemakings. This commitment was repeated by 
Administrator Whitman on September 7, 2001 (66 FR 46929) when she 
stated that ``IRIS values are not legally binding and are not entitled 
to conclusive weight in any rulemaking.'' To make this commitment a 
reality during the development of residual risk standards, how many 
FTEs with scientific background does the air program office have to 
evaluate new toxicological data?
    Answer. Different program offices within EPA participate in the 
IRIS process in different ways. Some program offices have an in depth 
expertise in toxicology and thus update and/or develop most of their 
IRIS assessments. OAR has limited expertise in this area and thus has 
relied to a large extent on the Agency's Office of Research and 
Development (ORD)/National Center for Environmental Assessment (NCEA) 
offices to update reference concentrations (RfCs) for priority 
chemicals. This support is critical to our regulatory program. ORD 
assists OAR in the air toxics residual risk program by reviewing 
toxicological data and in the consultative review of other residual 
risk assessments. ORD devotes approximately 9 FTE per year to assist 
OAR with IRIS. In addition, OAR has 2 FTEs with the requisite 
scientific knowledge to evaluate new toxicological data. The air 
program currently has 0.2 FTE of these FTEs available in OAR to do this 
kind of work. Discussions are currently in progress to determine how 
OAR can begin to develop IRIS files for chemicals that are not high 
priorities for other program offices and to help the Agency speed up 
the process of evaluating new toxicological data.
    Question. If EPA expects ORD to conduct any review, please describe 
the process by which this data will be reviewed to ensure a timely 
evaluation, especially in instances where there is inadequate time for 
a full fledged IRIS value review and update? How many FTEs in ORD will 
be devoted to reviewing toxicological data submitted during or in 
anticipation of rulemakings?
    Answer. ORD will continue to assist the Office of Air and Radiation 
(OAR) in the air toxics residual risk program. ORD reviews 
toxicological data in the standard process for developing air toxics 
assessments for IRIS. Where there is inadequate time or priority for 
developing an IRIS assessment, ORD recommends other sources for dose-
response values. ORD also assists in the consultative review of other 
residual risk assessments for OAR. ORD devotes approximately 8 FTE per 
year to the development of assessments for chemicals of priority to the 
residual risk program, and less than 1 FTE per year for consultative 
review.
                         mact standard setting
    Question. How many MACT standards have yet to be promulgated? 
Please provide an updated list of the remaining MACT source categories 
and the Agency's current schedule for when the Agency will promulgate 
standards for these source categories.
    Answer. There are 36 10-year Maximum Achievable Control Technology 
(MACT) standards that are yet to be promulgated; three of the 
promulgations represent a combination of 2 standards from the original 
list of categories subject to MACT. These were efficiently combined 
because they addressed the same industry. The updated list of remaining 
MACT standards and the draft schedule for completion are:
Signature by June 30, 2002
    Large Appliances
    Polyvinyl Chloride & Co-polymer Production
Signature by November 30, 2002
    Municipal Solid Waste Landfills
    Friction
    Paper & Other Web Coating
Signature by February 28, 2003
    Flexible Polyurethane Foam Fabrication Operations
    Coke Ovens; pushing, quenching & battery stacks
    Reinforced Plastics
    Semiconductors
    Miscellaneous Metal Parts & Products (Surface Coating) (&Asphalt/
Coal Tar Application on Metal Pipes)
    Refractories Manufacturing
    Brick, Structural Clay Products & Clay Ceramics Manufacturing \1\
---------------------------------------------------------------------------
    \1\ These promulgations represent a combination of 2 standards from 
the original list of categories subject to MACT. These were combined 
because they addressed the same industry.
---------------------------------------------------------------------------
    Asphalt Roofing/Asphalt Processing
    Integrated Iron & Steel
    Hydrochloric Acid Production Industry/Fumed Silica \1\
    Engine Test Cells/Stands
    Metal Furniture
    Fabric Printing, Coating & Dyeing
Signature by August 30, 2003
    Combustion Turbines
    Wood Building Products
    Lime Manufacturing
    Site Remediation
    Iron Foundries
    Taconite
    Miscellaneous Organic Chemical Products & Processes (MON)
    Organic Liquids Distribution
    Primary Magnesium
    Metal Can
    Plastic Parts (Surface Coating)
Bin 5 Signature by February 28, 2004
    Industrial, Commercial & Institutional Boilers & Process Heaters 
\1\
    Plywood & Composite Wood Products
    Reciprocating Internal Combustion Engines (RICE)
    Auto & Light Duty Truck Manufacturing (Surface Coating)
                         mact standard setting
    Question. Under the Section 112(j) of the Clean Air Act, if the 
Administration fails to promulgate a MACT standard within 18 months of 
the statutory deadline--May 15, 2001--owners and operators must file a 
permit application with their state and local permitting authorities 
that includes a source-specific MACT determination--a very burdensome 
requirement on sources. Part I of this application is due on May 15, 
2001. How many individual sources does EPA estimate will have to submit 
Part I applications? When will the Part II applications be required?
    Answer. As of May 15, 2002, the Part I permit application deadline, 
we had not promulgated 36 MACT standards covering 62 source categories. 
We roughly estimate that there are over 84,000 emitting facilities 
located at major sources subject to the Part 1 submittal requirements. 
The actual number of Part 1 applications will be significantly less 
because many major sources contain multiple emitting facilities 
contained in the source categories. However, each application will 
cover as many of the emitting facilities as are located at that source.
    In the recent rule amendments which created the two-part 
application process, we made it clear that the Part 2 application must 
include certain source-specific information needed to make a MACT 
determination, but the application itself need not include a ``source-
specific MACT determination.'' Although the current regulation 
specifies that sources have 24 months to submit the Part 2 application 
after submitting the Part 1 application, a national environmental group 
has filed a petition for judicial review to challenge this provision. 
We are currently engaged in settlement discussions in that case, and 
these discussions will most likely lead to a proposed change in this 
timetable. If we fail to reach a settlement an adverse judicial 
determination in that case could also change the timetable.
    Question. If EPA has yet to promulgate standards by this date, what 
additional information will have to be included in the Part II permit 
application?
    Answer. Part 2 of the permit application requires:
  --The anticipated date of startup of operation of any new affected 
        source.
  --The hazardous air pollutants emitted by each affected source in the 
        relevant source category and an estimated total uncontrolled 
        and controlled emission rate for hazardous air pollutants from 
        the affected source.
  --Any existing Federal, State, or local limitations or requirements 
        applicable to the affected source.
  --For each affected emission point or group of affected emission 
        points, an identification of control technology in place.
  --Information relevant to establishing the MACT floor.
  --Any other information reasonably needed by the permitting authority 
        including at the discretion of the permitting authority, 
        information required pursuant to Subpart A [the general 
        provisions] of this part.
    Question. How many individual sources does EPA anticipate under 
best and worst case scenarios will have to submit a Part II 
application?
    Answer. We estimate that anywhere from 0 to over 84,000 emitting 
facilities at major sources could be subject to the Part 2 application 
requirements. We are currently engaged in settlement discussions with 
an environmental group to establish a fairly tight schedule to 
promulgate the remaining MACT standards. Under the 24 month timetable 
in the current promulgated section 112(j) rule, we would expect to 
promulgate all MACT standards before any Part 2 applications are due, 
so that no sources would be affected. However, if the timetable is 
changed as a result of the legal challenge to the rule that has been 
filed, a significant number of Part 2 applications could be required. 
The number of affected facilities is greatest for the MACT standards 
that we expect to promulgate last. Of the 84,000 facilities, 
approximately 79,000 are in source categories for which we expect to 
issue a final standard more than 1 year after the submission of Part 1 
applications.
    Question. EPA's current failure to meet the May 15, 2002 ``hammer'' 
deadline is perplexing to the Committee given the Agency's previous 
public comments that assured state regulators and sources that the 
deadlines would be met. For instance in a May 19, 1999 letter, Ms. 
Sally L. Shaver, Director of the Emission Standards Division, wrote a 
letter to STAPPA and ALAPCO stating that ``EPA intends to promulgate 
all standards by the hammer date.'' Why now, less than 2 years later, 
is EPA saying that it will miss the hammer date for many source 
categories? What has happened to change this picture so dramatically 
that was not foreseen in May 1999?
    Answer. In May 1999, when the letter was written, the Agency was 
being realistic about the completion of the 10-year MACT standards. We 
did intend to promulgate all standards by the ``hammer date.'' We 
continued reinvention approaches such as consolidating rules, 
partnerships with states in making presumptive MACT determinations, 
generic MACT approach where rulemakings for source categories with four 
or fewer major facilities would be developed as a broad-based rule, and 
working with partners to reduce cost of rules to help with our goal to 
meet the ``hammer date.'' We had less information on the 10-yr MACT 
sources categories than we had on earlier MACT source categories, 
therefore we needed information from industry as we developed the 
standards. We did not anticipate the amount of information we received 
on these source categories, and in some cases the information was not 
received in a timely manner, so additional time was required to analyze 
the information. There were also procedural changes in our review 
process for the standards.
    Question. Even as recent as last year, the Agency's budget 
justification for fiscal year 2002 stated that: ``EPA plans to have all 
the 10-year MACT standards proposed and completed in fiscal year 
2002.'' Will EPA meet even this deadline and, if not, why not?
    Answer. No, but we plan to have all the 10-year MACT proposed by 
November 2002. We fully intended to have the 10-year MACT standards 
completed by the ``hammer date,'' but due to reasons mentioned in the 
previous response, we will still have 36 standards to promulgate.
    EPA's failure to meet the hammer date is all the more troubling 
when considering EPA's repeated decisions to ``retarget'' resources 
away from MACT standard setting activities. For instance:
    Fiscal year 2000 budget justification.--``(+$6,600,000) The Agency 
proposes to retarget resources from setting MACT and residual risk 
standards to better characterize total environmental toxic risk, 
particularly in urban areas.'' (Page I-47)
    Fiscal year 2001 budget justification.--(+$10,600,000) The Agency 
continues to retarget resources from setting MACT and residual risk 
standards to better characterize the total environmental toxic risk, 
particularly in urban areas.'' (Page I-52)
    Fiscal year 2002 budget justification.--(-$2,030,300) This 
reduction reflects that resources have been decreased for MACT standard 
development since EPA plans to have all the 10-year standards proposed 
and completed in fiscal year 2002. Some resources have been 
reprogrammed from MACT development for modeling and emission inventory 
efforts to characterize air toxics risk and exposure and for residual 
risk assessments on implemented MACT standards. In addition, resources 
were reduced for the one year effort to ensure all stakeholders have 
the latest information about air pollution control technologies and 
full access to RACT/BACT/LEAR Clearinghouse for Control Technologies.'' 
(Page I-62)
    Question. Why did the EPA repeatedly propose to redirect resources 
away from MACT standard setting given the costly and onerous 
consequences for states and sources if the Agency fails to meet the 
statutory deadlines?
    Answer. Section 112 of the Clean Air Act has many requirements. 
Title III of the Amendments, which contains major stationary and area 
source requirements, lists 188 HAPs and requires EPA to develop 
standards for major stationary sources of these pollutants. Within 8 
years after promulgating these MACT standards, EPA must evaluate the 
residual risk posed by these sources and promulgate risk-based 
standards, if needed, to provide an ample margin of safety to protect 
public health or the environment.
    As part of its ongoing efforts to protect public health in urban 
areas, and in response to the requirements of sections 112(c)(3), (k) 
and 202(l), EPA released the Integrated Urban Air Toxics Strategy which 
builds on the substantial emission reductions already achieved from the 
larger industrial stationary sources. While the Strategy is not a rule, 
additional regulations are required to establish emission standards for 
additional categories of area sources, and may be needed to fully 
address remaining risks posed by the combination of emissions from 
mobile, major stationary, and area sources. The goals of the Strategy 
are to reduce by 75 percent the risk of cancer associated with air 
toxics from large and small industrial/commercial sources, to 
substantially reduce noncancer health risks (such as birth defects and 
reproductive effects) from small industrial/commercial sources known as 
areas sources, and to address disproportionate impacts such as those in 
``hot spots,'' highly exposed population subgroups such as children and 
the elderly, and predominately minority and low income communities.
    Because of these requirements, we started retargeting resources to 
meet these goals. In addition, some of the MACT resources were 
allocated to address litigation on the 2-, 4-, and 7-year MACT 
standards, which we continue to be sued on. Our focus continues to be 
the completion of the 10-year MACT standards, but because of new 
industry information, procedural changes and other issues mentioned in 
previous responses, we did not meet the MACT standard deadlines.
    Question. Why did the Agency believe that other activities, such as 
obtaining more information on the nature of the air toxics problem, was 
more important than assuring that Congressional deadlines are met?
    Answer. As mentioned in prior response, EPA was trying to meet the 
many requirements of Section 112 of the Clean Air Act. We intended to 
meet the goal of completing the 10-year MACT standards and started 
shifting resources into risk-based activities and balance funding 
between residual risk and national, urban, and community assessment 
activities. Also, inventories are an integral part of the risk-based 
program and are needed to meet the residual risk requirements with 
technically-credible assessments.
    Question. What is the Agency doing now to avoid the mistakes of the 
past and assure that sufficient resources are now being dedicated to 
assure that all of the MACT standards will be issued before the Part II 
applications are due?
    Answer. We are doing our best to develop and promulgate the 
remaining MACT standards. We believe that the resources are adequate, 
but the critical resource is time. Many of these standards are very 
involved and cannot be sped up, while adhering to the Agency's internal 
review process and quality control procedures and allowing for 
appropriate stakeholder involvement as the standards are developed. We 
cannot assure with certainty that all remaining MACT standards will be 
promulgated before the Part 2 applications are due, especially if 
litigation settlement discussions result in a change in the timetable 
for submitting Part 2 applications.
    Question. Please provide the Committee with yearly estimates of the 
number of FTEs and budget resources that have been dedicated to MACT 
standard development for fiscal years 1999 to 2002 and your current 
proposal for fiscal year 2003.
    Answer. The following are the yearly estimates of the FTEs and 
budget resources that have been dedicated to MACT standard development:

----------------------------------------------------------------------------------------------------------------
                                       1999            2000            2001            2002        2003 request
----------------------------------------------------------------------------------------------------------------
FTE.............................           102.1            92.8            88.4            63.7            61.4
Contract........................       $10,890.0        $8,286.0       $10,700.0        $8,237.0        $8,162.0
----------------------------------------------------------------------------------------------------------------

    Question. The existing 112(j) MACT rule states that the Part 1 
application must include an identification of the ``types of sources'' 
that belong to the source category. Please explain to the Committee 
whether this requires sources to identify and list specific equipment 
or emission points at the source.
    Answer. The Part 1 application is designed to be relatively general 
in nature and not require specific information. The more detailed, 
specific information is intended to be supplied in Part 2 of the 
application. We do not intend sources to identify and list specific 
equipment or emission points when identifying the ``types of sources'' 
that belong in a source category. Instead, the source should generally 
describe what types of emission points are included by the source 
category at the source. For example, an asphalt processing facility 
(covered under the asphalt processing source category) would be 
composed of asphalt flux storage tanks, oxidized asphalt storage tanks, 
one or more blowing stills, and oxidized asphalt loading racks.
                    hydraulic fracturing: timetable
    Question. Provide a timetable describing EPA's review of questions 
surrounding hydraulic fracturing and study to review this issue.
    Answer. EPA's coalbed methane hydraulic fracturing study grows out 
of issues concerning the scope of EPA's Underground Injection Control 
authorities. In August 1997, the 11th Circuit Court of Appeals (the 
Court) ruled that either Alabama must regulate hydraulic fracturing in 
coalbed methane wells or EPA must take over Alabama's program and 
regulate the process under the SDWA as underground injection (LEAF v. 
EPA, 118 F. 3d 1467). In 1998, the Court issued a writ of mandamus 
ordering EPA to withdraw Alabama's UIC program or approve a revised 
program by December 1999.
    EPA worked with Alabama to modify the state's program consistent 
with the Court's decision, and published approval to a revised UIC 
program for Alabama in January 2000. Concurrent with the Agency's 
efforts to modify the state's program, members of Congress began to 
contact the Agency in March 1999 to recommend that EPA collect more 
information on the possible contamination of aquifers, and the 
Administrator responded within weeks to inform the Congress of the 
Agency's intentions to conduct a study. In April 2000, EPA launched a 
process to develop a study to evaluate the impacts to underground 
sources of drinking water (USDWs) from hydraulic fracturing of coalbed 
methane wells.
    In addition to requesting written comments on its draft study 
design, in August 2000 EPA held a public meeting in Washington, DC to 
receive stakeholder input on the scope of the study and the process EPA 
would follow in completing the study. After considering the extensive 
written and oral comments from a wide variety of stakeholders, 
including industry, state oil and gas agencies, public interest groups, 
and concerned citizens, EPA proposed its final design in the Federal 
Register in July 2001.
    Question. Why has the study taken so long to complete and why it is 
so far behind the original schedule?
    Answer. The study was designed to have three possible phases, and 
at the completion of each phase, EPA must determine whether the 
findings to-date warrant continuation into the next phase. The Agency 
is currently engaged in Phase I, a limited assessment designed to 
enable the Agency to determine whether hydraulic fracturing of coalbed 
methane wells clearly poses a threat to USDWs. If EPA decides further 
investigation is warranted, the study will continue into Phase II. 
Phase II would consist of additional data collection and the completion 
of a risk assessment. Phase III would be a review of existing 
regulations and a regulatory determination.
    Early in the implementation of Phase I of the study, EPA proposed 
the initial schedule with the expectation that we would find no 
hazardous constituents in the fracturing fluids. We have identified 
several constituents of concern, however, including diesel fuel. 
Further, the Agency intends to thoroughly investigate the economic as 
well as environmental implications identified in the process of 
implementing the study.
    EPA is taking the time necessary to ensure that the study is 
thorough and accurate before publishing a draft for stakeholder 
comment. And because the study results could have a great impact on 
many stakeholders, including states, industry, and other Federal 
agencies, the Agency is attempting to engage all affected interests at 
an appropriate level to collaborate on the data collection.
               hydraulic fracturing: peer review process
    Question. Could you please explain the peer review process for this 
study?
    Answer. The hydraulic fracturing study is carefully designed to 
ensure extensive peer review by experts in industry, academia, and 
state and Federal agencies of the study's data sources, analytical 
approaches, and conclusions. The peer review process has been conducted 
in four stages: (1) internal Agency review by headquarters offices and 
EPA Regions; (2) inter-agency review by the U.S. Department of Energy, 
U.S. Geological Survey, and state agencies dealing with ongoing 
hydraulic fracturing issues; (3) independent peer review by an EPA-
convened scientific panel of experts from industry, academia, and state 
and Federal agencies; and (4) stakeholder review.
    All supporting documentation and data from the study are part of 
the project files, and all reviewer comments are preserved as a part of 
the public record.
                hydraulic fracturing: peer review panel
    Question. In correspondence with members of the peer review panel 
on the study, EPA apparently indicated that the panel would have a 
final review prior to the public release of the study. More recent 
correspondence with the peer review panel has indicated that the panel 
will not see the study again until it is released publicly, at which 
time the panel would be invited to comment as part of the public 
comment process. This seems to violate the Agency's commitment to peer 
review studies to produce the best possible science. Why was the peer 
review panel denied the opportunity to again review the study prior to 
its public release and doesn't this weaken the study and throw into 
question its scientific validity?
    Answer. EPA's Peer Review Policy establishes the criteria and 
requirements for independent evaluation of scientific and technical 
studies and documents. The Agency has conducted the peer review for the 
hydraulic fracturing study consistent with that policy, and assembled 
an expert panel with representation from industry, academia, and State 
and Federal agencies. The charge to the peer review committee was to 
review the report to determine if (1) the report is complete, thorough, 
and accurate and (2) the scientific/technical studies reviewed are 
applied in a sound, unbiased manner. The peer review panel has provided 
extensive and useful comments. After addressing the panel's comments, 
EPA determined that no additional review was necessary from the panel. 
The peer review panel members will have additional opportunities to 
comment once the study is released.
            hydraulic fracturing: state oil and gas agencies
    Question. States in the United States have for decades regulated 
hydraulic fracturing in the United States. Were State Oil and Gas 
agencies contacted directly by the authors of the study to determine if 
and how states regulate hydraulic fracturing? If so, please document 
those contacts. If not, why not?
    Answer. An initial investigation by the Ground Water Protection 
Council (GWPC) into state regulation of hydraulic fracturing raised 
questions about whether technical requirements regulating the practice 
of hydraulic fracturing exist. In its investigation, GWPC contacted 
state oil and gas agencies for information related to complaints on the 
impacts of hydraulic fracturing.
    EPA did contact state oil and gas agency officials during Phase I 
to determine how they were responding to citizen complaints, to 
understand states' unique geologic conditions, and to learn more about 
hydraulic fracturing industry practices in individual states. The 
Agency is close to completing the final draft report for Phase I of the 
study; if it necessary to continue on to Phase III of the study, EPA 
will contact state oil and gas agencies again specifically to determine 
how states regulate hydraulic fracturing.
                    hydraulic fracturing: landowners
    Question. Were landowners contacted directly by the authors of the 
study in an attempt to determine if any landowner's wells were damaged 
by hydraulic fracturing? If so, please document those contacts. If not, 
why not?
    Answer. In the implementation of Phase I of the study, landowners 
contacted EPA, concerned that coalbed methane development had impacted 
their drinking water wells. Landowners voiced their concerns to EPA 
through electronic mail, letters, telephone interviews, and local 
meetings. The Agency responded to these concerns by conducting follow-
up phone interviews with nine individuals. Through these conversations, 
EPA has heard from citizens in all of the most active coalbed methane 
production basins: Black Warrior (Alabama), San Juan (Colorado and New 
Mexico), Powder River (Montana and Wyoming), and the Central 
Appalachian (Virginia). In response, the Agency contacted more than 30 
employees at state and local agencies to better understand ground water 
issues, investigations, and any actions taken in response to citizens' 
concerns.
    A few citizens reported that they believed their drinking water 
wells were impacted from hydraulic fracturing of coalbed methane wells; 
others expressed concern about the risks associated with hydraulic 
fracturing. Most of the citizens reporting problems did not specify 
hydraulic fracturing, but noticed that their problems started after 
coalbed methane production began. Citizens and county agency employees 
also reported that the ``dewatering'' of coal seams that occurs during 
production creates several environmental problems, such as: (1) 
contamination of wells with methane, hydrogen sulfide, and bacteria; 
(2) explosive levels of methane and toxic levels of hydrogen sulfide 
accumulating under buildings and in living spaces; (3) spontaneous 
combustion and continued burning of completely dewatered coalbeds; and, 
(4) flooding from water pumped to the surface.
    Based on its discussions with landowners, coalbed methane 
production may be negatively impacting drinking water wells. In two of 
the most active basins (San Juan and Powder River), drinking water 
wells appear to have been negatively impacted because large amounts of 
ground water are removed from coalbed formations in order to release 
the methane in coal seams. The hydraulic fracturing study conducted by 
EPA's UIC Program, however, is narrowly focused on hydraulic fracturing 
in coalbed methane wells, and does not address the potential impacts of 
ground water removal and subsequent discharge.
    Subsequent to these conversations, in July 2001 EPA published a 
notice in the Federal Register requesting further information from the 
general public. The Agency then sent copies of the notice to nearly 500 
local agencies to ensure that communities with aquifers that may have 
been impacted by coalbed methane development would contact EPA. EPA 
received four responses from counties it had not heard from previously, 
but none of these contacts produced information confirming that 
drinking water wells had been impacted from hydraulic fracturing 
activities. EPA heard from only two county agencies representing 
citizens that had contacted EPA to express concern that coalbed methane 
development had impacted their drinking water. This low response rate 
was not unexpected, however, since each of the Federal Register notices 
was accompanied by a cover note explaining our project and a request 
that agencies not contact EPA if they had already provided information 
to the Agency.
         lead: bio-availability of lead sulfides vs lead oxides
    Question. What is the bioavailability of lead sulfides as opposed 
to lead oxides?
    Answer. ``Bioavailability'' is a simple term used to describe a 
complex concept. Aside from chemical influences, bioavailability is 
also very dependent on particle matrix (micro structure of the 
particles) and particle diameter (particle size) as well as 
physiological status (pregnancy, age, nutritional status, etc) of the 
receptor. It is dependent upon the solubility/availability (both 
intensity and capacity) of the compound in an exposure matrix and its 
transport (active and passive) across a biological barrier. One 
suggested definition is ``that fraction of the total amount of material 
in contact with a body portal-of-entry (lung, gut, skin) that enters 
the central compartment (blood).'' This is the definition used in the 
comparison described below.
    EPA Region 8 has evaluated in vivo (swine) bioavailability for a 
number of lead contaminated soils as well as soil spiked with lead 
minerals. Additionally, the soils have been evaluated by in vitro 
bioavailability techniques. Both techniques have illustrated that lead 
mineralogy influences bioavailability. Galena (lead sulfide) has low 
bioavailability (0-5 percent in vivo Relative Bioavailability) whereas 
litharge (lead oxide) has high bioavailability (80-100 percent in vivo 
Relative Bioavailability). The Agency considers these bioavailability 
factors and other factors, such as particle size and timing of soil/
dust ingestion relative to meals, in making adjustments to the IEUBK 
model default value.
lead: lead sulfide in galena form vs lead in oxide form affect on human 
                                  body
    Question. Does lead sulfide, as it is found in its natural state of 
galena and mined to obtain lead, taken up and affect the human body 
differently than lead in the oxide form as found in lead-based paint or 
emissions from smelting?
    Answer. It is reasonable to assume that, all other factors being 
the same, lead oxide would dissolve more quickly than equal amounts of 
lead sulfide, in an acidic environment. However, small amounts of 
either form of lead might completely dissolve, or nearly so, in the 
stomach environment over a period of hours. The total amount of dust 
and the residence time in the stomach are key factors in this. The 
combination of the warm, chemically acidic environment, the constant 
agitation, and the 2-3 hour time period virtually assures the 
dissolution of the 80-130 mg of small particles ingested per day, which 
is the default range of age-related ingestion rates in the Integrated 
Exposure Uptake Biokinetic (IEUBK) model (discussed in the following 
question). However, as this gastric solution is passed into the 
duodenum, a sudden change to a basic pH occurs which, in the presence 
of normal amounts of phosphate, causes a precipitation of all lead to 
the highly insoluble form of lead pyrophosphate. From this point on, 
only about 1 percent of the pyrophosphate lead is available for 
absorption in the small intestine at any given time. If larger 
particles were ingested that didn't totally dissolve in the stomach, 
some of this lead, whether in the sulfide or oxide form, would continue 
to be slowly dissolved in the small intestine at different rates and 
made available for absorption at different times from ingestion. As the 
small amount of soluble lead from both the pyrophosphate and the 
partially dissolved particles is absorbed, more lead is dissolved, and 
during the total residence time in the small intestine, about eight 
hours, about 30 percent of the total amount of lead would be absorbed. 
In the IEUBK model, the default absorption percentage is 30 percent 
(regardless if ingested as lead sulfide or lead oxide) for lead in both 
soil and dust, based on the assumptions discussed here.
lead: potential risk of different forms of lead to regulatory decisions
    Question. What information does EPA have on this issue and how does 
it analyze and apply the varying potential risk of different forms of 
lead to its regulatory decisions?
    Answer. EPA has access to the published literature on the topic as 
well as knowledge of ongoing work and unpublished data. In performing 
risk assessments for childhood exposure to lead (Pb) in support of 
regulatory decisions, U.S. EPA routinely uses the Integrated Exposure 
Uptake Biokinetic (IEUBK) Model for Lead in children. This model 
developed by U.S. EPA's National Center for Environmental Assessment 
(NCEA), considers all normal sources of lead in its various chemical 
forms. Under current guidance, ``total'' contaminant concentration in 
soils is used to establish risk based clean-up levels. In the case of 
Pb, the IEUBK model is used to establish acceptable levels of soil Pb. 
The IEUBK is designed to predict the probable blood Pb concentration 
(PbB) for children between 6 months and 7 years of age who are exposed 
to Pb through multiple environmental media (e.g., air, water, soil, 
dust, and diet). Using an assumed (30 percent) absolute bioavailability 
of soil Pb, the PbB level is estimated by the model.
    In the case where there is evidence for a percentage other than the 
default 30 percent absorption, the model permits the risk assessor to 
make such an adjustment to this parameter, either more or less than the 
default 30 percent. Risk assessors are always encouraged to use non-
default parameters in the IEUBK model whenever they can present 
scientific evidence to support their use.
    EPA Region 8 has encouraged exposure-based monitoring aimed at 
quantitative evaluation of site-specific risk. The use of an immature 
swine model to estimate site-specific oral Pb bioavailability in 
children who are exposed to Pb has been used. Approximately 20 
different Pb contaminated soils on 10 different hazardous waste sites 
have been analyzed. Preliminary site-specific estimates of relative 
soil Pb absorption (relative bioavailability) range from 6 percent to 
greater than 85 percent when compared to soluble Pb acetate. These 
values translate to 3 percent to 42.5 percent absolute bioavailability, 
as used in the IEUBK model. The use of these values in the IEUBK model 
rather than the 30 percent default value results in different cleanup 
values. For example, a site-specific bioavailability study of Bingham 
Creek Utah (costing approximately $100K) provided a bioavailability 
factor of 19 percent. The use of the site-specific bioavailability of 
19 percent rather than the assumed default value (30 percent) resulted 
in reductions in estimated remedial costs on the order of $4 million.
 water infrastructure funding: reasonable level of funding to preserve 
                        existing infrastructure
    I consider the status of our Nation's water infrastructure as the 
most pressing issue facing the EPA, and one of the most important 
issues for the Nation, both for quality of life and public health. In 
particular, while I support the funding of $850 million for the 
Drinking Water State Revolving Fund, I am extremely disappointed that 
EPA has requested only $1.212 billion for the Clean Water State 
Revolving Fund, a reduction of $138 million from the fiscal year 2002 
level.
    This is especially troubling since the next EPA Gap Analysis is 
expected to confirm the need for some $350 billion in water 
infrastructure needs over the next 2 decades. Moreover, outside groups 
have indicated that the need could be as high as some $740 billion over 
the next 20 years, with $200 billion more in financing and another $980 
billion for local governments to maintain and operate this 
infrastructure. These additional costs are intended to include the cost 
to replace aging and failing infrastructure, activities which are not 
currently eligible.
    Question. These funding estimates are far in excess of any current 
level of funding and likely far in excess of any funding proposed at 
least in the foreseeable future. What is a reasonable level of funding 
needed to preserve the existing infrastructure?
    Answer. The financial demands that communities face in providing 
clean and safe water to all Americans are substantial, and the 
Administration is committed to helping find ways to meet those demands. 
The Federal government has provided more than $80 billion in wastewater 
assistance since passage of the Clean Water Act, which has dramatically 
increased the number of Americans enjoying better water quality. This 
includes replacement of aging and failing infrastructure, which is 
certainly an eligible use of the Clean Water State Revolving Fund 
(CWSRF) under Section 212 of the Clean Water Act in fact, the CWSRF has 
provided some $5.8 billion to repair aging and failing wastewater 
collection systems alone.
    For fiscal year 2003, the President's requests of $850,000,000 for 
the Drinking Water State Revolving Fund and $1,212,000,000 for the 
Clean Water State Revolving Fund, for a total of $2,062,000,000, is the 
largest-ever combined request for the State Revolving Funds.
    EPA's most recent Drinking Water and Clean Water Needs Surveys have 
identified $150.9 billion and $150.5 billion, respectively (both in 
1999 dollars), in documented needs eligible for SRF assistance in the 
coming decades. More recent estimates associated with correcting 
sanitary sewer overflows may increase the estimated total Clean Water 
needs, and the Agency expects to release a new Clean Water Needs Survey 
in August 2002.
    Over the past year or so, several stakeholder groups have issued 
reports estimating water infrastructure needs that are substantially 
higher, based on different methodologies and definitions. With that in 
mind, the Agency is actively working to improve information about long-
term infrastructure needs, assess different analytical approaches to 
estimating those needs, and estimate the gap between needs and 
spending. We expect to release the Agency's Gap Analysis this summer.
    While the Agency's Gap Analysis can help quantify the Nation's 
infrastructure challenges, the numbers themselves do not take into 
consideration how the various roles of Federal, State and local 
governments should be balanced. For the last 30 years, Federal, State 
and local governments have shared responsibility for infrastructure 
financing. Under any funding arrangement, therefore, the vast majority 
of future funds likely will come from local sources. It is also 
important to reduce capital, operation and maintenance costs through 
better management and more efficient service delivery, and by capturing 
productivity gains through innovations.
        water infrastructure funding: prioritizing funding needs
    Question. How should we prioritize the funding needs in the Nation? 
For example, what do we do about the aging and obsolete water 
infrastructure which is the concern of many cities and communities in 
the East and Midwest? How do prioritize these funding needs with new 
infrastructure requirements which have been created by the new arsenic 
standards?
    Answer. EPA recognizes the challenges facing America's communities. 
The Agency believes that the touchstone of our strategy to meet these 
challenges should be building fiscal sustainability. In particular, 
several basic principles should guide our pursuit of clean and safe 
water through fiscal sustainability:
    Utilizing the private sector and existing programs.--Fostering 
greater private sector involvement and encouraging integrated use of 
all local, State, and Federal sources for infrastructure financing.
    Promoting sustainable systems.--Ensuring the technical, financial, 
and managerial capacity of water and wastewater systems, and creating 
incentives for service providers to avoid future gaps by adopting best 
management practices to improve efficiency and economies of scale, and 
reducing the average cost of service for providers.
    Encouraging cost-based and affordable rates.--Encouraging rate 
structures that cover costs and more fully reflect the cost of service, 
while fostering affordable water and wastewater service for low-income 
families.
    Promoting technology innovation.--Creating incentives to support 
research, development, and the use of innovative technologies for 
improved services at lower life-cycle costs.
    Promoting smart water use.--Encouraging states and service 
providers to adopt holistic strategies to manage water on a sustainable 
basis, including a greater emphasis on options for reuse and 
conservation, efficient nonstructural approaches, and coordination with 
state, regional, and local planning.
    Promoting watershed-based decision-making.--Encouraging states and 
local communities to look at water quality problems and drinking water 
source water protection on a watershed scale and to direct funding to 
the highest priority projects needed to protect public health and the 
environment.
    The Agency has developed a comprehensive strategy to help drinking 
water systems that are affected by the new arsenic in drinking water 
standard. As described in its Report to Congress entitled ``Small 
System Arsenic Implementation Issues,'' beginning in fiscal year 2002 
the Agency will engage in three major activities: (1) a review EPA's 
small system affordability criteria to address affordability concerns 
raised by stakeholders and small communities; (2) develop and implement 
a small community drinking water assistance plan, which will enhance 
small systems' access to financial assistance and expand technical 
assistance and training; and (3) spend $20 million over fiscal year 
2002 and fiscal year 2003 for research, development, testing and 
implementation of effective, practical, and affordable treatment 
technologies to reduce compliance costs for drinking water systems 
affected by the new arsenic in drinking water standard.
    In addition, the Agency will continue its ongoing work with states 
to take full advantage of the suite of tools the SDWA provides to help 
small systems achieve compliance not only with the arsenic standard, 
but with other drinking water standards, including those for microbial 
contaminants, disinfectants, and disinfection byproducts, and for radon 
and radionuclides. A key component of this work is to maximize the 
availability of financial assistance to small systems under the 
Drinking Water State Revolving Fund (DWSRF). Finally, EPA and the U.S. 
Department of Agriculture (USDA) have signed a Memorandum of Agreement 
(MOA), under which USDA's Rural Utilities Service (RUS) commits to 
assigning high funding priority to projects that assist small 
communities in complying with the new arsenic in drinking water 
standard. The Agency further commits to enhance coordination of EPA and 
USDA programs to ensure that the maximum possible assistance is 
available to small communities for compliance with the new arsenic in 
drinking water standard.
              superfund cleanup: pace of superfund cleanup
    Question. What is the pace of Superfund cleanup compared to recent 
years and what can we do to ensure that the cleanup of SF sites are 
expedited to the extent possible?
    Answer. Conducting cleanups and achieving construction completions 
are Agency priorities. The amount of cleanup work the Agency has been 
performing during the last few years has been relatively stable. 
However, with nearly two thirds of the sites on the NPL cleaned, the 
remaining sites are lager and more difficult. (We are enclosing below a 
chart that explains Superfund cleanup compared to recent years).
    To make sure Agency resources are properly focused to achieve 
maximum results, we have initiated a Pipeline Management Review of 
Superfund sites that will result in a multi-year, site-specific 
strategy to ensure construction progress. Additionally, we are working 
to further enhance the ``enforcement first'' approach to increase early 
Potentially Responsible Party (PRP) involvement and maximize our use of 
PRP-funded special cleanup accounts.
    Question. I understand that some states are pushing for greater 
control over the SF program. To what extent do you support this 
approach and what are the pluses and minuses to greater state control?
    Answer. The Superfund program over the past several years has 
sought to ensure greater State involvement in the program. We have 
worked with states to support the development of State programs, such 
as voluntary cleanup programs, with a goal of getting more sites 
cleaned up by more people. The maturing of State programs, coupled with 
personnel and funding ceilings at the State level, in most cases has 
led to mutually agreed upon worksharing, where states and EPA strive to 
do the work each is best suited for. Let me provide a few examples.
    Since 1996, Superfund has followed a State concurrence policy that 
requests State or governor concurrence in decisions to place sites on 
the National Priorities List. This builds on fiscal year 1995 and 1996 
appropriations language. There has only been one exception to this 
policy since 1996. That site remains proposed to the NPL and EPA is 
working with the State (Wisconsin) in an effort to address the site 
without the need to finalize. Further, states frequently work with EPA 
in workshare arrangements where sites are assigned to EPA or the State 
for study and possible cleanup.
    In March 1998 Superfund published a Plan to Enhance the Role of 
States and Tribes in the Superfund Program. This allowed states to 
pilot activities that would establish new areas of involvement in the 
Superfund program. There were eight State pilots, most centering on the 
cleanup part of the process. As a result of the plan, Superfund 
developed an internal workgroup to continually explore ways of 
enhancing State and tribal roles, and is working with the Association 
of State and Territorial Solid Waste Management Officials towards this 
end.
    Both Superfund and RCRA management are working with State managers 
on the Senior Cleanup Council to increase understanding and cooperation 
across waste remediation programs. This is an issue that has long been 
of concern to states. Finally, the recently-signed Brownfields 
legislation requires extensive interaction between EPA and States in an 
effort to develop guidance and criteria for implementing the 
legislation. States are on a number of workgroups related to 
Brownfields legislation needs, limited by the requirements of the 
Federal Advisory Committee Act. We anticipate that the opportunity for 
states to continue to build and expand their own programs will continue 
to have Federal and State programs complement each other.
    EPA has been and will continue to be supportive of greater State 
involvement because it reduces duplication of effort and makes better 
use of resources.

Number of Superfund sites cleaned up each year, 1990 to present

                                              Number of sites cleaned up
        Year
1990..............................................................     8
1991..............................................................    12
1992..............................................................    88
1993..............................................................    68
1994..............................................................    61
1995..............................................................    68
1996..............................................................    64
1997..............................................................    88
1998..............................................................    87
1999..............................................................    85
2000..............................................................    87
2001..............................................................    47
2002 target.......................................................    40
2003 target.......................................................    40
    superfund cleanup: adequate funds to continue superfund cleanups
    Question. How do we ensure there are adequate funds in the future 
to continue Superfund cleanups?
    Answer. For fiscal year 2002, the President requested $1.3 billion 
for the Superfund program, excluding post 9/11 supplemental resource 
requests, consistent with the previous year's budget. For fiscal year 
2003, the Administration requested a similar budget to enable a 
comparable level of activity, while increasing the request for homeland 
security resources. The fiscal year 2003 budget will allow Superfund to 
continue to make cleanup progress at sites. We are currently 
considering what level of funding to request for fiscal year 2004 to 
ensure maximum Superfund performance and balance with other 
Administration priorities.
                      climate change kyoto accord
    Question. The United States has made it clear that it would not be 
bound to the Kyoto Protocol until developing nations are subject to 
binding emission targets. This is a key economic concern as well as a 
fairness issue. Nevertheless, sound science on global climate change 
issues also is key to both the United States domestic policy decisions 
on climate change and international agreements. While the EPA is not 
the primary Federal agency with regard to U.S. policy on international 
climate change issues, the EPA is an important partner in developing 
the environmental modeling and scientific research that will be 
critical to the continued evolution of U.S. policy. From your 
perspective as Administrator of EPA, what is the current status of the 
United States' international policy on climate change issues and what 
are the key issues and challenges facing the United States?
    Answer. Climate change is a complex, long-term challenge that will 
require a sustained effort over the long term. The Administration is 
opposed to the Kyoto Protocol because it exempts many countries from 
its requirements and could cause serious harm to the U.S. economy. 
However, America is committed to the United Nations Framework 
Convention and its central goal to stabilize atmospheric greenhouse gas 
concentrations at a level that will prevent dangerous human 
interference with the climate, though, as the President has noted, we 
do not yet know what that level is.
    The Administration's immediate goal, announced by President Bush on 
February 14, is to reduce the greenhouse gas intensity of the U.S. 
economy by 18 percent in the next 10 years, thereby slowing the growth 
of net emissions as they relate to economic output. While we have yet 
to determine what level of ghg concentrations would be dangerous, the 
Administration recognizes that achieving long-term stabilization of 
atmospheric greenhouse gas concentrations will require as the science 
justifies stopping and reversing greenhouse gas emissions growth. 
Slowing the growth of these emissions through expanded use of voluntary 
initiatives and proposed tax incentives will enable the development of 
technology to substantially reduce greenhouse gas emissions in the long 
term without the risk of harming the economy in the short term. The 
President has also committed that if progress is not sufficient by 2012 
and sound science justifies further action, the United States will 
respond with additional measures that may include a broad, market-based 
program, as well as additional incentives and voluntary measures 
designed to accelerate technology development and deployment.
    EPA is working to accomplish the President's commitment though 
reducing greenhouse gas emissions in partnership with businesses and 
consumers through our voluntary programs. We have found that these 
programs, such as Energy Star and Natural Gas STAR, can be incredibly 
effective, and we have every confidence that they will be able to lead 
us toward our goals for emissions reductions. We have also launched new 
programs such as Climate Leaders, which enables companies to 
voluntarily evaluate their impact on the environment and then act to 
change for the better in order to build on the successes of these 
voluntary programs.
    We are also looking beyond our borders to address this challenge. 
The United States has recently reached agreements with Australia and 
Canada which will focus on practical and economically efficient 
solutions to the climate issue, such as common approaches for emissions 
measurement, climate change science, technology development, and 
market-based approaches. We have also identified similar areas for 
cooperation with Japan and Italy specifically on the development of 
climate science and technology. Finally, we have formed Working Groups 
on climate change with China and India. The struggle to halt the 
effects of climate change does not recognize political boundaries, and 
we must work together with interested partners from around the world if 
we are going to effectively to address this long term, global issue.
              global and cross-border environmental risks
    Question. What is EPA doing to minimize pollution in the United 
States from pollution hazards originating outside the United States, 
such as from Mexico or Canada?
    Answer. EPA is actively engaged in a range of activities intended 
to reduce, prevent or otherwise minimize the impacts on the U.S. 
environment and public health from sources of pollution originating 
outside of our borders. The broad responses address a wide range of the 
contaminants of concern, a diversity of pollution source types and 
media transport mechanisms. EPA's activities include working along our 
borders with Canada and Mexico and cooperation with a substantial 
number of other countries across a wide area of the globe, for example 
by participating in multi-lateral agreements to address identified 
regional and global transboundary pollution threats. Many of EPA's 
major program offices, regional offices and laboratories are involved 
in these efforts, and in many of its endeavors the Agency also 
cooperates with other Federal and State agencies, non-governmental 
organizations and multilateral/international bodies.
    EPA's international efforts include environmental protection 
capacity building, technical assistance, technical information 
exchange, international monitoring and assessment, cooperative research 
and development, and negotiation of international agreements. However, 
the specific responses are a function of the particular pollutant's 
chemical behavior, media transport mode, nature of the source types and 
circumstances of the foreign involvement.
    The Agency is also concerned with conducting research and 
assessments of new or unaddressed risks, and improving the scientific 
basis of our general understanding of the known transboundary 
environmental threats, such as the global flows of mercury. EPA has 
both internal and international cooperative efforts aimed at improving 
our understanding of the problems, including research into the chemical 
and physical processes involved in long-range transport and 
transformation of pollutants, such as the global flows of mercury. The 
Agency also engages in technology development addressing the 
international problems.
    EPA's major efforts in addressing transboundary pollution impacting 
the U.S. mostly fall into the following four broad categories:
  --the U.S. border areas with Mexico and Canada and general 
        cooperation with these immediate U.S. neighbors on 
        transboundary contamination problems,
  --efforts addressing regional Arctic contamination and threats to 
        Alaska and indigenous populations, mostly from pollution 
        sources in Russia,
  --international cooperation and agreements addressing global sources 
        of persistent organic pollutants (POPs) and other toxic 
        substances, and
  --very long-range air transport of a variety of pollutants and the 
        problem of global cycling of mercury
                           program specifics
    U.S. border Areas with Mexico and Canada and General Transboundary 
Contamination Cooperation with these Immediate U.S. Neighbors:
U.S.-Mexico
    The U.S. and Mexico cooperate on a number of programs to protect 
the U.S. from transboundary pollution. Formal cooperation dates back to 
1983, when the U.S. and Mexico signed the La Paz Agreement to promote 
cooperation for the protection and improvement of the environment in 
the border region. This agreement serves as the basis for joint 
activities to protect public health and the environment in both the 
U.S. and Mexico. Two formal ``environmental plans'' have been 
implemented by EPA and its Mexican counterpart, SEMARNAT, and we are 
currently working on a plan that will cover the next 10 years. Detailed 
information on these activities is available in the U.S.-Mexico Border 
XXI Program: Framework Document and the U.S.-Mexico Border XXI Program-
Progress Report 1996-2000. Examples have some of these activities are 
provided below:
Air
    Binational air quality planning and management activities have been 
conducted in the sister cities of San Diego-Tijuana; Imperial Valley-
Mexicali; Nogales-Nogales; and Douglas-Agua Prieta. Recent efforts have 
concentrated on establishing and operating air quality monitoring 
networks in Tijuana and Mexicali, similar to those operating in San 
Diego and Imperial Valley.
    A Joint Advisory Council for the Improvement of Air Quality in the 
Ciudad Juarez/El Paso/Doa Ana County Air Basin (JAC) was created to 
provide locally-based recommendations to the Air Workgroup on how to 
manage air quality in the region. The JAC, completed a strategic plan 
in May 1999 that includes 26 priorities for improving air quality.
    Hazardous Wastes.--The EPA and Mexico's National Ecology Institute 
(Instituto Nacional deEcologRa, or INE) have operated the Hazardous 
Waste Tracking System (Haztraks) for several years. In 1998, Haztraks 
was replaced in Mexico with INE's version of a hazardous waste tracking 
system, known as SIRREP (Sistema de Rastreo de Residuos Peligrosos). 
The use of both systems has considerably improved the ability to 
monitor transboundary hazardous waste shipments in the U.S.-Mexico 
border region. It is worth noting that a 1999 study carried by the 
Texas Natural Resources Conservation Commission (TNRCC) determined that 
the operation of SIRREP and the Haztraks systems is the most effective 
way of tracking the movement of hazardous wastes between the two 
countries.
    A Consultative Mechanism for the Exchange of Information on New and 
Existing Facilities for the Management of Hazardous and Radioactive 
Waste within 100 Kilometers of the U.S.-Mexico Border has been 
developed. This mechanism serves to address public concern on both 
sides of the border as it relates to the siting and operation of 
hazardous and radioactive waste facilities in the border region. The 
agreement will allow for both countries to exchange data and other 
information on new and existing treatment, storage, and disposal 
facilities for these types of waste in the border region.
    In addition to the activities under the border plan, two binational 
institutions were set up between the U.S. and Mexico under a 
supplemental agreement to the North American Free Trade Agreement 
(NAFTA). These institutions are the North American Development Bank 
(NADB) and the Border Environment Cooperation Commission (BECC), which 
were established to develop and finance solid waste, waste water and 
drinking water infrastructure in the border area to reduce the 
possibility of cross border pollution. To date, 55 projects have been 
certified and more than 30 are either operational or under 
construction. When all 55 projects are completed they will serve more 
than 9 million people. In Juarez, Mexico a city of over 1 million, the 
first wastewater treatment systems are now operational.
    The EPA Office of Pesticides Programs (OPP) has a number of 
programs and activities concerned with the transport of agricultural 
products across the border. These actions have contributed to the 
reduction of pesticide residues on the imported agricultural products.
U.S.-Canada
    The U.S. and Canada cooperate extensively on monitoring, 
assessment, reporting and control and prevention of chemical, physical, 
and biological pollution, including increasing their focus and 
cooperation on biological pollution (e.g., invasive species of 
concern). A great deal of this cooperation includes overarching goals 
to better protect many, diverse, shared ecosystems and the public 
health of populations (including indigenous peoples) particularly along 
the shared extensive border areas, but also in the inland areas of both 
countries. In addition, binational cooperation has been underway since 
the early 1990s to better protect U.S.-Canada marine regions such as 
the Gulf of Maine.
    The U.S. and Canada have a long history of working together to 
control, reduce, and prevent cross border pollution. The Boundary Water 
Treaty of 1909 , which applies along the entire 5,500-mile inland 
border area, was in part designed to protect transboundary waters and 
U.S.-Canada watersheds, including protecting the public health of 
populations in both countries from the adverse effects of water 
pollution. Many major projects and activities addressing actual or 
potential pollution of transboundary waters continue to be conducted 
under the water pollution control and prevention requirements of the 
1909 treaty.
    Specifically, binational cooperation is underway to fulfill the 
treaty requirements for binational surface waters: e.g., St. Croix 
River, Lake Champlain, Great Lakes Basin including the Upper St. 
Lawrence River, Rainy River, Red and Souris Rivers system, Poplar 
River, Flathead River, Columbia River, Puget Sound-Georgia Basin, Taku 
River, and the Yukon River. The U.S.-Canada International Joint 
Commission (IJC) assists both countries with boundary waters management 
and protection for a number of the listed watersheds. 1909 Treaty 
cooperative efforts protect the U.S. portions of many shared U.S.-
Canada watersheds.
    Since the 1970's up to the present, the U.S. and Canada have 
steadily increased their binational cooperative frameworks and 
attendant activities along the common border area.. These activities 
concerned with improved management and prevention of transboundary 
pollution, have been conducted between Federal, provincial, state, 
tribal, and some local governments, and frequently include involvement 
of the NGO community, the private sector and the general public as 
well.
    Cooperation with Canada under the Great Lakes Water Quality 
Agreement, beginning in 1972, has resulted in substantial progress in 
restoring the quality of these important natural resources. Lake Erie, 
once considered an ecological wasteland, is now substantially restored, 
with fish eating birds, like eagles and ospreys, having made strong 
recoveries. DDT and PCB contamination has been reduced by 80 or 90 
percent. U.S.-Canada cooperation to protect and restore the Great Lakes 
Basin ecosystem includes many goals that serve to better protect U.S. 
public health and the U.S. parts of the shared aquatic ecosystems.
    EPA Region 5 has the lead on Great Lakes water quality issues, with 
many activities conducted or coordinated by the Great Lakes National 
Program Office (GLNPO). In addition, Regions 2 and 3, the Office of 
Water (OW), the Office of Prevention, Pesticides and Toxic Substances 
(OPPTS), as well as the Offices of Research and International Affairs 
(ORD and OIA) have all been active in these activities.
    Unfortunately, although a lot of progress has occurred, many large 
Great Lakes fish are still unsafe to eat due to their accumulating 
burden of toxic pollutants. Also, the Great Lakes basin ecosystem is 
being subjected to harmful changes due to the effects of a substantial 
number of foreign alien invasive species, so that the two countries 
continue to address new challenges.
    Under the 1991 U.S.-Canada Air Quality Agreement, emissions of 
sulphur dioxide and nitrogen oxides (key contributors to acid rain) 
have been substantially reduced, benefitting the Northeastern United 
States. A recently negotiated annex to the Agreement, signed in 
December 2000, will lead to reductions in ground level ozone pollution. 
Priority cooperation under the Agreement also covers particulate 
matter, ensuring certain existing or proposed point sources of air 
pollution along the common area do not cause significant transboundary 
air pollution which can harm one side or the other. Efforts are also 
underway to protect visibility in natural areas along the border. On 
air quality activities, EPA's Office of Air and Radiation (OAR) leads; 
other EPA offices involved include ORD and EPA Regions 1,2, 5, 8 and 
10.
    EPA also is furthering the existing bilateral agreements concerning 
mercury and other toxic substances, such as the1997 Great Lakes 
Binational Strategy, with the goal of 50 percent reduction in use and 
emissions of mercury by 2006. The Northeast Mercury Study of the U.S. 
Northeast States and Eastern Canadian Provinces, has focused on 
reduction of uses and emissions of mercury and safe management of the 
mercury life cycle. In 1997, Canada and the United States signed an 
agreement for the Virtual Elimination of Persistent Toxic Substances 
(PBTs) in the Great Lakes. The strategy sets long-term goals to promote 
emissions reductions of these toxic substances. EPA coordinates the 
U.S. activities by engaging all relevant stakeholders, developing 
action plans, coordinating reduction activities and reporting on 
progress. OPPTS and OSWER in EPA have major involvement in matters 
concerning PBTs and other hazardous substances.
    The two national governments have established three binational 
agreements that cover preparedness and response to pollution release 
accidents/emergencies which could arise along the border. These 
agreements could also be used by one country, in certain emergency 
instances, to call upon the other country to assist with a response to 
an emergency which may occur inland away from the binational border. 
One of the three agreements covers the four U.S.-Canada marine water 
regions and Great Lakes waters for oil and hazardous materials. Another 
one covers the rest of the inland border for oil and hazardous 
materials. The more recent third one covers radiological emergencies. 
Since September 11 , 2001, the two national governments are also 
carrying out special cooperation on security issues along the border 
and on related domestic issues of common concern related to homeland 
security.
North American Trilateral Cooperation between the U.S., Mexico and 
        Canada
    In the 1990s, co-led by the U.S. and Canadian Federal governments, 
the U.S. and Canada developed new trilateral cooperation with Mexico to 
increase multilateral cooperation on major issues such as persistent 
bioaccumulative toxic (PBT) pollutants, their sources, air transport, 
fate and deposition. Long-standing shared goals by the U.S. and Canada 
under their Great Lakes Water Quality Agreement on PBTs helped catalyze 
and focus larger trilateral efforts. The three countries are focusing 
together on PBTs and other pollutants, their environmental transport 
and other pathways. The U.S. , Canada and Mexico have increased their 
consultations and cooperation on the northward migration, or 
introduction, of animals, plants, and pathogens not native to North 
America (i.e., invasive species), with the shared goal of improving 
protection of the biological integrity of many North American 
ecosystems, and in the case of some invasive species, to protect the 
public health of populations of North America.
    In 1993, Canada, Mexico, and the United States established the 
Commission for Environmental Cooperation (CEC) under the North American 
Agreement on Environmental Cooperation (the NAAEC) to address regional 
environmental concerns. The NAAEC complements the environmental 
provisions of the North American Free Trade Agreement (NAFTA). The CEC 
is facilitating tri-national coordination and cooperation on matters of 
cross-border flows of air pollutants, as well as invasive biological 
species. Capacity building, public participation, and facilitation of 
risk management actions through pollution prevention, market-based 
incentives, and technological controls are priorities.
    In 2001, two meetings of air quality experts were sponsored by the 
CEC to address the exchange of emissions information for criteria air 
pollutants and greenhouse gases and to address air quality impacts of 
transboundary trade and transport corridors. To support environmental 
capacity building, a Mexican association of air quality experts has 
been established and a newsletter has been created to inform 
stakeholders in Mexico about the air quality program. The CEC is also 
providing funding for Mexican participation in the meetings of North 
American air quality experts addressing problems common to the three 
countries.
    Under the auspices of the NAAEC, in 1995, Mexico, Canada and the 
United States have developed a regional initiative on the sound 
management of chemicals. Under this initiative, CEC has already 
established regional action plans for PCBs, DDT, and chlordane and is 
developing an action plan for dioxins, furans and hexachlorobenzene. 
U.S.EPA provides technical input to these plans and coordinates 
relevant capacity building activities, such as providing support for 
dioxin measurements, and assisting Mexico with obtaining international 
funding to address DDT stockpiles.
    In 2001, the CEC air program collaborated with the Sound Management 
of Chemicals (SMOC) program and developed a national mercury air 
emissions inventory in Mexico. It is being combined with the national 
inventories in Canada and the United States to give a continental 
perspective for the globally cycling pollutant. Data comparability and 
information access are key to its success.
    In addition to mercury, air quality experts in the three countries 
are developing inventories for sulfur dioxide, nitrogen oxides, carbon 
monoxide, volatile organic compounds, particulate aerosols, and 
greenhouse gases. They are also developing plans to obtain the needed 
information through monitoring and other implementation tools for any 
significant data gaps that may be identified.
    Under SMOC, the North American Regional Action Plan (NARAP) on 
monitoring and assessment of persistent toxic substances, with a 
leading effort addressing mercury, is being carried out through a tri-
national task force of experts, with peer reviewed and published 
results. The monitoring effort is being coordinated with the 
development of EPA's routine monitoring strategy, and another important 
component is focusing on family and child environmental health 
indicators and monitoring parameters for mercury and other PBTs. 
Workshops facilitate the progress in the assessments and capacity 
building, and a leveraging of funds supports the implementation for 
phase 2 of the mercury NARAP, and those for DDT and PCBs, dioxins, 
furans and hexachlorobenzene. These are all being examined to ensure 
that objectives are met.
    Consideration also is being given to how the CEC, and particularly 
SMOC, could facilitate the regional implementation by the Parties to 
the 2001 Stockholm Convention on Persistent Organic Pollutants. The 
effects of persistent toxics on wildlife are being monitored as well as 
human health endpoints. A North American Pollutant Release and Transfer 
Register project addresses the sources, handling and stewardship of 
toxic chemicals from industrial activities in North America, and allows 
for better management of these transboundary pollutants.
    EPA's Office of International Affairs has the overall Agency lead 
on environmental issues concerning the U.S.-Mexico border. There is 
also major participation by EPA's Office of Water (OW), OPPTs and most 
EPA Regions. Other EPA program offices are also involved to varying 
degrees.
    Regional Cooperation Addressing Contamination Threats to Alaska and 
the Arctic, Including Indigenous Populations:
    The fragile Arctic environment and ecosystems, Alaska and 
indigenous populations are threatened by transboundary contamination 
mostly from sources in Russia. Transboundary transport mechanisms 
include atmospheric and ocean circulation and biological transmission 
through the Arctic food chain. The Russian contaminant sources are 
largely a legacy of the Soviet Union's armaments and military 
activities in the far North, the Cold War era industrial/agricultural 
infrastructure and practices, and related un-managed waste. The 
principal contaminant sources of concern include radioactive waste and 
spent nuclear fuel, PCBs mostly from the power grid system, dioxins/
furans from incinerators and industrial sources, obsolete pesticides 
from huge collective farm era stockpiles, and heavy metals such as lead 
and mercury from industrial activities.
    In the 1990's Russia had the highest concentrations of unsecured 
Cold War legacy radioactive waste in the world, and very little waste 
management infrastructure to address the deteriorating situation. The 
problems mounted rapidly as the nuclear submarine dismantlement program 
obligatory under the START treaty continued to generate large amounts 
of radioactive waste and unsecured spent nuclear fuel. Russia dumped 
the low-level liquid radioactive waste produced in the submarine 
decommissioning and dismantlement process in the Arctic, while the 
spent nuclear fuel accumulated in unsecured circumstance at Arctic 
coastal sites in Northwest Russia.
    Under an EPA initiative responding to a Russian request for 
assistance, the U.S. (EPA, DOS/AID, DOD, and DOE) undertook in 1994 a 
multilateral project with Russia and Norway to upgrade and expand 
Russia's only operational radioactive liquid waste processing facility 
(originally developed for the Russian nuclear icebreaker fleet) to 
process the low-level liquid waste from the nuclear submarine 
disarmament program. The facility is now undergoing final operational 
testing and Russia terminated all ocean dumping of radioactive liquid 
waste since the start of the project.
    The unsecured spent nuclear fuel in the Russian Northwest 
constitutes 95 percent of the high level radioactive waste threat to 
the Arctic environment. EPA proposed the development of a prototype 
transportable spent nuclear fuel dry storage cask as a means of 
securing Russia's inventory of spent nuclear fuel arising from the 
decommissioning and dismantlement of large portions of their strategic 
submarine fleet under START. The U.S. nuclear power industry had 
pioneered dry cask storage, and the EPA proposal was to develop a low-
cost prototype transportable storage cask for use in Russia, based on a 
unique Russian concrete-metal cask concept.
    The Transportable Spent Nuclear Fuel Storage Cask Project was 
organized as a trilateral effort between the U.S., Russia and Norway 
under a military environmental cooperation declaration involving the 
three countries and lead by their respective defense establishments. 
For the U.S., the effort has involved cooperation among DOD, EPA, DOE 
and DOS. The successful testing of the prototype cask has caused serial 
production to start under separate programs within Russia and, 
bilaterally, as part of the cooperative threat reduction efforts 
between Russia and the U.S. A prototype concrete storage pad was 
proposed by EPA to hold the loaded casks. This portion of the 
cooperative program is also nearing completion.
    Since 1998, the EPA multilateral strategy on Arctic contamination 
has been shifting emphasis to the problem of non-radioactive chemical 
threats to the Arctic environment and Alaska emanating from Russia's 
Cold war era legacy. The U.S. proposed a three phased project to the 
Arctic Council to assist Russia in addressing its PCB problems: (1) 
development of a PCB inventory for the Russian Federation, with 
emphasis on sources potentially impacting the Arctic, (2) assessment/
feasibility of available technologies to address the particular major 
source problems identified by Russia, (3) selection and demonstration 
of at least one technology addressing one or more major source 
categories.
    The Russian PCB Project was endorsed as an official project of the 
Council's new Arctic Council Action Plan and EPA was asked to provide 
the project technical lead. The project has received funding from EPA 
and DOS plus all other Arctic nations and the Netherlands. The first 
(inventory) phase is now completed and the second phase is nearing 
completion, with the focus on PCB destruction technologies and 
alternative dielectric fluids. The project model is being applied under 
the Arctic Council to ``Russian Sources of Dioxin/Furans'' under 
Swedish project lead and U.S./EPA co-lead and to ``Obsolete Pesticides 
in Russia'' under U.S./EPA project lead.
    International Cooperation and Agreements Addressing Global Sources 
of Persistent Organic Pollutants (POPs) and Other Toxic Substances:
    Many Persistent Organic Pollutants (POPs) are subject to long-range 
transport processes, and consequently pose a common threat to human 
health and the environment ( particularly sensitive ecosystems), all 
over the world. The United States has taken a leading role to reduce 
and/or eliminate POPs and their releases on a regional and global 
basis. In 2001, the U.S. signed the Stockholm Convention on POPs and is 
working to ratify the treaty. The 1997 Canada-U.S. agreement for the 
Virtual Elimination of Persistent Toxic Substances in the Great Lakes 
and the and the 1993 tri-national NAAEC agreement between the U.S., 
Mexico and Canada and establishment of the CEC have all been discussed 
previously.
    Since the early 1990's, EPA has been involved with activities 
concerned with identifying and quantifying sources of contamination 
impacting the Arctic environment, ecosystems and populations under the 
Arctic Environmental Protection Strategy (AEPS). Subsequently, the AEPS 
was subsumed under the Arctic Council, a consultative mechanism whereby 
the eight Arctic nations collaborate and, for example, provide 
assistance to Russia in meeting environmental goals.
    In 1998, the United States signed the legally binding regional 
protocol with other members nations of the United Nations Economic 
commission for Europe (UNECE) on POPs under the Convention on Long-
Range Transboundary Air Pollution. This agreement seeks to eliminate 
production and reduce emissions of POPs in the UNECE region and 
addresses the 12 Stockholm Convention POPs and 4 additional chemicals 
(hexachlorocyclohexanes, hexabromobiphenyl, chlordecone, and polycyclic 
aromatic hydrocarbons). U.S. EPA is involved in ensuring the U.S. meets 
the obligations of the protocol and is actively engaged in the 
scientific assessment of potential additional chemicals. The EPA also 
continues activities under the Convention on Long-Range Transboundary 
Air Pollutants (LRTAP Convention) Heavy Metals Protocol, signed by the 
U.S. in June 1998 and ratified in January 2001, whereby nations of the 
UN Economic Commission for Europe agree to control emissions of 
mercury, lead and cadmium.
    EPA has initiated activities (previously described) under the 
Arctic Council/Arctic Council Action Plan (ACAP) intended to assist 
Russia in accepting and implementing the LRTAP protocols, as well as 
the Stockholm Convention. Russia has now signed the Stockholm 
Convention. The United States has also provided technical and financial 
assistance for POPs-related activities to a variety of countries 
besides Russia and regions other than the Arctic, including Mexico, 
Central and South America, Asia, and Africa. Examples of this 
assistance include projects led by the U.S.EPA on the development of 
dioxin and furan release inventories in Russia and Asia, the Chemicals 
Information Exchange and Networking Project for chemical managers in 
targeted countries in Africa and Central America, the destruction of 
pesticide stockpiles in Africa and Russia, and the reduction of PCB 
sources in Russia and the Philippines.
    Other international work has addressed trade in hazardous 
substances, some of which are POPs. The United States, along with 71 
other countries and the European Community, have signed the Rotterdam 
Convention on the Prior Informed Consent (PIC) Procedure for Certain 
Hazardous Chemicals and Pesticides in International Trade, building on 
a 10-year-old voluntary program. The PIC Convention identifies 
pesticides and industrial chemicals of concern, facilitates information 
sharing about their risks, and provides countries with an opportunity 
to make informed decisions about whether they should be imported. U.S. 
EPA has been actively involved in the voluntary program by engaging in 
the development and implementation of the PIC procedure.
    The following two successful projects, are examples of efforts 
involving EPA that the U.S. has supported within a regional context, in 
cooperation with other organizations and countries:
Connecting POPs Managers Via the Internet: the Chemicals Information 
        Exchange Network (CIEN)
    In a partnership with the United Nations Environment Programme 
(UNEP), and funding from the U.S. State Department, U.S.EPA is 
providing Internet access and training to chemical management officials 
and other stakeholders in Africa. Africa was chosen for initial focus 
because it is the continent with the lowest Internet connectivity and 
the greatest need. It is planned that the project will be expanded to 
Central America in the near future, and beyond that as resources become 
available. Internet access will assist implementation of the Stockholm 
Convention by providing POPs chemical information to decision-makers. 
Internet access also will enable chemical and pesticide regulators, as 
well as health and safety ministries, to access information on best 
practices and funding opportunities, and will allow them to promote 
regional cooperation and action plan development. EPA is also 
participating in the information Exchange Network on Capacity Building 
for Sound Management of Chemicals (INFOCAP) under the auspices of the 
Intergovernmental Forum on Chemical Safety.
PCBs in Russia
    The U.S. State Department has funded and U.S.EPA is implementing a 
project in Russia to address environmental problems resulting from the 
manufacture and industrial use of PCBs. Partners in this effort include 
Norway, Denmark, Sweden, the United Nations Environment Programme 
(UNEP), and the Arctic Council. The project aims to reduce emissions of 
PCBs and enable Russia to meet the requirements of both the Stockholm 
Convention and the LRTAP POPs Protocol. The project involved conducting 
a PCB inventory, the results of which were presented at an official 
ceremony at the Norwegian Embassy in Moscow in September 2000. It will 
also entail a demonstration project to evaluate and showcase a selected 
PCB destruction technology.
    Very Long-Range Air Transport of Pollutants and Global Cycling of 
Mercury:
    Very long-range air transport of pollutants and the global cycling 
of mercury is a rapidly growing area of attention for the U.S. and 
other countries. At the present time these matters, are heavily 
concerned with research, monitoring and development. EPA has taken many 
steps to better understand the sources and mechanisms of long-range 
transport of persistent bioaccumulative toxic (PBT) substances and 
other air pollutants, as well as undertaking some initial steps in 
developing co-benefit technologies for emissions control, promoting 
pollution prevention.
    In May 2000, the EPA Office of International Affairs (OIA) and the 
Office of Air (OAR) initiated an agency-wide workgroup on the 
International Transport of Air Pollutants (ITAP). The first year was 
devoted to developing an appreciation for all the activities ongoing 
within the Agency related to long-range transboundary transport, 
including monitoring, modeling, emissions inventory development, 
control technology development, technology and information transfer, 
and analysis related to international policy development.
    In July 2000, OIA, with support funding from OAR and the Office of 
Research and Development (ORD), co-sponsored the First International 
Conference on Trans-Pacific Transport of Atmospheric Contaminants, 
involving scientists from both sides of the Pacific Basin, including 
China, Japan, Russia, South Korea, Canada, and the U.S. The conference 
discussed the state of science on long-range atmospheric transport in 
the North Pacific region, identified uncertainties and gaps in our 
knowledge, and promoted a network of individuals and organizations 
interested in these issues to further international collaboration.
    In June 2001, OAR co-sponsored a workshop with Environment Canada 
entitled ``Photo-oxidants, Particles, and Haze Across the Arctic and 
North Atlantic: Transport Observations and Models.'' This conference 
was conducted as part of the U.S. participation in the Convention on 
Long Range Transboundary Air Pollution (LRTAP Convention) and the 
Arctic Monitoring and Assessment Program (AMAP) under the Arctic 
Council. The meeting focused on identifying the research needed to 
quantify the sources-receptor relationships for ozone and fine particle 
transport across the North Atlantic and Arctic.
    EPA is currently shaping a PBT routine monitoring strategy, 
coordinating with other agencies, states, tribes, intergovernmental 
organizations and the private sector, which will incorporate the 
international dimension. Such a strategy will help establish trends for 
long-range transport, and also help us evaluate effectiveness of our 
risk management actions.
    For mercury specifically, the Agency priority pollutant which 
cycles globally, ORD was instrumental in developing new methods for 
measuring the various species to assess long-range transport 
mechanisms. EPA is developing state-of-the-art knowledge about 
transformation of mercury into various species in the atmosphere and 
the transport consequences. The species determines distance traveled 
and ultimate fate. Research utilizing these new analytical methods has 
been ongoing in South Florida, Cheeka Peak, Washington; Barrow, Alaska; 
and Mauna Loa, Hawaii to distinguish local sources of mercury from 
external sources. These studies have involved the first aerial 
measurements and studies at elevation as well as at ground level.
    In regard to pollution emissions minimization abroad, OIA is 
sponsoring a mercury-SO2 co-benefit demonstration project at 
a small coal-fired facility in Russia, in order to evaluate the 
effectiveness of emissions reduction using an electrostatic 
precipitator (ESP) add-on system. If the expected minimum of 50 percent 
reduction in mercury is achieved, it will be possible to utilize this 
low-technology approach in many countries where similar Russian ESP 
systems are in place. Additionally, a higher technology, although 
higher cost, approach has also been identified which is expected to 
reduce mercury by 99 percent in conjunction with SO2 
reduction, is being considered for application in China.
    In conjunction with the Department of State Cooperative Threat 
Reduction Program, OIA has initiated development of a proposal for 
mercury bioremediation at a former chloralkali facility in Kazakhstan, 
and in preparation for this project, sponsored a meeting in May 2002 of 
all scientists engaged in mercury research and pollution prevention in 
Kazakhstan and the neighboring countries of Kyrgystan, Azerbaijan, and 
Russia.
    The Office of International Affairs also played an instrumental 
role with Department of State during the UNEP Governing Council session 
in February 2002, at which UNEP launched a global mercury assessment, 
with a technical report and set of alternatives for decisions to be 
presented to the February 2003 UNEP Governing Council.
                               pesticides
    Question. The administration is again proposing to replace 
appropriations to fund the pesticides reregistration program with a 
fee-based system. Many small businesses believe that a fee registration 
program would hurt their economic viability and place them at an unfair 
business disadvantage to larger businesses. How would the EPA address 
these concerns?
    Answer. There are a few different fee programs in the pesticide 
program. All of the programs have provisions for reduced fees or 
waivers for companies that are small businesses or can demonstrate 
economic hardship. The various fees are discussed below.
    Registration Fees.--These fees were originally enacted in 1988 and 
immediately suspended by amendments to the Federal Insecticide, 
Fungicide and Rodenticide Act (FIFRA) in 1988. However, that 
prohibition expired in September 2001 and was renewed for 1 year by the 
Congress. These fees could not be used for pesticide reregistration, 
since they are based on recovering costs of the registration program. 
The fees are currently set up to go directly into the Environmental 
Services account at Treasury. While the receipts could be separately 
appropriated to the Agency, generally such fees are deposited to 
Treasury and are not available to the Agency. When last in effect, the 
registration fee rule provided for fee waivers or refunds in whole or 
in part for minor uses, if the action was in the public interest, or 
upon request by the applicant if they can demonstrate severe economic 
impact.
    Reregistration/Maintenance Fee.--Reregistration/maintenance fees 
were first introduced in FIFRA 1988 and re-authorized in Food Quality 
Protection Act (FQPA). This fee will expire on September 30, 2002. The 
maintenance fee addresses small business concerns in two ways. First, 
the per product fee for each registrant's first product is discounted 
by 50 percent. In fiscal year 2002, the fee structure was $1,225 for 
the first product and $2,550 for each subsequent product. Second, the 
fee structure includes caps. No registrant pays more than $55,000 for 
their first 50 products and $95,000 total. For small businesses these 
caps are set at $38,500 for the first 50 products and $66,500 total. 
Although all companies not paying at one of the caps benefit from this 
discount, it especially helps the nearly 800 companies that pay for 
only one product.
    Tolerance Fees.--The proposed fee is authorized by FQPA 1996 
amendments to FIFRA and Federal Food, Drug and Cosmetic Act (FFDCA). 
The proposed rule essentially updates the existing tolerance fees. This 
fee is intended to recover all costs for processing tolerance actions, 
including petitions and reassessed tolerances. The fee is structured so 
that the first tolerance of an active ingredient (a single ingredient 
may have many tolerances) would be assessed the highest fee, then 
quickly diminish per each successive tolerance relating to the active 
ingredient. The proposed rule was published in the Federal Register on 
June 6, 1999 (OPP-30115), however in 2000, 2001 and 2002, Congress 
prohibited EPA from promulgating a final tolerance fee rule.
    The proposed rule provides that the Administrator may grant a 
waiver on a case by case basis when requested in writing by the 
petitioner or registrant, for an application for a tolerance or a 
tolerance reassessment action that meet the criteria for safer 
products, products that are in the public interest, and registrants who 
can demonstrate an economic hardship. The concerns of small business 
would be one of the Agency's priorities in reviewing the requests.
                                 ______
                                 

            Questions Submitted by Senator Pete V. Domenici

    environmental air quality: contribution to public health burden
    Question. In the environmental air quality arena, most of the 
Agency's research effort is being directed toward understanding the 
health effects of fine particles. This effort responds to congressional 
direction and current public concerns, and is based on the 
epidemiological evidence that airborne particles are statistically 
associated with death and illness. Yet, all recent studies that examine 
the effects of multiple air pollutants indicate that not only 
particles, but also other air pollutants are associated with death and 
illness. Is it not true that many air pollutants are likely to 
contribute to the public health burden?
    Answer. We agree that many air pollutants are likely to contribute 
to the public health burden of air pollution. For example, recent 
National Scale Assessment of air toxics based on 1996 data revealed 
several pollutants with health risks to the American population. The 
third external review draft of the Air Quality Criteria Document for 
Particulate Matter summarizes the body of science associating fine 
particles (and other air pollutants) with death and illness. This draft 
has recently been released and will be undergoing review by the EPA's 
Science Advisory Boards CASAC Committee. The document evaluates the 
strength and coherence of the statistical associations between health 
effects and particulate matter (PM). The extent that the associations 
with PM also apply or are confounded by other pollutants is a matter of 
much debate and continued research. In general, associations of health 
effects with air pollutants seem to be dominated by PM, with occasional 
emergence of other pollutants as co-factors or appearing as an equal 
determinant. These co-pollutants have ranged from nitrogen dioxide to 
sulfur dioxide to carbon monoxide depending on study venue. But these 
co-pollutants have been of inconsistent importance, suggesting that 
they may indeed be important considerations but are likely of secondary 
contribution. The extent to which toxicological evidence has provided 
biological plausibility to the findings regarding PM supports this 
contention.
  environmental air quality: effect of air pollutants and contaminants
    Question. What is the Agency doing to determine how the mixtures of 
air pollutants that people actually breathe affect health, and which of 
the hundreds of air contaminants are most important?
    Answer. Several of the Agency's current research efforts relate to 
understanding how complex air pollutant mixtures affect health. 
Particulate matter (PM) is itself a complex mixture of components 
contributed by various air shed sources and secondary transformations. 
The health effects research under EPA's PM research program will help 
our understanding of the observed excess mortality and morbidity 
associated with particulate air pollution. This research is evaluating 
the contributions of individual constituents as well source-attributed 
mixtures in both epidemiological and toxicological studies. Results 
from these studies will help: (1) determine the biological mechanisms 
underlying PM-related effects; (2) identify which PM components (or 
sources) are most responsible for health effects; and (3) quantify the 
factors affecting susceptibility in the population. In addition, 
research to elucidate whether, and to what extent, the effects 
attributed to PM exposures are confounded by other commonly occurring 
pollutants such as SO2 and ozone will be performed to 
improve interpretation of the epidemiological studies on which the 
NAAQS are based.
    The Agency also has additional efforts underway to understand and 
quantify air pollution risks in the air toxics program. Air toxics 
research covered by the draft Air Toxics Research Strategy (ATRS) and 
the draft Air Toxics Multi-Year Plan (MYP) have grouped and prioritized 
air toxics to aid in determining risk across multiple scales and from 
stationary (residual risk), mobile, and indoor air sources. The ATRS 
also identifies key research directions for mixtures including 
identification of those not following the default assumption of 
additive toxicity and identification of the constituent interactions of 
mixtures.
    environmental air quality: incorporating national environmental 
respiratory center research strategy into agency's assessment of public 
             health burden and future regulatory strategies
    Question. In New Mexico, the National Environmental Respiratory 
Center (NERC) is pursuing a strong research strategy aimed at 
dissecting the contributions of many different classes of air 
pollutants to the death and illness associated statistically with 
airborne particles and the few other pollutants that are measured 
routinely. How does the Agency plan to incorporate this program into 
its assessment of the public health burden from air pollution, and the 
future regulatory strategies that may be required to address multi-
pollutant effects?
    Answer. EPA believes the research approach taken by the NERC will 
eventually provide important insights into appropriate approaches to 
addressing multiple air pollutants. One way we are involved in NERC is 
our active representation on the Scientific Advisory Committee of the 
NERC, which meets twice a year to advise the program on its strategic 
plan as well as to review program progress. This involvement 
incorporates the Agency view and communicates program status back to 
the Agency.
    As the NERC recognizes, the assessment of the health effects of air 
pollution is complicated by its complex nature. The regulatory 
approaches taken by EPA have focused both on single pollutant classes 
as in the National Ambient Air Quality Standards (NAAQS; e.g., ozone, 
lead, SO2, etc.) as well as control of complex mixtures that 
are emitted from a number of regulated source categories. Even the 
NAAQS regulations often result in multiple pollutant control, and at 
least one NAAQS pollutant, particulate matter, is itself a complex 
mixture. Reductions of multiple pollutants in these programs has 
undoubtedly benefitted public health, but we need more information on 
pollutant and source combinations to improve both the effectiveness and 
efficiency of such programs. As the approach of the NERC to the study 
of air pollutants, which is inclusive of the complex emissions of 
sources, is complicated by design, analyses of the findings is also 
complicated. However, there is growing interest in the integrated 
control of air pollution by source,' and when paired with new 
statistical applications (e.g., principal component analyses) to both 
epidemiological and toxicological studies of complex mixture exposures, 
we anticipated that the more complete understanding of source 
contributions to health rather than individual pollutants will lead to 
significant advances in public health protection.
    EPA is paying close attention to how these research developments 
can inform and improve air quality management. At present there is no 
clear best method' for incorporating the health impacts of complex 
source emissions, since often multiple sources emit the same pollutants 
in varying quantities and under various conditions of operation. 
Appreciating how source emissions affects health is also complicated by 
factors such as aging of the atmosphere, photochemical processes, and 
multiple source contributions. Yet, it is clear that health will be 
better protected if the entire matrix of a polluted air shed can be 
considered in developing control strategies and our understanding of 
source-based health impacts will allow the Agency to target pollutant 
control with greater efficacy and reduced overall cost to governments 
and the economy.
    One non-regulatory area in which we would like to consider multiple 
pollutants is the system for providing air quality information to the 
public. Currently, public notices on daily air quality are usually 
driven by an individual pollutants, reported to the media as an Air 
Quality Index that can be better appreciated by the lay community. We 
are currently examining research from NERC, EPA's internal research 
program and other programs to determine whether and how the current 
index might be modified to differentiate the message when multiple as 
opposed to single pollutants are elevated. This examination will help 
us formulate additional research questions for NERC and others to 
facilitate improved public health communication in the future.
    environmental air quality: research to understand health effects
    Question. The Agency's air pollution research tends to focus on a 
few classes of pollutants, such as particles, that are reviewed, 
debated, and regulated one-at-a-time. Although the single-pollutant 
approach stems from the language of the Clean Air Act, which has 
certainly helped to clean up the air, epidemiological studies have now 
made it clear that all routinely measured air pollutants are associated 
to some degree with death and illness. These are signals that the 
single-pollutant approach may not continue to serve us well in the 
future. What research is the Agency supporting to understand the health 
effects of the much larger number of air pollutants that people 
actually breathe every day?
    Answer. The Agency supports both single pollutant and multiple 
pollutant research. Epidemiology studies, by their very nature, include 
multiple pollutants in their analyses of health outcomes. By and large, 
a single pollutant (usually PM or ozone) dominate the responses, but 
other pollutants also have an impact on the outcomes and the importance 
of these multiple factors is widely appreciated and considered in the 
risk assessments. Additionally, both panel/field (human) and laboratory 
toxicological studies (both human and animal) that incorporate mixture 
approaches are supported with the view that complex air pollution 
exposure scenarios are the reality. The Agency's involvement with the 
National Environmental Respiratory Center in New Mexico provides one 
example where this ``top-down'' approach to the study of emission 
mixtures is currently be employed. Analogous and complementary studies 
with fuel oil and coal emissions are being studied intramurally by EPA. 
There is growing appreciation of the potential for source-based 
analyses of exposures in the field and the laboratory (e.g., 
concentrated air particulate exposure units) to improve understanding 
of health effects and control opportunities. These analyses are gaining 
in importance in study design and assessments.
    In addition the draft Air Toxics Research Strategy and draft Multi-
Year Plan have grouped and prioritized the 188 air toxics listed in the 
Clean Air Act Amendments of 1990 as a way that allows health effects 
research to focus on those associated with the likely worst health 
effects. For example, research in the areas of mode of action, shape of 
dose response curves, irritancy of the respiratory system, and 
physiologically-based pharmacokinetic models have potentially broad 
application across several air pollutants.
 environmental air quality: national environmental respiratory center 
   incorporated into agency's strategy for understanding effects of 
                     complex air pollutant mixtures
    Question. How does the Agency propose to incorporate the forward-
looking multi-pollutant research of the National Environmental 
Respiratory Center in New Mexico into its strategy for understanding 
the effects of complex air pollution mixtures?--And evaluating how 
regulatory strategies may need to evolve in the future?
    Answer. The NERC recognizes that the assessment of the health 
effects of air pollution is complicated by its complex nature. As 
stated in Question 3 above, EPA believes the research approach taken by 
the NERC will yield insights into appropriate approaches to managing 
multiple air pollutants as well as information on pollutant and source 
combinations that can improve both the effectiveness and efficiency of 
our regulatory programs. There is growing interest in the integrated 
control of air pollution by source', and when paired with new 
statistical applications (e.g., principal component analyses) to both 
epidemiological and toxicological studies of complex mixture exposures, 
we anticipate that a more complete understanding of source 
contributions to health rather than individual pollutants will lead to 
significant advances in public health protection.
    EPA is paying close attention to how these research developments 
can inform and improve air quality management. At present there is no 
clear best method' for incorporating the health impacts of complex 
source emissions, since often multiple sources emit the same pollutants 
in varying quantities and under various conditions of operation. 
Understanding how source emissions affect health is also complicated by 
factors such as aging of the atmosphere, photochemical processes, and 
multiple source contributions. Yet, it is clear that health will be 
better protected if the entire matrix of a polluted air shed can be 
considered in developing control strategies, and our understanding of 
source-based health impacts will allow the Agency to target pollutant 
control with greater efficacy and reduced overall cost to governments 
and the economy.
                                 ______
                                 

               Questions Submitted by Senator Patty Murray

          coeur d'alene basin: final record of decision (rod)
    Question. Is the EPA still planning to issue the final Record of 
Decision (ROD) for the Coeur d'Alene Basin this summer? Has EPA 
responded to the Idaho delegation's request for an NAS study on EPA's 
proposed ROD and for a delay in the final ROD? If not, when does EPA 
expect to respond? If so, what was EPA's response?
    Answer. EPA Region 10 still intends to issue the Record of Decision 
(ROD) for the Coeur d'Alene Basin this summer. In letters dated April 
15, 2002, Regional Administrator John Iani replied to the Idaho 
congressional delegation's requests for a ROD delay and an NAS study. 
The reply assured the delegation that EPA is working closely with the 
State of Idaho regarding their concerns on the ROD, and is also 
supportive of the State's recently formed Coeur d'Alene Basin 
Improvement Environmental Project Commission. EPA welcomes an 
independent review by the NAS but would like to move forward with the 
ROD with a commitment to modify the ROD in the future based on any new 
information or findings.
    In addition, EPA is working with the Federal trustees, tribes, 
local communities, the State of Washington and other stakeholders.
    superfund tax: administration's opposition to tax chemical and 
                          petroleum industries
    Question. Is the Administration still opposed to reinstating the 
Superfund tax on the chemical and petroleum industries?
    Answer. A number of years have passed since the Superfund taxes 
expired. Although the Superfund taxes expired, the annual 
appropriations for the program have remained relatively steady. It is 
important to note, that the expiration of the taxes has not affected 
the appropriated funding for the Superfund program. I am confident that 
Congress and the Administration will continue to work together to 
provide appropriate funding for the Superfund program.
    The Administration continues its strong commitment to the polluter 
pays principle. In fiscal year 2001 EPA successfully managed the 
Superfund enforcement program whereby 70 percent of Superfund long-term 
cleanups at non-Federal facility sites are performed or paid for by 
parties responsible for the contamination (PRPs). Last year (fiscal 
year 2001), EPA produced a near record amount in private party cleanup 
commitments for cleanup and cost recovery--$1.7 billion--an increase 
from the previous year of almost $300 million. Of the $1.7 billion, EPA 
obtained commitments from PRPs to reimburse EPA $413 million in past 
cleanup costs--a large increase from the $145 million achieved in the 
previous year.
superfund cleanup: adequate funding in fiscal year 2003 for washington 
                        state superfund cleanups
    Question. I am concerned that the Administration has not requested 
enough funding for Superfund to keep cleanups in Washington state (and 
throughout the nation) on schedule--I am especially concerned about 
potential slowdowns at the Asarco site in Tacoma, Washington, and the 
Midnight Mine site on the Spokane Reservation. Will the 
Administration's request of $1.29 billion for Superfund in fiscal year 
2003 provide enough additional funds to ensure that Superfund cleanups 
in Washington state are not delayed because of insufficient funding?
    Answer. Status of Asarco.--Based on the current schedule, 
approximately $60 million in work is scheduled in the next 3 years. 
This includes completion of excavation and filling the onsite landfill, 
armoring the shoreline, completion of cleanup of approximately 500 
yards, and beginning offshore sediment remediation. Asarco has been 
identified as the Potentially Responsible Party (PRP), and the Agency 
is working to have Asarco as the fund lead for this site. However, 
Asarco currently does not have funds to do more than a fraction of the 
work. Due to the financial situation of the PRP, the burden of 
completing the cleanup may, at some point in the future, fall on the 
Superfund program.
    Status of Midnight Mine.--Contaminated water emerging from the 
Midnight mine is currently captured for treatment in an on-site 
treatment system; however, a long-term solution is needed to address 
the site as a whole. Data evaluation, hydrologic modeling and 
preparation of the remedial investigation report are currently 
underway. Human and ecological risk assessments and a feasibility study 
of cleanup alternatives will be initiated in fiscal year 2003. The 
schedule for completion of the study and selection of a remedy will be 
based on EPA regional funding allocations and priorities for fiscal 
year 2003 and beyond. EPA continues to work with the Spokane Tribe on 
the issues surrounding this complex site. The Agency is also attempting 
identify PRPs to conduct the cleanup.
               asbestos: libby, montana asbestos clean-up
    Question. What is the Administration's request for funding in 
fiscal year 2003 to clean up contaminant asbestos from Libby, Montana? 
What is the Administration's request to address broader issues 
surrounding asbestos, such as implementing recommendations from the 
EPA's Inspector General (for example, creating the Blue Ribbon Panel on 
Asbestos, updating EPA's IRIS for asbestos, developing a NESHAP for 
contaminant asbestos etc.).
    Answer. EPA has committed more than $60 million in fiscal years 
2000 through 2002 for environmental investigations, cleanup actions and 
medical investigations in Libby. Current estimates place fiscal year 
2003 needs at approximately $21 million. These projections include many 
assumptions about the number of homes or additional properties which 
may require clean up, and may be subject to significant revision as 
field work progresses.
    In addition to the Administration's request for funding in fiscal 
year 2003 to clean up contaminant asbestos from Libby, Montana, EPA's 
fiscal year 2003 request also addresses the broader issues surrounding 
asbestos, which includes funding for implementing recommendations from 
the EPA Inspector General's report and recommendations to be developed 
in 2002 by a Blue Ribbon Panel, and funding for other actions to reduce 
potential asbestos risks, such as lung cancer, asbestosis, and 
mesothelioma.
    EPA recently signed a cooperative agreement with former EPA Deputy 
Administrator Hank Habicht and the Global Environment Technology 
Foundation to convene a Blue Ribbon Panel (formerly the Asbestos Focus 
Group) of national experts to provide the Agency with guidance on how 
best to respond . Discussions are currently underway to identify the 
team of national experts that will comprise the Panel. The panel is 
expected to meet several times over the course of the next several 
months.
    In response to the Inspector General's report EPA also created an 
Asbestos Coordination Team (ACT) to facilitate internal and external 
communications and information sharing on asbestos issues. EPA is also 
a member of the OMNE committee (consisting of the Occupational Safe and 
Health Agency [OSHA], the Mine Safety and Health Administraion [MSHA], 
the National Institute for Occupational Safety and Health [NIOSH] and 
the Environmental Protection Agency [EPA]) within the Department of 
Labor to coordinate on asbestos and other worker chemical safety 
issues.
    Other actions EPA has already taken or will take in 2002 and 2003 
to reduce asbestos risks include updating lists of producers and 
processors of vermiculite, reviewing and updating other pertinent 
documents and studies, and developing a product sampling and analysis 
plan for gardening products and home attic insulation. EPA published 
its horticultural study of vermiculite products in August, 2000. The 
results indicated that, in general, the use of these products poses 
minimal risk to recreational gardeners, but there may be cause for 
concern for occupational exposures. EPA's study of asbestos 
contaminated vermiculite home attic insulation began in January 2001, 
is being peer reviewed in July and August 2002, and is expected to be 
published in September 2002.
      asbestos: broadening and changing the definition of asbestos
    Question. Does EPA have any plans at this time to look into 
broadening and/or changing the definition of asbestos to include 
nonasbestiform varieties and/or additional minerals which may pose 
health threats?
    Answer. EPA's Office of Research and Development is updating the 
Agency's Integrated Risk Information System (IRIS) file on asbestos, 
which may address expanding the definition of asbestos, but the Agency 
is awaiting the deliberations of the Asbestos Focus Group (formally 
called the asbestos Blue Ribbon Panel) before coming to any conclusions 
regarding future actions on this issue. The Asbestos Focus Group 
assists the Agency with recommendations on how best to use its 
resources for the oversight of Asbestos in use in products and in 
buildings and its manufacture, processing and distribution in commerce. 
Final recommendations will be provided to the Agency in early 2003.

                          SUBCOMMITTEE RECESS

    Senator Leahy. With that, let us have a recess.
    [Whereupon, at 11:30 a.m., Wednesday, March 20, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
















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

                              ----------                              


                       WEDNESDAY, APRIL 17, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:30 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Barbara A. Mikulski (chairman) 
presiding.
    Present: Senators Mikulski, Johnson, Bond, and Domenici.

             CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

STATEMENT OF LESLIE LENKOWSKY, CHIEF EXECUTIVE OFFICER

            OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

    Senator Mikulski. Good morning. The Subcommittee on VA-HUD 
appropriations will come to order. This hearing will focus on 
the appropriations request for the Corporation for National and 
Community Service. I want to warmly welcome the National 
Service CEO, Dr. Leslie Lenkowsky.
    I was pleased to hear from him last week at the Health 
Committee, where we were authorizing the service and working 
with the President of the United States in his review, and 
invigorated call for service. I'm glad to have you here today 
before this subcommittee, because this is where the so-called 
rubber meets the road here. We operationalized those good 
intentions that are envisioned in authorizing with, of course, 
our own perspective.
    Dr. Lenkowsky comes to us with a great deal of experience. 
His long history of national service is going to make him, I 
believe, the right man at the right time. Appointed by 
President Bush I to serve on the original commission to 
establish the Commission on National Service, National and 
Community Service, but when it was meant to be a demonstration 
project, then President Clinton as part of a bipartisan effort 
appointed him as one of the founding Directors of the 
corporation.
    So he knows the whole history, he knows the story, he knows 
the intent, so as well as coming with an incredible background 
from the academic community, where really his career has been 
focused on the role of philanthropy and its intersection with 
public policy, but how to stimulate innovation, creativity, 
accountability without big bureaucracy, so you are the kind of 
guy this committee likes.
    So we look forward to working with you and to bringing all 
of this experience to bear, because National Service is in a 
new century, and we need to meet the new challenges of our 
country while at the same time retaining that very important 
value base of neighbor helping neighbor.
    Last week, the President released his principles for 
National Service reauthorization. We are pleased the President 
has embraced National Service, and look forward to working with 
him in a bipartisan way to foster those objectives.
    Some of my goals in this hearing are going to be twofold, 
one a continuation of last week's hearings to have a better 
opportunity to look at the President's principles, and then how 
that would be put into the appropriations. Second, how to work 
with this Director as a part of our appropriations to see how 
we can take National Service into the new century, continuing 
to create the habits of the heart that make our Nation great, 
but at the same time providing qualitative and quantifiable 
service to the communities, reducing student debt, and 
maintaining proper fiscal management.
    Volunteerism is our Nation's trademark. It highlights what 
is best about America. It is the backbone of our communities. 
Preserving safety nets for seniors, keeping communities safe, 
and getting kids ready to learn. The idea behind National 
Service was to link values to public policy, and to help young 
people with an opportunity to serve their communities while 
helping to pay for higher education, either to reduce their 
debt or to have like a nugget, particularly for poor kids to be 
able to go on to higher education.
    It was also to link responsibility to opportunity, and we 
must remember that, so that for every opportunity there is an 
obligation, whether it is a legal one, or one that you feel in 
your heart for being a citizen of the greatest Nation in the 
world.
    But while we're looking at the noble aspects of community 
service, we really have to be accountable to the taxpayer and 
financial management, which has not been one of the National 
Corporation's strong suits. We want to commend the corporation 
for a clean audit two years in a row, with no material 
weaknesses and only one reportable condition, and we will be 
discussing that with you.
    We have come a long way since 1996, when accountants were 
unable to audit the corporation's financial statements because 
they were in such a mess. The reportable condition is in grants 
management, which is crucial, but we have every faith, Doctor, 
in your ability, both your programmatic ability as well as your 
management ability. This is not about how do we get the 
accounting right. It's how do we get the corporation right.
    In the budget review, the President asked for $638 million. 
This is the biggest request that we've gotten in a long time. 
It is in addition to $397 million requested under Labor-HHS, 
and also in addition to what is asked for in FEMA. The 2003 
request asked for $403 million for AmeriCorps State and 
national programs, $162 million more than last year. The 
President wants to add 25,000 new AmeriCorps volunteers for a 
total of 75,000 volunteers. Twenty-three thousand of these 
would be AmeriCorps State and national programs.
    Second, the request would be to expand the National 
Civilian Conservation Corps $10 million over last year for 35, 
opening two new campuses and adding 500 members responding 
primarily to public safety. Also, $57 million for the National 
Service Trust to pay for AmeriCorps education awards. In 2002 
we did not appropriate into the trust because there simply was 
not enough funding. This year, we want to make sure we have the 
figure right.
    The budget eliminates $11.5 million designated by this 
subcommittee for national organizations, and as I have 
discussed with you privately, and I want to say publicly, we've 
got to look at how we support those national programs.
    Those large corporations are like large caps. They are the 
blue chips of volunteerism in our country. We know what 
dividends they can pay, and we have to see how we are going to 
be a public investor as a part of their efforts.
    The Challenge Grants offer an opportunity to discuss this. 
We look forward to working with the President in his 
reauthorization, his new ideas for the Freedom Corps, and we 
are pleased that at this juncture, both a new century and after 
September 11 a new call to duty, that we work with him. We 
believe that this President himself is a duty-driven kind of 
guy, and he wants the rest of America to embrace those values 
of honor and duty and a call to citizenship.
    So we look forward to working with you, and I would turn to 
my colleague, Senator Kit Bond, who as the chairman of the 
subcommittee over the years has played an absolutely critical 
role in sustaining National Service when those in the other 
body wanted to terminate it.
    Senator Bond.

                STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Thank you, Madam Chair. It is a pleasure to 
join you in welcoming Dr. Les Lenkowsky as Chief Executive 
Officer of CNCS.
    Les, my sincere thanks to you and the Director of USA 
Freedom Corps, Josh Bridgeland, for a very constructive meeting 
on Monday, and as I told you then, not only is our chair really 
the godmother of AmeriCorps and National Service, she has been 
the greatest champion, and it is with great excitement that 
together we look at the new reinvigorated budget request, the 
spirit that the CNCS has, because really--I guess it was de 
Tocqueville who said that the real spirit of America comes from 
the volunteer sector, that great fire that burns in the 
churches and the voluntary organizations.
    We look to you to nurture that fire and to provide the 
fuel, because along with--and I stop to compliment you on the 
progress you have made on turning the corner on the management 
problems and now we can start addressing the performance of the 
corporation's program, because along with the Peace Corps, the 
CNCS does play a unique and leading role in volunteer 
activities.
    We saw out of the tragedy of the terrorist attacks on 
September 11 a public cry for citizens to become more involved 
in public service and help communities respond to the new 
threats. As I told you, I have never seen more people in my 
home State wanting to volunteer. As I travel across Missouri, 
people from all walks of life, college graduates, high school 
students, senior citizens have all come up and said they want 
to help.
    Retired health care professionals want to be able to 
participate if there is another tragedy. I have had World War 
II veterans who want to sign up and go back to war, and I said, 
maybe we can use your enthusiasm and your training, but 
probably we are not going to send you to the mountains of 
Afghanistan.
    Really, the events of September 11 reinvigorated our spirit 
of public service and compassion and responsibility, and I 
think we now have the unique opportunity to capture and harness 
this spirit to improve our communities. We won this spirit out 
of the great tragedy of September 11. It came at a great cost. 
We cannot afford to lose that which was so expensively won for 
us, but I am concerned the current structure of the programs, 
the corps may not essentially meet effectively and efficiently 
the volunteer needs of Americans, and I question whether the 
corporation is getting the biggest bang for its buck, and I 
think we need to work together on fundamental reforms.
    My view is very strongly that the corporation ought to be 
focusing less on retail activities and more on wholesale 
activities. That means we need to focus the funds, the 
training, the work of the CNCS on training the volunteers to 
mobilize other volunteers. In other words, the corporation 
should train the trainers, because there is a much broader 
reach of people with volunteer time and talents that I believe 
that the members of the organization can mobilize.
    As the chair said, she and I both sit on the authorizing 
committee as well as the appropriating committee, and so you 
will get your fill of us this year, and we look forward to 
working on the reauthorization programs. I think we can truly 
make volunteerism more meaningful and accountable.
    There have been, as we have discussed, inadequate 
management systems and oversight practices have been lacking, 
and a lack of performance outcome data, and these have made it 
a little bit more difficult to get the budget through in the 
Congress, and it has made it an easy target of criticism, and I 
think we are all best served if we can avoid that, those 
openings for attack up front.
    You have received a clean opinion with only one general 
question, and this is the second year in a row. We do know that 
the President has released his principles and reform for a 
Citizens Service Act, and one of the noteworthy items is 
improving the accountability of the corporation's grantees.
    I like the fact that he has called for clearly defined 
performance goals that are measurable. One of my first stints 
in public office was as a State auditor, and we did performance 
audits and asked people, what is it you are trying to provide, 
and how do you know you are doing it? Do not just give us the 
inputs, how much you spend on it, what good comes out of it, 
and I think the corporation needs to be taking a much harder 
look to see those grantees that get the job done, and more 
money, and those who do not, move them out the door.
    I think this kind of strong tough love is going to be 
important. As we work, we hope to expand the budget and the 
responsibilities of the corporation, but management and 
accountability are our top priorities.
    One other issue is the National Service Trust Fund. Last 
year, the chair and I requested the CNCS Inspector General to 
review the financial condition of the corporation's trust fund. 
I'm not going to go into details here, but there is a major 
discrepancy between what the corporation is requesting, and 
what the OIG is estimating for the trust fund. It just does not 
compute. Maybe we do not know how to figure, but there is some 
major disconnect there.
    Finally, I will focus in the Q&A on the issue of 
sustainability. By law, Congress envisioned the corporation 
would consider the grantees' reliance on Federal funding. In 
reviewing the application it expected some grantees would 
eventually operate without Federal funding, but in practice the 
corporation continues to fund the same grants. It is a problem 
we see throughout Government. The rich get richer. Whoever got 
last year gets this year.
    The corporation provided funding year after year for really 
good organizations, and I have no complaint about the 
organizations--Habitat for Humanity--these are worthwhile 
organizations and perform valuable service, but should the 
corporation be looking for new areas to encourage and enhance 
and support with the programs that have not had the benefit of 
Federal assistance?
    With that, Madam Chair, I look forward to the questions and 
answers, and we will see how much we can do before they ring 
the bell for us.
    Senator Mikulski. Thank you very much. Senator Johnson, do 
you have an opening statement?
    Senator Johnson. No, Madam Chairwoman. I would simply 
submit a statement of welcome to Dr. Lenkowsky. The AmeriCorps 
and National Service Corps are obviously very important to my 
State of South Dakota, and I am pleased you are holding this 
hearing and look forward to working to provide an adequate 
budget.
    Senator Mikulski. Thank you very much.
    With that, we would ask you to proceed, Doctor.
    Dr. Lenkowsky Thank you very much, Madam Chair, Senator 
Bond, Senator Johnson. I greatly appreciate having the 
opportunity to appear before you this morning. As a former 
board member, I am most grateful for the efforts you have put 
into making the Corporation for National and Community Service 
what it is today, and laying the groundwork for what it can 
become in the future.
    Senator Mikulski. Doctor, this is your oral statement, is 
that correct?
    Dr. Lenkowsky. That is correct. I have both an oral and a 
written statement.
    Senator Mikulski. I did not mean to interrupt.
    Dr. Lenkowsky. Again, thank you for all you have done to 
lay the groundwork for what this corporation can become in the 
future. This is an extraordinary moment in the history of our 
country, and for the agency I head. Since the terrible events 
of September 11, we have seen expressions of patriotism in the 
United States unlike any I can remember in my lifetime, and at 
a tragically high price. All of us have again realized how 
precious our freedoms are and why it is important for all of us 
to accept the responsibilities of being citizens.
    A survey taken in January by a research center at the 
University of Maryland found that 81 percent of young adults 
between the ages of 15 and 25, cutting across all demographic 
groups and political affiliations, favor a year of voluntary 
national or community service to earn money towards college or 
advanced training. Applications to AmeriCorps and SeniorCorps 
are up substantially over what they were a year ago, and a blue 
ribbon committee chaired by former Senator John Glenn has just 
called upon the Nation's schools to invest more heavily in 
service learning.
    Despite all of the renewed interest in serving, however, 
what Americans have been doing lately tells a different story. 
The University of Maryland survey, for example, reported that 
37 percent of those young adults never volunteer, up from 27 
percent in 2000. Fewer people volunteer occasionally as well in 
that 2-year period.
    To make what so many Americans have been feeling since 
September 11 into a lasting change in what they do, President 
Bush has called on all Americans to give at least 2 years of 
their lives to serving their country, and established the USA 
Freedom Corps as a White House Council to mobilize the 
resources of the Federal Government to help them do so.
    Along with the Peace Corps and a new Citizens Corps, which 
will focus on homeland security, the Corporation for National 
and Community Service is proud to be one of the operating arms 
of this historic new initiative. Through our programs, 
AmeriCorps, Senior Corps, and Learn and Serve America, we 
support the President's call to service by helping to create 
opportunities for all Americans to serve full-time, part-time, 
and while they are students.
    We will also work closely with our Nation's many worthwhile 
charities and nonprofit organizations to assist them in 
recruiting and managing volunteers, as well as accomplishing 
their missions, including providing security for our homeland.
    The budget request before you aims to provide the resources 
necessary for the corporation to do this, and last week the 
President submitted to Congress principles and reforms for a 
Citizens Service Act which will be the first reauthorization of 
the corporation since it was created in 1993.
    We believe strongly that for the corporation to play the 
role the President wants us to in the USA Freedom Corps, we 
need to make AmeriCorps, Senior Corps, and Learn and Serve 
America more responsive to State and local needs, more able to 
support and encourage volunteering, more accountable for 
results, and more effective in assisting hard-pressed 
charities, especially faith-based and community organizations.
    I would like to submit these principles for the record as 
well, and would be glad to answer questions about them. We are 
currently working with the Senate Health and the House 
Education and Workforce Committee on reauthorization of the 
corporation's programs. We will keep you and your staffs fully 
informed on our progress.
    While our existing authorizing laws, together with the 
management improvements we have made in recent years, are 
enabling the corporation to make progress, we believe that the 
changes the President is calling for would produce more 
volunteers and more help for nonprofit organizations for each 
Government dollar spent. Our request to the subcommittee totals 
$638 million, an increase of about $229 million over the amount 
appropriated for 2002.
    Included in this increase are funds for 25,000 additional 
AmeriCorps members, two additional National Civilian Community 
Corps campuses, and a Challenge Grant program to expand private 
support for teaching and other National Service programs. Other 
elements of the President's proposed budget for the 
corporation, including an increase of 100,000 members in Senior 
Corps, and an additional 1,000 AmeriCorps VISTA and AmeriCorps 
NCCC members, will be considered by the Appropriations 
Committee's HHS-Labor Subcommittee.
    We are mindful that this is going to be a difficult year 
for the Federal budget. The requirements of the war on 
terrorism and homeland security, as well as the lingering 
effects of the economic recession, have created sizeable 
demands for additional spending. However, President Bush feels 
strongly, and we agree, that our Nation has a window of 
opportunity that occurs only once or twice a century.
    Through the USA Freedom Corps we have a chance to help 
bring forth a new, great generation whose contributions to 
addressing our most serious problems will be felt far into the 
21st Century. By investing a relatively modest amount of 
additional resources in the work of the corporation for 
national and community service, you will be assisting Americans 
to answer the question, what can I do to help, by increasing 
the opportunities they have to be good citizens.
    We have a written statement which we have submitted for the 
record, and I would be glad to answer your questions.
    [The statement follows:]

                 Prepared Statement of Leslie Lenkowsky

    Madam Chair, Senator Bond, and Members of the Subcommittee: Thank 
you for the opportunity to discuss the views of the Administration 
concerning the fiscal year 2003 budget request for the Corporation for 
National and Community Service.
    This is my first opportunity to appear before you, since the Senate 
confirmed my nomination by President Bush to be the Chief Executive 
Officer of the Corporation for National and Community Service. Prior to 
this appointment, I served three consecutive terms as a Member of the 
Corporation's Board of Directors and the Board of its predecessor 
organization.
    Most importantly, this is an extraordinary moment in the history of 
our country and the Agency I head. Since the terrible events of 
September 11, we have seen expressions of patriotism in the United 
States unlike any that I can remember in my lifetime. At a tragically 
high price, all of us have again come to realize how precious our 
freedoms are and why it is important for all of us to accept the 
responsibilities of citizenship in order to preserve them.
    To make this a lasting change in our civic consciousness, President 
Bush has called on all Americans to give at least two years of their 
lives in service to their country. As the President has said, we can 
build a stronger Nation and fight terrorism by making a commitment to 
service in our own communities, whether that be tutoring a child, 
volunteering at a hospital, or participating in a neighborhood crime 
watch.
    Most of our Nation's civic work is being done without the aid of 
the Federal Government. That is as it should be, as the Federal 
Government did not create this civic spirit. At the same time, the 
Federal Government can do a better job in helping to support and 
encourage it where it can.
    Therefore, through an Executive Order, the President established 
the USA Freedom Corps, which will build on existing Federal programs 
that engage citizens in service, as well as create new opportunities 
related to homeland security and meeting other critical needs.
    The USA Freedom Corps initially will have three major components, 
which will be administered separately but coordinated through a White 
House council. It includes an improved and enhanced set of programs 
supported through the Corporation for National and Community Service. 
Specifically, the Administration has proposed additional community-
based service opportunities and leveraging thousands of additional 
volunteers by adding 25,000 new AmeriCorps members and 100,000 new 
volunteers in senior service, and by removing current barriers to 
service.
    As part of the announcement of the USA Freedom Corps, the 
Administration indicated its intent to work closely with the Congress 
on a bill that will reform and extend the Corporation's programs and 
authorities. The Administration's reforms were outlined in the document 
entitled ``Principles and Reforms for a Citizen Service Act,'' released 
on April 9.
    For the Corporation to play the role envisioned by the President 
under the USA Freedom Corps, we need to make AmeriCorps, Senior Corps, 
and Learn and Serve America more responsive to State and local needs, 
more accountable for results, more adept at leveraging private 
resources, and more effective in assisting hard-pressed charities, 
including faith-based and community organizations.
    The $229 million increase the President has requested for fiscal 
year 2003 for the Corporation, in the VA-HUD appropriations bill, is 
less than one-quarter of one percent of the total bill--but it is a 
vital part of the President's initiatives to strengthen our Nation at 
this critical time in our history. Defending our Nation requires more 
than a strong military--it requires a strong and enduring civic spirit 
and commitment to serving our neighbors, our communities, and our 
country.
    Following is a summary of the Administration's plans for service 
and volunteerism and the fiscal year 2003 budget request.
                           usa freedom corps
    In his State of the Union address, President Bush announced the 
formation of the USA Freedom Corps--a White House council that 
coordinates and is working to enhance the many service opportunities, 
both domestic and international, available to Americans of all ages. 
The Freedom Corps, which is chaired by the President, brings together 
under one umbrella, the Corporation for National and Community Service, 
the Peace Corps, and a new Citizen Corps dedicated to homeland 
security.
    As part of the USA Freedom Corps announcement, President Bush 
called on all Americans to serve their country for the equivalent of 
two years--or 4,000 hours--over their lifetimes. Some Americans--such 
as those just graduating from high school or college or those beginning 
their retirement--may want to perform one or more years of 
uninterrupted service. Other Americans may wish to commit service hours 
over many years. Some citizens will serve for many more than two years, 
others for less. This initiative is not a Federal mandate--it is a 
profound individual commitment and a worthy national goal.
    The President's Budget for 2003 includes more than $560 million in 
new funds to support these new citizen service initiatives. Of these 
increases, $290 million is earmarked for the programs of the 
Corporation for National and Community Service, the largest share of 
which, $229 million is under the jurisdiction of this Subcommittee.
    The USA Freedom Corps initiative is directed by an Assistant to the 
President, John Bridgeland. The Freedom Corps Council, established by 
an Executive Order and comprised of a number of Federal departments and 
agencies, will make further policy recommendations to the President on 
new ways to enhance service, help agencies recruit and mobilize 
volunteers, chart civic progress, and recognize the participation of 
Americans in serving their neighbors, their communities, and their 
country.
              principles for a citizen service act of 2002
    As part of the announcement of the USA Freedom Corps, the 
Administration indicated its intention to work closely with the 
Congress on a bill that will reform and extend national and community 
service programs. The legislation that authorized these programs has 
proven to be remarkably resilient, but there are significant 
opportunities to make the programs more effective.
    On April 9, the President presented to the Congress a set of 
principles for legislation that would reauthorize and reform the 
Corporation's programs. The principles seek to: (1) support and 
encourage the greater engagement of citizens in volunteering; (2) make 
Federal funds more responsive to State and local needs; (3) make 
Federal support more accountable, and more effective by focusing on 
sustainability of community service programs; and (4) provide greater 
assistance to secular and faith-based community organizations.
                    fiscal year 2003 budget request
    The budget request before this Subcommittee totals $632.6 million. 
This is an increase of $229.4 million above amounts available in fiscal 
year 2002.
                        strengthening americorps
    The majority of the requested funding increase would support 25,000 
additional AmeriCorps members, an increase of 50 percent above the 
level of 50,000 that we are supporting in 2002. AmeriCorps members 
mobilize, manage, and train volunteers. The members, and the volunteers 
they help organize, engage in a wide variety of activities, for example 
teaching children to read, working to make neighborhoods safer, and 
helping build affordable homes for low-income families. With the coming 
class this fall, more than 300,000 Americans, 18 or older, will have 
participated in AmeriCorps since it was created in 1993 through 
amendments to the National and Community Service Act of 1990 (``the 
Act'').
    Still today, many members of the public do not understand how 
AmeriCorps functions.
    AmeriCorps members serve in nonprofit and community organizations 
like Habitat for Humanity, neighborhood watch organizations, the 
American Red Cross, Boys and Girls Clubs, local faith-based 
organizations, and many more local community organizations. These 
organizations, not the Federal government, select most of the members 
and manage them. The members assist those organizations in meeting 
community needs, as the organizations define them.
    AmeriCorps is largely decentralized. State commissions on community 
service, led by citizen volunteers appointed by governors, select most 
of the programs in which AmeriCorps members serve. Most of the 
projects, and the needs being met, are determined in States and local 
communities, not in Washington.
    AmeriCorps has both full-time and part-time members. Slightly more 
than half of the individuals in these programs serve full-time and 
receive a very modest living allowance, slightly over $9000 per year, 
in order to be able to serve. The other half serve part-time; they 
generally do not receive any living allowance from the Corporation.
    All AmeriCorps members, both full-time and part-time, receive an 
education award, available for seven years, to help finance college or 
pay back student loans upon successful completion of service. At the 
end of this year, we estimate the first AmeriCorps class will have used 
about 72 percent of the education award amounts that were earned.
    It's also important to understand that States, local communities, 
and the private sector make financial commitments to AmeriCorps. There 
are various statutory provisions that mandate such cost sharing.
    There are three main components to the AmeriCorps program: First, 
``AmeriCorps*State and National'' provides grants to States and to 
national organizations to support members in local nonprofit 
organizations across the country. Second, ``AmeriCorps*VISTA''--the 
continuation of the Volunteers In Service To America program--focuses 
its members' activities on supporting community and faith-based 
organizations in meeting the needs of low-income communities. And 
third, the ``AmeriCorps*National Civilian Community Corps,'' or 
``NCCC'', is a ten-month, full-time residential service program for men 
and women that combines the best practices of civilian service with the 
best aspects of military service, including leadership and team 
building. As you know, AmeriCorps*State and National, and NCCC are 
funded by your VA-HUD appropriations bill and the AmeriCorps*VISTA 
program is funded through the Labor-HHS-Education appropriations bill.
    Since it was created in 1993, AmeriCorps projects have involved our 
members in meeting community needs in education, health and human 
services, public safety, and the environment. Initial evaluations have 
found positive results. For example, a review of tutoring programs 
found that ``tutored students at all grade levels improved their 
reading performance from pretest to post-test more than the gain 
expected for the typical child at their grade level.'' \1\ Other 
studies have identified positive results consistent with the basic 
purposes of the legislation.\2\ In addition, we are currently 
conducting a ``longitudinal'' study to measure the long-term impact of 
AmeriCorps service upon the individuals who have served.
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    \1\ Abt Associates. 2001. AmeriCorps Tutoring and Student Reading 
Achievement. Final Report. Cambridge, MA.
    \2\ Aguirre International. 1999. Making a Difference: Impact of 
AmeriCorps*State/National Direct on Members and Communities 1994-1995 
and 1995-1996. San Mateo, CA.
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    At the same time, the program has had its share of challenges and 
problems over the years. As a Board member, I called for more 
independent assessments and evaluations, and upon becoming the Chief 
Executive Officer I promptly established a new Office of Research and 
Policy Development, reporting directly to me, for this purpose.
    Further, over the years, several members of Congress have 
identified the need to achieve greater efficiency and accountability. 
As a result, AmeriCorps has tightened its financial management, reduced 
its per-member costs, and adopted and enforced tough rules on political 
activity. I am very pleased to report to the Subcommittee, that the 
Corporation has just received its second consecutive ``clean opinion'' 
from outside auditors, and for the first time the opinion finds ``no 
material weaknesses.''
    Having come this far, this Administration is seeking to strengthen 
AmeriCorps and create additional opportunities for national and 
community service. Specifically, our fiscal year 2003 budget requests:
  --$57 million for the National Service Trust. When combined with the 
        balances in the Trust and interest earnings, these monies will 
        support the anticipated education award and interest costs of 
        up to 75,000 members.
  --$403.3 million for AmeriCorps* State and National Programs. These 
        funds are used by State commissions and nonprofit organizations 
        to support AmeriCorps programs. The Budget proposes an increase 
        of $162.8 million above current levels in order to add 24,000 
        members in 2003. (The other 1,000 additional members are to be 
        supported through the National Civilian Community Corps and 
        AmeriCorps*VISTA). Within this category, we propose funding 
        for:
    --Homeland Security.--In general, activities in this area fall 
            within the categories of public safety, public health, or 
            disaster response and preparedness. We support thousands of 
            volunteers serving police departments, fire departments, 
            rescue teams, emergency response agencies, and land 
            management agencies. They are not armed, nor can they make 
            arrests, but they carry out vital tasks including 
            organizing neighborhood watch groups, community policing, 
            victim assistance, fingerprinting and other tasks that free 
            up officers and other professionals to do front line work. 
            Volunteers in public health roles assist in immunizing 
            children and adults, serving as case managers, distributing 
            health information, and providing health screenings. 
            AmeriCorps members also have a long track record of working 
            with FEMA and other relief agencies in helping communities 
            respond to disasters and will work actively with Citizen 
            Corps councils throughout the country on homeland security.
    --A Senior Service Initiative.--The Corporation requests AmeriCorps 
            funding for up to 10,000 seniors to serve 900 hours over a 
            1-2 year period and earn a part-time education award of 
            $2,362.50. This award could be used by the senior for 
            education or given to a grandchild or other designated 
            individual as a scholarship for future education. This 
            initiative is intended to build on successful pilot 
            programs known as the Experience Corps, which uses retirees 
            for activities requiring significant skills or training. An 
            independent evaluation of the Experience Corps' school-
            based programs concluded that 92 percent of students 
            measured showed improved reading during the school year. In 
            addition to tutoring, as with other AmeriCorps programs, 
            seniors would perform a wide range of services to meet 
            community needs, including homeland security.
    --A Literacy Initiative.--The Corporation will continue to 
            emphasize the placement of members in programs designed to 
            help teach reading. These efforts will be conducted in 
            coordination with the Department of Education.
    --A Technology Initiative.--The Corporation will continue its 
            emphasis on involving AmeriCorps members in programs that: 
            (1) assist in delivering internet access and other 
            technologies to low-income individuals and families; (2) 
            help train school teachers and staff in community 
            organizations in using technology in their work with young 
            people; (3) build the technology skills of Americans, 
            especially children, who have not yet been exposed to 
            computers; and (4) use technology to meet the needs of 
            communities.
    --AmeriCorps Education Award Program.--This program--providing 
            education awards, but no living allowances--is currently 
            funded from demonstration authority under Subtitle H of the 
            Act. The President's Budget proposes to fund this as an 
            ongoing program (within Subtitle C), in order to increase 
            the types of programs and organizations in which AmeriCorps 
            members may serve, while minimizing the cost to the 
            Corporation.
    --An AmeriCorps ``Promise Fellows'' Program.--The activities under 
            this program, previously funded from Subtitle H 
            demonstration authority, are also proposed to be funded 
            through Subtitle C, AmeriCorps*State and National. This 
            change would more fully integrate the activities of 
            AmeriCorps members serving in support of the ``five 
            promises to youth'' under America's Promise. With this 
            transfer to subtitle C, States and nonprofit organizations 
            would have the flexibility to determine the level of 
            support for AmeriCorps*Promise Fellows, who specialize in 
            helping organizations and communities increase their 
            capacity to help needy young people.
    --Faith and Community-Based Activities.--Building on the initiative 
    begun in fiscal year 2002, program guidelines will continue to 
    reflect an increased emphasis on supporting and expanding 
    activities related to faith- and community-based programs, 
    including additional outreach and capacity-building, and the 
    expectation that grantees will include faith-based and small 
    community organizations as they develop and implement their 
    programs. In fiscal year 2003, the Corporation anticipates a 
    significant increase in the number of faith-based and small 
    community organizations participating in AmeriCorps, either 
    directly or through intermediaries. As has been the case ever since 
    the Federal Government began the VISTA program in the 1960s, 
    assistance to faith-based organizations will continue to be 
    strictly for secular activities.
    --Volunteer Mobilization and Management.--For the current fiscal 
            year, a fundamental objective of AmeriCorps is to help 
            mobilize, support, and manage the vast networks of 
            volunteers assisting non-profit organizations in meeting 
            community needs. This includes working cooperatively with 
            the many volunteer networks that already exist in the 
            field. In fiscal 2003, we will seek to further strengthen 
            AmeriCorps' capacity-building activities.
  --$35 million for the AmeriCorps*National Civilian Community Corps. 
        Under this budget request, the AmeriCorps*National Civilian 
        Community Corps would expand from five to seven campuses. This 
        expansion would permit the most cost-effective deployment of a 
        proposed 1700 members in fiscal year 2003. The expansion is 
        planned in areas of the country that do not currently have 
        adequate support from AmeriCorps*NCCC--the South and the 
        Midwest. Homeland security and disaster response will continue 
        to be a high priority for AmeriCorps*NCCC.
  --$10 million for funding of challenge grants to enhance 
        sustainability of non-profits by the private sector. The 
        Corporation requests $10 million under Innovation, 
        Demonstration and Other Activities for challenge grants to 
        support the expansion of teaching and other national service 
        programs under AmeriCorps. Private sources would provide at 
        least 50 percent of the amount required to expand existing 
        national service programs under AmeriCorps. The Corporation has 
        supported effective teaching programs in the past, such as 
        Teach for America and Notre Dame's Alliance for Catholic 
        Education, but has not used an authority that targets Federal 
        funds to challenge the private sector to help expand these 
        efforts. Further, this request would support other national 
        service programs that have the capacity to raise substantial 
        amounts of new private funds. When fully implemented, we 
        estimate that up to 5,000 additional members could be supported 
        with these funds.
    I'd like to take a few minutes now to address some of the questions 
that you and others may have about our budget requests.
    One question you may have is whether nonprofit organizations will 
be able to recruit 25,000 additional AmeriCorps members. We believe 
that many Americans want to serve and that nonprofit organizations, 
with appropriate funding and lead times, will have little difficulty in 
recruiting an additional 25,000 members. Since the State of the Union, 
the number of applications submitted through our on-line recruitment 
system, when compared to a comparable period a year ago has increased 
by more than 100 percent (although on-line applications are still a 
minority of applications received). Individual programs have 
experienced increases as well. For example, Teach for America (TFA), an 
AmeriCorps program, told us a couple weeks ago that they have seen more 
than a 180 percent increase in applications compared to a year ago. As 
a result, they are projecting an incoming corps this year of between 
1,700 and 1,900--up from 900 last year.
    Not all of the more than 900 programs across the country have seen 
these results. But our informal surveys this past fall indicate that 
they are seeing greater interest in service among young people. In 
short, we believe that people will apply and that the national service 
network will be able to recruit many thousands of additional 
participants in AmeriCorps, who will in turn recruit many more 
volunteers--at least 3 for every AmeriCorps member. We call this 
leveraging of additional volunteers.
    A second question you may have is whether organizations have the 
capacity to use these additional participants effectively. That is a 
question we have also discussed with existing programs, and potential 
new grantees. A sample of programs surveyed last fall indicated that 
many are hoping to double in size. In addition, a conference of small 
community and faith-based organizations last year revealed a strong 
interest in accessing additional national service resources, as long as 
we take steps to minimize the administrative burdens on these 
organizations. Also State service commissions, as well as the 
Corporation, each year turn down many qualified applicants. And, 
finally, it's important for you to know that we are committed to 
actively assessing the effectiveness of all existing and new grants 
through an aggressive set of outcome measures.
    A third question you may be considering is whether more Federal 
resources are needed in order to generate 25,000 additional members. 
Couldn't we rely on other sources of funding to do this? In fact, our 
budget assumes approximately $350 million in financial and in-kind 
support for AmeriCorps from non-Corporation resources, including 
funding from the private sector, individuals, States, and community 
organizations. We believe there are opportunities to expand this 
funding, such as through the challenge grants mentioned above. At the 
same time, the Federal Government has an important role to play in 
enabling thousands of additional Americans to make a substantial time 
commitment to national service thereby building a vital non-profit 
infrastructure. In addition, small hard-pressed community organizations 
need our assistance to build their capacity to provide services. Except 
for individuals with substantial means, providing these organizations 
with full-time assistance requires the availability of modest living 
allowances, and educational awards provide additional important 
incentives.
    I intend to continue to work with the Congress to achieve the 
proper balance of public and private sector support for national and 
community service.
                       effective service-learning
    Our budget request includes $43 million for the support of service-
learning programs--known as Learn and Serve America--in our Nation's 
elementary and secondary schools and institutions of higher education. 
Over the last decade, growing numbers of our Nation's elementary and 
secondary schools and institutions of higher education have used 
service-learning as a way of integrating education and service.
    A 1999 U.S. Department of Education study found that 32 percent of 
all public schools organized service-learning as part of their 
curriculum, including nearly half of all high schools. In addition, an 
impressive fifty-seven percent of all public schools organized 
community service activities for their students. This growth is 
significant when compared to a similar study conducted in 1984 that 
found only 9 percent of all high schools offered service-learning, and 
twenty-seven percent of all high schools offered some type of community 
service.\3\
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    \3\ National Center for Education Statistics. 1999. ``Service-
Learning and Community Service in K-12 Public Schools.'' Statistics in 
Brief. Office of Educational Research and Improvement. U.S. Department 
of Education.
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    A 1999 study by the Rand Corporation found that Learn and Serve 
America participants had a positive impact on the organizations they 
served. Student volunteers helped community organizations reach more 
people and improve the quality of their services. These accomplishments 
included: improving (younger) students' school achievement; promoting 
children's readiness for school; improving the English skills of 
immigrants; improving adult literacy and job skills; and strengthening 
parents' child care skills.\4\
---------------------------------------------------------------------------
    \4\ Gray, Maryann J., E. H. Ondaatje, and L. Zakaras. 1999. 
Combining Service and Learning in Higher Education: Summary Report, 
RAND.
---------------------------------------------------------------------------
    Our objective is to encourage schools at all levels to respond to 
the President's call to service--for 4000 hours of service over one's 
lifetime--and institute more service-learning programs. Such programs, 
which tie rigorous school studies to worthwhile volunteer work in the 
community, are critically important if we are to instill the ethic of a 
lifetime of service and civic involvement in a rising generation of 
Americans.
    We do not propose additional funding for Learn and Serve, but 
instead propose to target more Learn and Serve resources on improving 
the quality of programs. And, as we did in the reauthorization of the 
Elementary and Secondary Education Act, we will propose to add more 
accountability to this system of Federal support.
    For higher education, in fiscal year 2003 we propose to continue 
individual campus grants, designed to allow individual institutions of 
higher education to create sustainable programs that are conducted in 
collaboration with schools, nonprofits, and other local organizations 
and institutions. We also propose new grants to higher education 
associations and to consortia that include higher education 
institutions and other organizations. Examples of previously funded 
higher education consortia include Campus Compact, the American 
Association of Higher Education, the United Negro College Fund, and 
Community-Campus Partnerships for Health.
               management and administrative improvements
    All of us involved with national and community service--the 
Corporation's Board, its previous CEOs, the Congress, State Service 
Commissions, and programs across the country--have recognized the 
significant management and administrative challenges that have faced us 
over the last decade. The Corporation has made progress over the last 
couple years, but much more remains to be done and the Bush 
Administration is committed to making the necessary reforms.
    In this effort to improve the Corporation and its operations, 
fiscal year 2000 was a landmark year. The Corporation received an 
unqualified opinion on its financial Statements for the first time. 
This achievement resulted from a commitment to strong management 
controls and accountability for financial resources. In addition, we 
have during the last month received the results of the 2001 audit from 
the independent auditor under contract to the Office of the Inspector 
General, and the Corporation received an unqualified opinion for the 
second year in a row. Significantly, this year, the auditors reported 
no material weaknesses.
    In general, the Congress has provided the Corporation with the 
tools and support necessary to achieve management improvements. 
However, we have additional ideas that are intended to strengthen our 
ability to carry out our programs efficiently and effectively. As you 
know, we are discussing these ideas in with our authorizing committees.
    Our budget request for fiscal year 2003 includes $35 million for 
program administration, of which $14 million would support State 
Service Commissions. Most of the $4 million increase in requested 
administrative funds would be targeted to State Commissions to support 
the program expansion to 75,000 AmeriCorps members, and their efforts 
to meet standards we have developed for Commission accountability. The 
other portion of the increase would support inflationary costs, 
including civilian pay raises proposed in the President's Budget, as 
well as further improvements in our financial and systems performance.
    Having completed installation of a new accounting and financial 
management system--that has proven essential to our positive financial 
audits in 2000 and 2001--the Corporation is now implementing a new 
electronic grant system, using funding provided specifically for this 
purpose by the Congress. We expect to complete systems development and 
testing this fiscal year, conduct training, and begin implementation on 
a phased basis throughout fiscal year 2003, consistent with our 
established grant cycles. When completed and fully operational, the 
Corporation will have an integrated grants management system providing 
comprehensive financial management information for all grants and 
cooperative agreements. Grantees will apply for and receive assistance 
electronically, thereby greatly reducing current paperwork burdens. And 
the grant system will interface with the Corporation's financial 
management system. The design meets the Grants Financial System 
Requirements of the Joint Financial Management Improvement Program, and 
the requirements of the Government Paperwork Elimination Act and the 
Federal Financial Assistance Management Improvement Act.
                         other budget requests
Innovation, Demonstration, and Other Assistance
    In the area of innovations and demonstrations, the Administration 
is requesting $25.5 million (in addition to the $10 million identified 
above for challenge grants) for various purposes, including: training 
and technical assistance, recruitment, Martin Luther King, Jr. Day 
grants, and other activities that are critical to the support of high 
quality programs. Moreover, if Congress approves our request to 
transfer the AmeriCorps Education Awards program and the Promise 
Fellows program from this category, we will have greater flexibility in 
carrying out the original intent of this type of support which is to 
develop new methodologies for encouraging service. I continue to 
believe that a critical role for the Corporation is to support those 
innovative activities that will lead to the overall strengthening of 
programs and service experiences across the country.
                               evaluation
    The Corporation conducts or contracts for evaluations of its 
programs, initiating several studies each year on a range of issues. 
These studies originate from several sources. The National and 
Community Service Act mandates several evaluation studies. Other 
studies are an important part of the Corporation's compliance with the 
Government Performance and Results Act (GPRA). Other research derives 
from the Corporation's Strategic Plan, which is developed through our 
Board of Directors. In fiscal year 2003, we are requesting $5 million 
to support the studies identified in our budget justification.
    These evaluations are a major part of the effort to enhance program 
performance and collect data addressing critical program issues. I 
believe strongly in the centrality of research and evaluation to the 
future of national and community service, and have therefore created an 
Office of Research and Policy Development (RPD), reporting directly to 
me, to focus greater attention in this area.
    Increasingly, I expect the Corporation's new Office of Research and 
Policy Development to be recognized by the broader governmental, 
philanthropic and nonprofit communities as a resource on a wide range 
of research and evaluation issues.
Points of Light Foundation
    The fiscal year 2003 budget requests $10 million for the activities 
and operations of the Points of Light Foundation that are designed to:
    1. Encourage every American and every American institution to help 
solve the Nation's most critical social problems by volunteering their 
time, energies, and services through community service projects and 
initiatives;
    2. Identify successful and promising community service projects and 
initiatives with nonprofit organizations, corporations, families, and 
youth, and disseminate information concerning such projects and 
initiatives to other communities in order to promote their adoption 
nationwide;
    3. Build the capacity of institutions to support volunteer service, 
and develop individuals as leaders to serve as strong examples of a 
commitment to serving others and to convince all Americans that a 
successful life includes community service; and
    4. Expand its efforts to build the capacity, visibility, and 
sustainability of a unified nationwide network of local Volunteer 
Centers.
America's Promise: The Alliance for Youth
    The 2003 budget requests $7.5 million for America's Promise: The 
Alliance for Youth. That organization, founded by Secretary of State 
Colin Powell and currently led by former Senator and CEO of the 
Corporation, Harris Wofford, seeks to act as a catalyst to challenge, 
energize, and inspire individuals, organizations, and communities to 
expand efforts to ensure that youth become productive, responsible 
adults.
Earmarked Grants
    The fiscal 2002 appropriations for the Corporation for National and 
Community Service marked the third year of funding for ``earmarked 
grants'' and included $11.5 million for five specified organizations: 
Communities in Schools, the Parents as Teachers National Center, the 
Youth Life Foundation, Teach for America, and the YMCA of the USA.
    Although it is Congress' prerogative to set earmarks, I would urge 
restraint in this area. The Corporation's Board of Directors and I 
believe very strongly that the best results occur when organizations 
are required to compete for available public funds. The fiscal year 
2003 budget therefore does not propose any earmarks. Moreover, several 
grants awarded under this category in fiscal years 2001 and 2002 were 
for multi-year efforts, thereby eliminating the need for any additional 
funding for the activities of those organizations in fiscal year 2003.
Office of the Inspector General
    As a separate request, the President's Budget requests $5.1 million 
for the audit and investigative activities of the Office of the 
Inspector General.
    I value the important work of that office to conduct independent 
and objective audits and investigations and to prevent and detect 
fraud, waste, and abuse. Furthermore the reforms being put in place to 
strengthen program accountability will require an active partnership 
between that Office and the Corporation's senior management.
    The President has nominated J. Russell George to be the Inspector 
General of the Corporation for National and Community Service. Mr. 
George has an extensive background in working to promote effectiveness 
and efficiency in government. Most recently, he has served as the Staff 
Director and Chief Counsel to the U.S. House of Representatives 
Committee on Government Reform, Subcommittee on Government Efficiency, 
Financial Management and Intergovernmental Relations, that has 
jurisdiction over the Inspector Generals program nationwide.
    Madam Chair, that concludes my statement concerning the 
Corporation's budget request for fiscal year 2003. We are clearly at an 
opportune moment in the history of Federal support for service, and I 
look forward to working with you, Senator Bond, and the other Members 
of this Subcommittee and the Congress to make the President's proposals 
a reality. I am available to address any questions that the 
Subcommittee may have.

                             FREEDOM CORPS

    Senator Mikulski. Thank you very much, Doctor. Let me go 
right to our questions.
    I think that there is confusion over the Freedom Corps, 
AmeriCorps, and so on, and could you share with the committee 
what is the Freedom Corps, and second, how does the national 
and community service fit into this?
    Dr. Lenkowsky. Thank you, Senator. We do have a bit of what 
I call a corps identity crisis going on at the moment. The 
Freedom Corps is a White House Coordinating Council. It is a 
Cabinet-level council chaired by the President, consisting of 
Members of the Cabinet and heads of independent agencies such 
as myself, and staffed by John Bridgeland, the Special 
Assistant to the President. It can be thought of as analogous 
to the National Security Council or the National Economic 
Council.
    The USA Freedom Corps was established by executive order, 
but it does not affect the legislative authority or my 
responsibility to you as CEO of the Corporation for National 
and Community Service. The same would be true of my colleagues 
in the Peace Corps and the various agencies in the Citizens 
Corps.
    There are three major operating arms right now under the 
umbrella of the Freedom Corps. One is the Peace Corps, which 
engages in overseas volunteer activities. The second is the 
corporation. We're going to continue to do the range of 
activities we currently do on the domestic front. The third one 
is the Citizens Corps. That's the new one. It will be chaired, 
coordinated through the Federal Emergency Management Agency, 
and it consists of a number of programs, such as the Department 
of Justice's Neighborhood Watch organization, that are focused 
on homeland security.
    The corporation's role vis-a-vis the Citizens Corps is to 
provide support to it. About 30 percent of our AmeriCorps and 
Senior Corps members are already engaged in public safety, 
public health, and disaster preparedness activities. We expect, 
as part of the State and local level planning, that this will 
go on under the aegis of Citizens Corps. In the event, which we 
hope will not occur, of another tragedy striking our cities or 
rural areas, there is going to be a need to get people.
    Senator Mikulski. So essentially it is like just, I will 
call it a coordinating council?
    Dr. Lenkowsky. That is correct.
    Senator Mikulski. Then within this subcommittee we are 
being asked to fund two programs, one, the National Service 
Corporation that you are here for, and the other one is the 
Citizen Corps, which would be under FEMA.
    Dr. Lenkowsky. That is correct.
    Senator Mikulski. Now then, what President Bush is asking 
under our subcommittee is the expansion of the programs as we 
know it, which means AmeriCorps, the Senior Corps, and the 
Learn and Serve America, am I not correct?
    Dr. Lenkowsky. That is correct.
    Senator Mikulski. So it does not break new ground. He wants 
an expansion of what we have, and will work with us and the 
authorizing on what should be a new framework for the new 
century?
    Dr. Lenkowsky. That is correct.
    Senator Mikulski. And it would be to essentially call for 
the new, reinvigorated sense of patriotism, is that correct?
    Dr. Lenkowsky. That is correct, Senator.

                              SENIOR CORPS

    Senator Mikulski. Now, I am going to come back to the 
Citizens Corps in a minute but for now let's go to the Senior 
Corps. You are talking about expanding the number of 
volunteers, but also saying that the seniors--first of all you 
want to change the age.
    Dr. Lenkowsky. Correct.
    Senator Mikulski. Then you want to change what they do. You 
want to have them have a benefit that they can use either for 
their own education or to give it to a grandchild, is that 
correct?
    Dr. Lenkowsky. We want to make a Silver Scholarship 
available to seniors who commit a significant amount of their 
time to the Senior Corps program, that is correct, Senator.
    Senator Mikulski. This would be up to 10,000 seniors who 
serve 900 hours over 2 years would get a $2,300 education 
grant. Now, here is my question, okay, because first of all I 
am going to ask you, do you think you will need authorization 
to do this, and number two, then do you think you need the 
Finance Committee's permission, or legislative permission, 
shall we say, to do this, and are we--it is hard enough to fund 
AmeriCorps for young people to have education. Why are we 
getting into this? Would you comment?
    Dr. Lenkowsky. There are two provisions related to seniors, 
Senator. The one you cited, the $2,300 for 900 hours, is 
actually part of AmeriCorps today. In AmeriCorps you can be a 
senior and serve, and you can earn an education award. That is 
the law today, so you are absolutely right, we do not have any 
authorization issue there. The problem that has arisen is that 
for a senior who is serving at, say, age 55 or older, to get an 
award useful only for their own education is not necessarily 
the most valuable way we can thank them for their service.
    I was on a talk show, and a woman who served in VISTA, or 
in the Senior Corps, or in AmeriCorps at age 62 said, well, 
thanks for the ed award, but you know, my education is done. 
Can I not transfer this award, say, to a child or grandchild, 
or maybe a tutee that I have been working with, or someone I 
have been mentoring. We do need legislative authority to enable 
us to do that, Senator.
    Senator Mikulski. And does the administration believe that 
that should be tax-free?
    Dr. Lenkowsky. Senator, we do not think the ed award for 
anyone should be taxable. This is a major part of our proposals 
for all age groups, not just the senior group.
    Senator Mikulski. Well, my time has expired. Is it the 
administration's position, then, that the education awards, 
regardless of how they are garnered, either in AmeriCorps or 
Senior Corps, should not be taxable?
    Dr. Lenkowsky. That is correct, Senator.
    Senator Mikulski. And this is going to require an action by 
the Finance Committee?
    Dr. Lenkowsky. I think that is probably correct, Senator, 
but I can tell you, I was just visiting our NCCC campus in 
Denver and there I heard what I hear whenever I meet with 
AmeriCorps members regardless of their age, that the taxability 
of this ed award is their single largest complaint. Remember, 
these people, particularly the young people, do not actually 
see the money. The money goes from our trust fund into the 
school, or to pay back a loan, but what they do see is the tax 
bill, and since they are young people, often going to school, 
they do not have a lot of money stored away to pay taxes.
    Senator Mikulski. I am not arguing with the merits. I am 
arguing where we are. In other words, as we authorize it, do 
you have a Finance Committee--are you discussing this with the 
Finance Committee?
    Dr. Lenkowsky. We will be talking with the Finance 
Committee, yes.
    Senator Mikulski. Well, I will come back for other 
questions, but I think this helps clarify Freedom Corps, then 
the National Service program within it, and then your desire to 
both expand it, as well as for Senior Corps change the age and 
change what can be done with the education, am I correct in 
that?
    Dr. Lenkowsky. There is a separate provision for Senior 
Corps. It is a little bit different. That one also requires 
authority. The Silver Scholarship is a much smaller amount, 
$1,000 for seniors who commit through Senior Corps and not 
through AmeriCorps a substantial amount of time.
    Senator Mikulski. I think we need to get a list of these 
education benefits.
    Senator Bond.
    Senator Bond. Thank you, Madam Chair. It appears that the 
vote has started, but that always makes it interesting around 
here.
    Senator Mikulski. Senator, if I would suggest, why don't I 
leave and you pursue your line of questions, and Senator 
Domenici, if you feel comfortable with the vote, and if I am 
not back just recess, and then we will come back for a second 
round. Does that sound good?
    Senator Bond. That is my suggestion. Thank you, Madam 
Chair. It is always good to get the gavel back, even though it 
is briefly.
    Senator Mikulski. That has a geopositioning device on it.

                             CITIZEN CORPS

    Senator Bond. Dr. Lenkowsky, I am concerned, as the chair 
is, as I discussed with you yesterday, locating the new 
proposed Citizen Corps to be run by FEMA. Frankly, FEMA has not 
run volunteers. You are the people that run volunteers, and 
FEMA is going to have an awful lot of work to do when we get 
finished with all the funds we dump on them, so we want to 
continue to discuss with you whether in fact FEMA would be 
better off describing and defining the roles that volunteers 
need to play, and tasking CNCS to mobilize the volunteers.
    There is a heck of a lot of difference between running the 
FEMA programs and doing what you do, which is a very staff-
intensive effort to mobilize volunteers, but we will continue 
to work with you on that.
    Dr. Lenkowsky. I can assure you, Senator, that is 
appropriate. At both the State and local level we will provide 
as much support to that effort as we can, and the larger 
questions I think are questions you need to discuss with your 
colleagues.
    Senator Bond. That may not be at your pay grade. We will 
work with others on that.
    On the sustainability question I mentioned some fine 
organizations that are getting funded regularly, and I just 
would like your view on why would AmeriCorps continue to fund 
Youth Build when it already receives substantial funding, much 
more funding really from HUD, and do you expect that these 
existing grantees will just continue getting the money that is 
available, or should there be some effort to move dollars into 
new promising programs to get them started?
    Dr. Lenkowsky. As a board member, Senator, I was strongly 
in favor of making sure that sustainability was emphasized in 
all our programs. Our proposals envision a number of steps to 
enhance sustainability by grantees, and especially by the kinds 
of grantees that are large and well-established.
    The most important is our Challenge Grant program. The 
Challenge Grant has been part of our authority since the 
corporation was established, but if I am not mistaken, until 
President Bush, no one has proposed actually funding it. We 
have put a fairly modest amount of $10 million in the budget 
request. We can discuss that if you would like, but the aim of 
the Challenge Grant program is, of course, to give well-
established organizations a real incentive to develop private 
support for their activities, and to move to less dependence on 
funding from the corporation so we can reach out to the smaller 
groups.
    As you suggested, Senator, we are also going to put a 
greater emphasis on capacity building, part of which involves 
the capacity to go out and get resources from throughout one's 
community, so we want to help them become sustainable that way. 
The challenge we are facing, of course, is that one of the 
glories of our nonprofit world is, there is a lot of variation 
in it, and we do not want to create a cookie-cutter approach 
that says, 3 years and you are out. We want to be sensitive to 
what different organizations are doing and what their 
situations are.
    I visited an AmeriCorps program in Red Hook, New York, 
which is taking back a neighborhood that for 40 years has been 
the object of benevolent but misguided intentions on the part 
of public policy. Until AmeriCorps got there, people were 
afraid to walk out their doors. Now the Red Hook Public Safety 
Patrol is bringing back this neighborhood. It is cleaning it 
up. Crime rates are down, drug use is down. The members come 
predominantly from the community, and they are using AmeriCorps 
as a stepping stone to getting higher education themselves.
    We have been there 7 years. That is a long time, but I 
visited that one personally, and frankly, I think while we 
obviously want to push towards sustainability, and there is a 
fair amount of support coming from the City of New York. As 
with all of our programs, as you know, there is a matching 
requirement. We do not want to arbitrarily say, enough is 
enough, because this is a deep-seated poverty situation.
    Senator Bond. Well, I think that is a unique situation, but 
the Challenge Grant was going to be my next question. We are 
inundated with earmarks, with scores of wonderful organizations 
such as the Girl Scouts, Camp Fire USA. Because they do not 
appear to fit into the strict AmeriCorps funding programs you 
have urged that the best results occur when organizations are 
required to compete for available public funds. If we expanded 
the Challenge Grant program, would you be able to allocate 
grants to these people and make these choices?
    Dr. Lenkowsky. Yes, Senator. Again, we have to have a 
competitive process for doing so, but the whole idea is that 
the other area I would like to call your attention to as well 
is our National Direct program, which is also a vehicle for 
funding. Most of the groups, in fact, you mentioned I think are 
probably National Directs. We want to make that more 
competitive as well. We proposed additional funding for 
National Directs. We want to be competitive.
    Senator Bond. If you will excuse me, I want to turn to 
Senator Domenici so he can ask questions before we have to go 
vote.

                  SPECIFICS OF THE PRESIDENT'S BUDGET

    Senator Domenici. Again, I cannot come back, but before we 
finish, are you going to be able to straighten us out as to 
which programs we are going to be funding and which ones the 
President is asking us to fund? There are so many things we 
have going that he does not want any more, but he wants some 
new things in this area of public service, is that correct?
    Dr. Lenkowsky. That is correct. The only things before you 
now are what have always been part of the National Community 
Service Act legislation. That is to say, funding for AmeriCorps 
in particular, and for the National Civilian Community Corps 
Challenge Grants. There is a separate appropriations bill as 
you know, Senator, that deals with VISTA and some of our senior 
programs. There is no change at all in what we have done in 
years past.
    Senator Domenici. So the President's budget supports 
AmeriCorps continuation?
    Dr. Lenkowsky. That is correct.
    Senator Domenici. And what is the President's proposal?
    Dr. Lenkowsky. We are proposing a Citizens Service Act 
which encompasses the reforms of AmeriCorps and our other 
programs. I think it is very important to emphasize that. I 
think we have listened to the members of this committee and of 
other committees, learned from our own experience, and as a 
former board member I have been particularly involved in this 
discussion, so what we are proposing is not simply an expansion 
of our existing programs at all. It is really a significant 
overhaul and improvement.
    The expansion really reflects two things. First, once we 
have done that, we think we can really make these programs 
work. Second, the moment in our time when so many people are 
looking for ways to serve this country, we think through these 
improved programs we can be helpful.
    Senator Domenici. Now, the new approaches by the President, 
could you just state quickly what that is going to be? Are we 
going to pay those volunteers like we did under AmeriCorps?
    Dr. Lenkowsky. A portion of them are stipended, that is 
correct, Senator, but it is now less than half, and we have 
added to our mix various kind of nonstipended or partially 
stipended programs. One of the President's principles, in fact, 
is to take the education-award-only version of AmeriCorps, 
where participants do not receive a stipend from the Federal 
Government, just an education award on the completion of their 
service, move that from the demonstration phase, where we are 
limited to how many of those we can do, and into the regular 
AmeriCorps, giving more discretion to the State and local folks 
as to whether they want to use that approach or other 
approaches.
    Senator Domenici. I just wanted to comment for the record, 
and to my good friend from Missouri, I was unaware that in my 
little State, there are 12,000 New Mexicans that are in this 
American Service Corporation program, and the amount of money 
spent just on us is $6.7 million. Do you believe that the 
corporation is now on track as far as carrying out the work 
that Congress intended when it authorized these programs?
    Dr. Lenkowsky. I think we are certainly moving in the right 
direction. We have, as has been noted, our second clean audit 
in a row, and while I would like to take full credit for that, 
the truth of the matter is that a lot of the hard work to get 
there reflects the efforts of the career employees and other 
board members in the agency. We are going to build on that, and 
we think through the proposal in our reauthorization package we 
will move even further in the right direction and make this a 
program we are all going to be proud of.
    Senator Domenici. Senator Bond, there are several types of 
programs that are funded by the corporation we are speaking of 
in New Mexico, and they have gone to existing institutions, so 
you do not have to go back and start over, like the 
Boys and Girls Club, and it is wonderful to see us 
fund a Boys and Girls Club and expand in a poverty area.
    It would take them 2 years of fundraising and all kinds of 
activity to double the size. Instead of doing work helping 
these kids the adults are busy trying to put the building 
together and come up with the money, and so I am one who thinks 
that Boys and Girls Clubs, existing organizations, if they 
apply and are doing the kind of work you are generally doing, 
that you would get a very good bargain by not starting over 
with a whole new staff trying to add criteria.
    The Boys and Girls Clubs in New Mexico, I do not know about 
yours, but there are eight or nine that receive funding from 
your bill, and it is a very good way to spend our money in my 
opinion.
    Dr. Lenkowsky. That is the challenge of sustainability as 
well. You do not want to throw out good organizations that are 
doing good work.
    I should also tell you about a wonderful program at the 
University of New Mexico, where we are getting students out 
into some of the poorer communities. They are all just getting 
an award from the corporation. They may have received some 
stipends locally, but basically these are getting college 
students engaged.
    Senator Domenici. Can you give us that name for the record?
    Dr. Lenkowsky. I will make sure you get that in the record.
    [The information follows:]

    The Learn and Serve America Higher Education Program at University 
of New Mexico--Gallup (UNM-Gallup) involves 525 college students and 
600 K-12 students in conducting service-learning projects in McKinley 
County, a highly impoverished area in which 72 percent of inhabitants 
are Native Americans. The UNM-Gallup students mentor kindergarten-
through 12th-graders and tutor Family Literacy, Adult Basic Education, 
and college developmental students. They also conduct human service, 
housing, conservation, and environmental service-learning projects and 
leadership development activities in conjunction with 40 community 
organizations. The project uses summer institutes, in-service 
workshops, and mini-grants to assist 100 faculty members in adding 
strong service-learning components to their curriculum and instruction 
designs in order to ensure that service-learning will be sustained over 
the long-term at UNM-Gallup and in the surrounding community.
    In the past year, UNM-Gallup, has provided tutor/mentor assistance 
to over 400 students in family literacy and adult basic education 
programs in McKinley County, New Mexico. These students, ranging in age 
from youth to senior citizens, have received over 9,000 hours of one-
on-one tutoring.
    The college has conducted two regional ``College, Career and 
Service'' fairs drawing 400 high school students and over 300 college 
students to an exploration of more than 50 public service, education 
and business opportunities. This initiative offers students the 
opportunity to be of service to others and become more civically 
engaged.
    During their annual Earth Week activities, the college initiated a 
community clean-up effort in central public area where car bodies, 
glass and other trash have been dumped for years. This clean-up effort 
has lead to the city and county collaborating to introduce three 
sponsored clean-up days this spring addressing litter hotspots and 
citizen involvement. The Learn and Serve America program also organized 
a forum in which nearly 100 community members and representatives from 
the Navajo Nation Division of Forestry, the Zuni Department of Natural 
Resources, the Plateau Sciences Society, UNM-Gallup, K-12 institutions 
and other interested citizenry, met concerning community environmental 
issues. A planning group was formed to pursue an academic and service-
learning program at UNM-Gallup that will focus on the study and use of 
native plants and indigenous knowledge in pursuit of a new vegetation, 
soil and water management system for the Southwest and beyond.
    The Learn and Serve America program provides mini-grants for a 
number of service-learning programs designed to link older with younger 
students or students with others in the community. This year for 
example, middle and high school students participated in an essay 
contest on the issue of safety in our communities, families and 
individual lives. Students read their essays before 150 peers and other 
community members and the contest was judged by college students. Mini-
grants also supported a pre-school program involving 40 students in 
planting flower gardens at the school, who then presented the flowers 
to the senior citizen residents of Red Rocks Care Center. In another 
project, a class of 4th graders created activity packs containing 
books, writing and thinking activities for pre-schoolers and instructed 
40 children in the activities included in the packs. One mini-grant 
funded an innovative ``Listening, Language and Literary Skills'' 
project in which high school students recorded elementary level books 
for younger students to check out of the library for use in building 
reading comprehension and fluency. Other projects this year focused on 
building arts, geometry and science skills through community 
beautification.
    To ensure the long-term sustainability of service-learning and 
partnerships among schools, colleges, and community groups over time, 
the Learn and Serve America program provided seven training events this 
year alone. Through these events, 180 college students, 60 faculty, and 
40 community members a better understanding and appreciation of 
service-learning as an educational method linking academic work with 
community service.

    Senator Domenici. Thank you, Mr. Chairman.
    Senator Bond. Senator Domenici, thank you very much for 
your comments and your interest. This is a very exciting time, 
and I think we have an opportunity to support the corporation. 
It is truly exciting, but we hear our master's voice, and I 
will take the prerogative of the chair and declare a recess 
until the chair returns.

                           NATIONAL PROGRAMS

    Senator Mikulski. The subcommittee will reconvene. Doctor, 
I want to raise the issue of the national program, which is to 
get the administration's perspective on how it wishes to fund 
the national programs. This committee is challenged by the fact 
that these outstanding programs like Teach for America, the Y, 
and a list that I could have, have--and this committee has 
pursued an earmark strategy that leaves--but that is not a way 
to do it.
    In this year's request alone we have $38 million worth of 
requests and each one has merit, so we are not even disputing 
that. I would like to get your perspective on, number 1, how do 
you think we should work together to handle this? What should 
be the role of the national groups, and how--again, there is no 
relationship between the money they ask for and the number of 
people they serve. There is not a clear--and I am not saying we 
should go to a formula.
    Some have been flat-funded, like Teach America over the 
years when they were just a small start-up, and they were like 
an IPO, and they are now a blue chip, and paying enormous 
dividends. The Scouts, that really goes to leadership money, 
not directly to individual Scouts, and I am going to support 
them, and I ask you for your advice on really--this is both an 
authorizing and an appropriations question. Could you share 
your thoughts from the administrative perspective on how we can 
deal with this, or how do you propose to deal with this in this 
year's appropriations?
    Dr. Lenkowsky. Yes, Senator. I was really taken by your 
analogy yesterday to large caps, mid caps, and small caps, but 
it fits well with what I have thought ever since I began my 
career years ago as a grant-maker for a private foundation, 
that good grant-making--and that is what we do here--ought to 
be like good investing. You need to diversify the portfolio, 
and a good balance, some that are your blue-chippers, some that 
are your organizations that may have a niche appeal, that would 
be the mid-cap kind of approach, and some that are the start-
ups, the innovators that you think can grow, and some are 
risky, but you want to take that risk prudently because you 
think they do have that potential.
    Our view is, in fact, to try to have that kind of 
diversified portfolio. We share your concern about doing things 
through earmarks. We also need to improve the way I think we 
report on a lot of these organizations, and what we do 
administratively. For example, while it is true, if you look at 
Teach for America--which is a wonderful program. I was 
privileged to have known its founder when she was just getting 
it going--it looks like we do not give them a lot of money, a 
little more than $1 million, but that money pays for their 
recruitment and training efforts, which are critical, but the 
big value-added of the corporation's involvement with Teach for 
America is for our award-only program.
    Every member of Teach for America receives an ed award on 
the completion of service, which amounts to millions of 
dollars. It does not show up in the budget because it is a 
trust fund expenditure. We want to be very clear on how we are 
funding organizations. We want to focus them a little bit more, 
and make sure that our National Directs are, in fact, national 
organizations, blue-chippers are really blue-chippers, and not 
organizations that may work in one or two States and somehow 
have gotten into the National Direct pool.
    The big issue we need to talk about in the context of 
authorization and appropriation is the cap that exists on 
National Directs in current law, and our authorization 
proposals. We do not propose to change this. One-third of the 
AmeriCorps allotment is reserved for these blue-chippers. The 
other two-thirds under our proposals for reauthorization would 
go to the States, and through the formula grants, and that 
would be to handle those mid-caps as you put it, the State-
relevant programs.
    However, through the budget process there has been a second 
cap put on, which is about 18 or 19 percent of the funding for 
AmeriCorps slots. We have proposed in the President's budget a 
substantial increase in dollars for the National Directs, but 
we chose not to increase the percentage in relationship to the 
State funds. That may be something you would like to revisit as 
we go forward here, because a lot of the groups that come in 
for earmarks could just as easily be competitive in the 
National Direct pool, and that would also give us a good check 
on quality.
    Let me just say a word about the small caps, the 
innovators. One of the things we are proposing in this budget 
and in our reauthorization principles is to move a couple of 
things we have been trying, the ed award only program, the 
America's Promise Fellows, out of the demo phase and into the 
regular AmeriCorps funding pool. We think they have proven 
their worth and it is time to make that change. That would have 
a very nice consequence as well, since we are proposing 
continued funding of our research and demo phase at its current 
levels to free up some funding for us to try to do a little 
more demo type activity and really try to find those small 
caps, those start-ups, or those new approaches to AmeriCorps.
    One interesting one that I have been considering is our 
NCCC program, the National Civilian Community Corps. It is a 
great program but it is an expensive program, because in 
addition to a stipend we have to provide room and board, 
because these are people who live on campuses like the one in 
your State at Perry Point.
    Well, we ought to think a little bit about some new models 
to take the best of in NCCC, but apply them in a new way. I 
like to say the equivalent of the ready reserve. If you think 
of NCCC as the Regular Army, maybe we ought to think a little 
bit about the Ready Reserve type that not only gives the 
experience of NCCC to more people, potentially at a lower per-
member cost, but enable us to partner with other kinds of not-
for-profit organizations that want to do the kind of NCCC work 
which is very much a part of our homeland security effort. Our 
range for experimentation and innovation is going to be broader 
under the President's proposal.

                            CHALLENGE GRANTS

    Senator Mikulski. I am going to come back to that. Going 
back to the days of the original administration project, the 
part-time versus full-time, the belief that the poor have 
capacity to serve and not only be beneficiary of services. That 
was one of the innovations of Senator Dodd, actually, in the 
early days of our work, as our thinking evolved from military 
service to National Service.
    Tell me your vision of the Challenge Grants. This 
subcommittee, though authorized, has never funded the Challenge 
Grants simply because we were under very spartan circumstances, 
and political prickliness, and we did not fund it. We just did 
not have the money and there was not the political will within 
the Congress. Working now with this bipartisan effort under 
President Bush, how do you see--and presuming we get a decent 
allocation, what do you see the role of the Challenge Grants as 
being, does this deal with maybe the earmark ideas, and 
essentially your thoughts on the Challenge Grants.
    Dr. Lenkowsky. The Challenge Grants are going to be very 
useful, we think, for those organizations that are requesting 
earmarks, because these are usually well-established 
organizations that have a proven track record, but have not 
always generated the level of private support that they are 
capable of generating.
    A lot of our National Directs do generate a lot of private 
support. City Year gets about two-thirds of its revenues from 
the private sector. The percentage for Teach for America is 
even greater, but we think there is probably room to expand, 
and through the Challenge Grant process we want to put up a 
relatively small amount of Federal funds that will have to be 
matched by private contributions.
    As you know, the matching grants provide often a great 
inducement for private funders to join in a project. We want to 
give our successful, well-established organizations 
opportunities to go to potential private supporters, 
corporations, foundations, wealthy individuals and say, okay, 
if you provide support for these volunteer service activities 
it will be matched by the Corporation for National Community 
Service.
    What we propose is a one-to-one match. One corporation 
dollar for every private one, but in our reauthorization 
proposal after a number of years we increase that to two to 
one--two private for every one public, to give a stronger 
incentive for the private sector to get behind these excellent 
groups, and hopefully reduce the pressures for earmarks or just 
for competition through our National Direct pool.
    Senator Mikulski. Senator Bond, I was asking Dr. Lenkowsky 
about the whole issue of the national groups and the earmarks, 
and he gave us some really excellent insights, but in my 
conversation with him yesterday what I was talking about was, 
first of all, or often, we encourage Government to be run like 
a business.
    And I said, so let us think like a business, and we are 
public investors, and this was just kind of fun that we think 
about the national groups like the Y, and Teach for America, 
which you have been so supportive of, as large caps, and then 
there is the wonderful programs run by the States under the 
Governor's Commission, so they are responsive to the States and 
the needs of that community.
    And then third, there is the kind of small cap, and that is 
the small start-up, really new, social entrepreneurs that have 
new ideas, maybe with part-time, or weekend, or generational 
issues, et cetera, so that is what we were also talking about.
    You are here, and let us give you time for a second round, 
and then I am going to come back to the part-timers.
    Senator Bond. Thank you, Madam Chair. Not to flog the 
investment analogy too far, but if you are investing in a large 
blue chip or mid cap or small cap, the only reason you do it is 
to see a return on your investment, and I would suggest that 
whether you are looking at a large organization that we know is 
great, or a small organization that is just starting up, one of 
the tests ought to be, what new are you going to get from this 
investment, and you talked about the Red Hook and the 
tremendous progress.
    Okay, you are seeing a pay-off there. Are there new things 
where we can get these existing agencies to expand? If you are 
just putting money into a grant program that is going to 
continue to go on, there may be other needs, and so I would 
urge you and the corporation to look very carefully at again 
performance measurements, expectations, standards by which to 
measure what are you going to get when you put the money in, 
and I would really like to see that test applied.
    I need to go back to the very first question I mentioned 
earlier about the National Service Trust. Senator Mikulski and 
I asked the OIG to review the trust fund, and no new funds were 
needed in 2002, and recommended $75 million in new funds for 
2003 to enable the corporation to meet its liabilities to fund 
43,000 AmeriCorps members.
    The administration's request, however, assumes the funds 
for 75,000 volunteers but only requests $57 million. Where does 
the money come from?

                      NATIONAL SERVICE TRUST FUND

    Dr. Lenkowsky. What we are dealing with here, Senator, are 
the differences between financial statements, which are 
retrospective, and actuarial estimates, which as you know are 
prospective and depend on such things as estimates of the take-
up of what rate of utilization of the ed awards will we see 
going forward, and so on.
    We brought PriceWaterhouseCoopers in to look at this as 
well, and we have been working very carefully to try and get an 
accurate estimate of how much we need so that going forward we 
will have the funds on hand to meet the anticipated usage of 
the education awards. We think the $57 million proposed in the 
President's budget will enable us to do that, but we would also 
be glad, together with our IG, to sit down with your staff and 
review these calculations with you.
    It is like anything else in this financial business.
    Senator Bond. The cash flow, and I am no fan of accrual 
accounting for small business. We work with the IRS to give 
them some relief, but if you say that you are going to start up 
new programs and going to be accruing, say, roughly $150 
million in obligations, you need to put that in the budget 
authority even if you only cash-flow out $57 million, because 
we do not have a bow wave coming down where you load up a whole 
bunch of volunteers and say, well, we can cover them this year, 
because the cash-out is only $57 million.
    If you are incurring those liabilities, that is where we 
need you to come up with the budget authority to make sure we 
do not wind up with programs that we cannot afford as the bills 
come due.
    Dr. Lenkowsky. We certainly agree with you on that. We 
ought to work together and let your staff have a look at these 
estimates, and if you think there are some things we need to do 
to adjust them, we would be glad to do that.

                           HOMELAND SECURITY

    Senator Bond. Now, I mentioned the concern I have about the 
Citizen Corps being in FEMA. Could you discuss the 
corporation's current activities related to homeland security 
and disaster relief? For example, is the corporation planning 
to award grants this year to support communities and 
organizations in initiatives like public safety, health, 
disaster preparedness? Is this different from the supplemental 
proposal for $50 million to jump-start a Citizen Corps in 2002, 
and where do we stand on this?
    Dr. Lenkowsky. Our request has nothing to do with the 
supplemental. We do have in the 2002 budget about, $20 million 
of additional spending that is to be used for homeland 
security. This was immediately after September 11. We have just 
put the notices of fund availability out. I am glad to tell you 
we had an extraordinary response from not-for-profit groups 
interested in participating.
    Senator Bond. Was this done in cooperation with FEMA?
    Dr. Lenkowsky. No. I should make it clear, and I believe we 
are submitting to you at your request a copy of our memorandum 
of understanding with FEMA. We have a longstanding 
understanding with FEMA, so while we are moving forward with 
our own programming this is nothing new qualitatively. It is 
just an increase in the amount, in light of the conditions we 
have seen in this country post September 11. As we go forward 
in 2003, we expect that we will continue to see about 30 
percent or so of our AmeriCorps and Senior Corps slots engaged 
in public safety, public health, disaster preparedness. These 
are things that the groups have identified as priorities for 
their own activities.
    I think, and you are aware, that a number of our NCCC folks 
came into your State after some recent weather-related damage 
to help work with all of the other first responders and 
volunteer groups.
    Senator Bond. That was the Kansas City ice storm.
    Dr. Lenkowsky. Exactly, to help get things back in working 
order. We are going to continue to do this. What Citizens Corps 
does, though, is going to give a little more structure at the 
State and local level so that our State commission, our 
gubernatorial State commission folks will be able to 
participate at the State level in inventorying and planning a 
little more systematically for the use of our assets should 
disaster strike. The same will be true at the local level. It 
is really our participation in the coordinating effort, and not 
really to change our programming as such.
    Senator Bond. Well, this obviously will be continued, but I 
have made my views clear as to who is better running 
volunteers, and we will take that up later.
    Thank you very much.

                             CITIZEN CORPS

    Senator Mikulski. Thank you very much. I would like to pick 
up just for one quick moment on the line of questioning of 
Senator Bond for the Citizen Corps. First of all, we support 
what the President wants to do in terms of a new call to 
service. Senator Bond and I have been working for almost a 
decade on the reform of FEMA, really, because when President 
Bush I was in, and Hurricane Andrew devastated Florida, FEMA 
was the second disaster to hit Florida, and Bush I sent down 
Andy Card, so we have had a rocky road, but it has developed 
into a good road.
    We now are working with Joe Allbaugh to help FEMA become an 
all-hazards agency, and there are issues there over what--Tom 
Ridge wants to expand it. Senator Bond and I have really 
serious yellow flashing lights over FEMA's ability to organize 
and train and sustain volunteers, not to do the FEMA job, and 
for us to continue now to do our reform, because it takes in 
homeland security and all hazards. That is a big job. Allbaugh 
has a big job, and working very hard to do it very well, so we 
are clear about that.
    There is a myth about volunteers, that people can just show 
up, and give them a rake, and it is going to be all fine. There 
is the issue of screening, training, and then sustaining both 
their motivation and their skills, and we really do not think 
that FEMA is the place to really think about doing this, but 
perhaps we should have a memorandum, perhaps with you.
    And then there is this whole issue of how Citizen Corps 
fits in with the volunteer fire fighters who they think are 
already the Citizen Corps, so we have got some real issues 
here. I hope to meet with the Director of Freedom Corps, but we 
would hope that perhaps we can resolve this in some collegial 
way, keeping the momentum that the President has created. We 
want to keep that momentum, and yet at the same time have what 
he wants to do in the right place with the right policies and 
the right funding.
    Dr. Lenkowsky. I understand completely, Senator. All I can 
say for our agency is, everybody in this agency and all of our 
members of AmeriCorps, Senior Corps, and Learn and Serve are 
ready to serve when and how asked.

                  NATIONAL SERVICE VS. NATIONAL GUARD

    Senator Mikulski. Right. Let me then go back to two other 
issues while Senator Bond is here. I just want to have us also 
for the record--two things. Because you were part of the 
founding of National Service and the commission, I want to get 
your view--well, first of all, as I recall, when we founded it 
National Service, meaning citizen volunteers, were never to 
compete with the National Guard, who were citizen soldiers, and 
the reason for that is that both offered education grants. The 
guard was always worried that it could not compete, so we were 
very clear there was a distinction.
    Senators' Bayh and McCain have a proposal of 18 months' 
military duty, 18 months' reserves, 18 months of community 
service, a total of 54 months, very different from what we 
have. Is it your recollection--and also a reaffirmation of 
policy that the National Guard, and whatever we do to expand 
AmeriCorps or other opportunities for volunteerism were never 
to compete with the National Guard. In other words, that there 
were two distinct routes for service.
    Dr. Lenkowsky. That is exactly right, Senator. I was a 
National Guardsman myself many years ago. I know the 
differences. I know the distinctive and valuable contributions 
the National Guard makes and National Service makes, but they 
are separate and should be kept separate. People who want to 
serve at both in various points in their life, they should be 
able to do that. That is great. But we certainly understand the 
distinction between the two, and should not confuse it.

                  PART-TIME MODEL FOR NATIONAL SERVICE

    Senator Mikulski. Now, let me go to the part-time, and we 
invented again National Service, and this goes to the 
innovations that you have talked about. Even in homeland 
security there was an understanding that not everyone could go 
away, or should go away. It was essentially a model of a 2-year 
affluent person using the Peace Corps model. We knew that for 
many they had technical skills, like now in technology, where 
they could not go away but they wanted to serve. Or second, it 
might be that single mother who in the process of volunteering 
is getting an incredible experience and an education voucher 
maybe to go on and get that nursing degree at the local 
community college.
    Could you share with us, number 1, your view of the part-
time model, and is there funding in your request to affirm 
this, and is this also a tool for, again, creativity within 
this new framework that not everybody can do 2 years, and it 
also has meant, quite frankly, we did not have a housing 
allowance but you could get the education.
    Dr. Lenkowsky. Yes, Senator, that is exactly still our 
understanding. Whenever I travel, I am really quite privileged, 
because I often go into some of the worst parts of every 
community and see the best people. These are people who are 
bringing back their own neighborhoods. They are people who are 
not Ivy League college graduates. They live in those 
neighborhoods. They are engaged in AmeriCorps full-time or 
part-time, a mixture of both, usually, and through their work 
they are contributing not only to their communities in a very 
positive way but also to themselves, taking the next step up 
the ladder of social mobility.
    I was doing a little research recently and it turns out 
that one out of every five AmeriCorps members had a parent who 
received food stamps, so AmeriCorps looks like America. We want 
to keep it that way, and we want to have the kinds of 
flexibility in how we can bring people into AmeriCorps to make 
sure that a very diverse group of people can participate. The 
President's budget does contemplate that partly by moving our 
ed award, which also includes a lot of our part-time, into the 
general AmeriCorps mix, where we will have more room to offer 
those kinds of positions.
    We made certain assumptions just coming up with the number, 
but basically there is lots of room within that number for a 
mixture of full-time, part-time, and ed award only placements.
    Finally, under our innovation area, one of the things I am 
very eager to try and have actually written a little bit about 
this, are more varieties of AmeriCorps that would enable people 
to participate in different ways. For example, if you were a 
young person living in Madison, Indiana, and you wanted to join 
AmeriCorps today, the odds are you would have to move, because 
we probably do not have an AmeriCorps grantee in Madison, 
Indiana.
    Now, that puts an additional burden on somebody to 
participate who wants to participate, but suppose we had a 
variety of AmeriCorps, or form of AmeriCorps which you might 
call individualized model, where you could actually become a 
member of AmeriCorps through a selection process. If you were 
chosen, you could find an organization within certain limits, 
such as an accredited organization, or United Way organization. 
It could be a nursing home that took care of your grandmother 
for years and years, and you would like to spend a year or two 
giving back that way. I mean, an individualized model rather 
than the kind of group models which we have, which are typical 
right now.
    There are some disadvantages to it. It probably makes the 
problems of accountability and management a little trickier, so 
we want to test it. We do not want to jump right into it. But 
it also gives us the flexibility to get people from all walks 
of life into our programs.
    Senator Mikulski. I think that is excellent. I want to come 
back to the variety, because it could very well be someone who 
has technology skills and says, well, there is nothing in 
Madison, but I would like to work in the Police Athletic League 
program. They have tech centers, and I would like to help all 
of the people there to be able to teach tech to the kids.
    Dr. Lenkowsky. Exactly.
    Senator Mikulski. Senator Bond.
    Senator Bond. Madam Chair, I am going to submit the rest of 
my questions for the record.

                            CHALLENGE GRANTS

    Senator Mikulski. I am just going to clarify the Challenge 
Grants, then, one other thing related to variety, but with the 
Challenge Grants, what do you see as being encountered in the 
Challenge Grants? There is confusion now whether State and 
local funds would be counted in the Challenge Grant, and I am 
not talking necessarily about the teacher's salary being paid 
to a teacher in AmeriCorps, but where the City of Baltimore, 
along with the Abell Foundation was contributing to the 
administration of Teach for America in Baltimore.
    Dr. Lenkowsky. As you know, there is a matching requirement 
in existence today for AmeriCorps. I believe it is a 15-percent 
match, and that could be accomplished by any non-Federal 
source, including State or city funding and, of course, private 
funding.
    To be honest, I do not think we have really thought 
carefully enough yet about the Challenge Grants. My own 
instincts, given what we are trying to accomplish, would be 
that the match would come from private sources, but I think we 
need to consult with our grantees, the Teach for Americas, the 
City Years to make sure that as we set up the provisions of 
this program we are doing it in a way which ultimately achieves 
the goal, which is to enable them to generate the kinds of 
resources they need to become as self-sufficient as possible, 
so we want to keep the goal in mind here, and my view would 
generally be that Challenge Grants ought to be matched with 
private money, but I think we need to consult carefully with 
our grantees.

                    COMMUNITY SERVICE IN RURAL AREAS

    Senator Mikulski. Well, as we move forward with our 
appropriations and the desire to see if we cannot fund 
Challenge Grants this year, we really need very clear guidance 
from you on that matter.
    One of the things I would like to just bring to your 
attention is the issue around rural communities, or where they 
do not have foundations. I have been struck, and I know my 
colleague has been a real advocate for rural communities, where 
we have county commissioners who are part-time people who run a 
county.
    My mountain county in Garrett, my Somerset County on the 
shore do not have these foundations--the Abell Foundation, or 
the kind of United Way we have, and yet I have been so 
impressed by their dedication to try to empower and help people 
in their own community, and if they put some money in I think 
you ought to look at it.
    I am going to really ask you for the policy recommendation, 
but communities that do not have access to foundations, where 
there are at least a modest, or modicum of local effort and 
local commitment, I would like us to see how we could recognize 
that, because that is the point. We have challenged that.
    Dr. Lenkowsky. We might also need to think of the Challenge 
Grant also valuing volunteer time. A major part of the 
President's principles calls for judging AmeriCorps programs by 
their ability to leverage nonstipended volunteers, those 
occasional volunteers who on average give 3\1/2\ hours a week.
    Senator Mikulski. It would be simple enough to implement. 
You are very good at that, but I would like to have guidance on 
whether, in addition to foundations or any type of private, 
literally private money, to look at also State and local or 
other income.
    We are going to say goodbye to Senator Bond. I am just 
going to ask another set of questions related to your 
testimony. I want to go to your written testimony, and I want 
to give you the Challenge Grant part, because we really have 
worked in partnership, and I cannot say enough about Senator 
Bond's commitment to sustaining this program during very 
difficult times.

                        ESTABLISHMENT OF ECORPS

    I want to go to page 6 of your testimony, where you talk 
about the senior initiatives, the literacy initiatives, and the 
technology initiatives, all of which are really quite 
interesting. I want to go to things like technology. I am 
trying to establish an eCorps within AmeriCorps. Now, I am 
really asking your advice as to how--and I think we can agree 
upon the technology, and that goes to my concern about the 
digital divide, that second--the digital divide, as I define 
it, as access to technology and access to people who can teach 
you how to use it.
    I was thinking about it in schools and community-based 
centers, PAL programs and so on. But the eCorps from AmeriCorps 
was literally teaching the people who need to teach, who in 
many ways themselves have not had access, in other words, an 
eCorps. I call it an eCorps. I do not care what we call it, but 
what I was looking for, that there are a lot of people who are 
not even infotech majors, but have those skills, and they could 
be the part-timers, and again I am going to leave it to your 
creativity.
    I do not think this has ever really quite gotten off the 
ground, and I just wanted to lay out my picture, and could I 
hear from you, your description, and we have had a good 
discussion on the Senior Service initiative, but on the 
literacy and the technology side, and see what your thoughts 
are to be able to stimulate that.
    Dr. Lenkowsky. Let me start with the technology one, 
because I know that is an interest of yours. We are, in fact, 
funding a large number of technology initiatives now, and would 
be glad to submit a list of those to you for the record, but I 
completely agree. I think with what you are suggesting, that 
what we really ought to be doing in our technology efforts is, 
again, part of our general theme of capacity-building.
    We ought to be teaching the teachers. We ought to be 
helping the organizations develop the capacity to use modern 
technology. You usually talk about the digital divide as being 
one between different people, and there is one, but there is 
also a great digital divide between different kinds of 
organizations, those big national organizations are moving very 
quickly into all sorts of electronic technology, electronic 
fundraising, membership development, all sorts of things, but 
our smaller groups stay level who are often on the front line. 
They are ones that need the help getting that new capacity. I 
think that is a very valuable part of what we can do through 
programs like VISTA and so on.
    I think where I might differ a little with you, Senator, 
is, I would not want to limit this to AmeriCorps. As you know, 
we are also proposing a significant increase in the Senior 
Service Corps.
    Senator Mikulski. That is an excellent recommendation.
    Dr. Lenkowsky. You and I talked a little bit yesterday 
about trying to make sure that our senior programs and senior 
volunteers generally is as attractive to the rising generation 
of seniors, and I am on the front end of that one, approaching 
retirement, as it has been to the previous generation who have 
that strong sense of duty to country.
    We know that a lot of the motivation behind the rising 
generation of seniors is related to using the skills they 
acquired in their working years, but putting them to some other 
use once they are approaching their retirement years, and I 
think if we could engage our seniors in some of these 
technology activities, too, we have a win-win here. We will get 
more attention on the part of the rising generation of retirees 
and bring a lot of valuable skills to organizations and people 
in the technology arena, so that is my vision for the use of 
technology.
    Literacy, as you know, a very large fraction of our 
AmeriCorps members are engaged in tutoring and mentoring. I 
would expect not only to continue that, but to expand that. One 
of the President's proposals which is not before this committee 
is an appropriations matter, and we did discuss a bit in my 
testimony with the Health Committee concerning the Federal 
Work-Study program.
    The Federal Work-Study program is really a very creative 
idea. Back in the 1960's it was part of the war on poverty, and 
the idea was that young people from modest backgrounds who had 
got the grades, the ability to go to college, would get a 
certain amount of financial aid that would be premised on their 
going back into their communities and tutoring and mentoring 
younger people just like them who needed that sense of hope and 
aspiration, and that has changed.
    Work-Study programs are used by colleges and universities 
for all sorts of things these days, and I am sure they are very 
valuable. The President's proposals call for making available 
setting a target of 50 percent of Federal Work-Study slots 
which will be used for community service, and I would expect 
that if we were able to do this a fairly large proportion of 
those would be related to literacy.
    The colleges and universities have very justifiable 
concerns with that proposal, and we are going to be sensitive 
to that and work with them, but there are a lot of ways that 
you can achieve the President's goal.
    For example, I learned of a program--I believe it is at 
Harvard--where they are doing distance tutoring. They have 
really set this up through technology to be able to tutor 
children all around the country in reading and other skills, 
and these are Federal Work-Study students, so the opportunities 
here to be creative are enormous.
    One of the things that is most inspiring to me about the 
President's call to service is when you start thinking 
seriously about this you see there are all sorts of creative 
ways to do it using a lot of existing resources. This is not 
something, as we discussed earlier, where we have got to have a 
10-year R&D effort before we can figure out some good things to 
do.

                        LITERACY AND TECHNOLOGY

    Senator Mikulski. Well, we know that the First Lady is 
devoting herself to education, and we salute her on that, and 
her mother-in-law, Barbara Bush, really did an outstanding job 
on the whole issue particularly of adult literacy, to show that 
there was not something to be ashamed or stigmatized about, and 
I really think did an important service. We want to be able to 
support the literacy issue, and we will work that out in 
appropriations and authorizing, but we see literacy and 
technology as linked. Often, technology is a tool for literacy, 
as you have indicated, and we look forward to how we can foster 
those, but not have so many specific line items that we don't 
lose out of creativity and flexibility.
    The whole idea, when we were working to create this, 
Senator Nunn, myself, and folks like yourself and the Mandel 
Foundation, was that this was not to be just one more 
Government program. It was not meant to be one more social 
program. It was to be about a social movement around the habits 
of the heart, for every opportunity there is an obligation and 
so on, and it was meant to be flexible, not so prescribed. In 
other words, get away from the mentality of the sixties 
programs, not the value base of those, but remember how they 
were overprescribed, over-line-itemed, and over what I call--
you would have 30 line-item boutique programs, but you could 
not get a critical mass to achieve a critical mass of social 
good.
    So I am looking out for these initiatives, but really I am 
going to again invite you to keep us in the spirit of 
creativity, flexibility, local needs, because they are 
different, and at the same time national standards that we 
expect for training, appropriateness, fiscal accountability and 
so on, but we really do want to keep that local flexibility and 
creativity.
    Dr. Lenkowsky. I could not agree more with that, Senator.
    Senator Mikulski. I think we have really covered 
everything. I want to thank you for your excellent testimony. I 
think your written testimony also provides a very good road 
map. We are going to be as good as our allocation, which is 
kind of sitting out there. I am going to need the Hubbell 
telescope to see it, but it is on the horizon for us, and again 
we just welcome you with enthusiasm and hospitality.
    Dr. Lenkowsky. I look forward to working with you, Senator.

                          SUBCOMMITTEE RECESS

    Senator Mikulski. This subcommittee stands in recess until 
next Thursday--excuse me, next Wednesday, on April 24, in which 
we will be taking testimony from the Neighborhood Reinvestment 
Corporation and the CDFI.
    Thank you very much, and we are recessed.
    [Whereupon, at 11:10 a.m., Wednesday, April 17, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
















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

                              ----------                              


                       WEDNESDAY, APRIL 24, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:37 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Barbara A. Mikulski (chairman) 
presiding.
    Present: Senators Mikulski and Bond.

                 NEIGHBORHOOD REINVESTMENT CORPORATION

STATEMENT OF ELLEN LAZAR, EXECUTIVE DIRECTOR
ACCOMPANIED BY:
        MARGO KELLY, DEPUTY EXECUTIVE DIRECTOR
        CLARENCE J. SNUGGS, DEPUTY EXECUTIVE DIRECTOR/TREASURER
        JEFFREY BRYSON, GENERAL COUNSEL

            OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

    Senator Mikulski. Good morning, everybody. The VA-HUD 
Committee will now come to order.
    And we want to welcome Ellen Lazar, the Executive Director 
of the Neighborhood Reinvestment Corporation, and her team; and 
Mr. Tony Brown, the new Director of the CDFI Fund, who we also 
welcome. Both Neighborhood Reinvestment and CDFI seek to 
improve conditions in low income neighborhoods.
    We asked you to testify together at the panel, recognizing 
the distinct, but complementary, missions in a way that we 
could get right to the questions. And some of the questions 
deal with predatory lending, the ability of nonprofits to 
really function in neighborhoods and community development 
corporations. There are many questions that really go both to 
your distinct missions. There are parallels or even 
collaborations, so we thought we would do that.
    And also, we have a markup in Senator Kennedy's committee 
at quarter of 11:00. So we are going to try to move very 
rapidly.
    First of all, both of your institutions recommend, really, 
the area of community development. And we are very interested 
in wanting to know what is working, what is not, what are the 
lessons learned.
    Also, we are very cognizant of the fact that in terms of 
the President's budget, the President has proposed level 
funding of $105 million for the Neighborhood Reinvestment 
Corporation. And we want to know the consequences of flat 
lining.
    Though when I took over this subcommittee in 1988, it was 
$10 million, and I am not sure, if it were indexed and all, 
where it would be. But Congress has had a steady commitment to 
the Neighborhood Reinvestment Corporation.
    For CDFI, the President's budget request is at $68 million, 
a $12 million or 15 percent cut from last year. I have a lot of 
yellow flashing lights about that.
    And, Mr. Brown, we would like to know what are the 
consequences of this cut, and get a picture from you.
    This hearing will focus on really the role, the mission, 
and the resources of both institutions. We are very impressed 
that in fiscal year 2001 at Neighborhood Reinvestment, which 
has been an important tool in assisting communities with 
housing and economic development, but also community 
development and capacity building. I think that is one of the 
signatures of Neighborhood Reinvestment, and that you are not 
just another housing program. You are not a real estate 
program. You are a real community program. And it is about 
community development and capacity development.
    We know that what has been so impressive to the Congress 
over the year is the way that Neighborhood Reinvestment has 
leveraged funds right at the local level to promote economic 
development, neighborhood stability, and home ownership. We 
know that you have helped many first-time home buyers in 
purchasing and keeping their homes.
    Due to our concern about the shortfall in rental housing, 
we know that you have had a real effort to explore innovative 
ways to produce mixed income rental housing for very low income 
families and have a whole new initiative on that. And we are 
very much interested in the whole multi-family area.
    The whole issue of promoting Section 8 for home ownership, 
everyone says ``Let us do that,'' but I am concerned about the 
ability of new homeowners who are very poor and often have not 
been given the financial literacy skills that they need to 
sustain this. I do not want an American dream to become a 
family nightmare, and how we can avoid that from happening.
    This committee has been troubled for some time about the 
whole issue of FHA defaults in neighborhoods, where they become 
what they call HUD houses. And that is the way they are 
referred to, ``Senator Mikulski, there's a HUD house in my 
neighborhood.''
    And rather than remarking on how wonderful it is, it 
usually has been someone has defaulted on their mortgage, 
usually because of no fault of their own. And HUD wants to sell 
it, and HUD becomes a slum landlord and then just unloads it, 
sometimes to even predatory or scum-bum people. So we want to 
know kind of where you are on that.
    And also, in terms of CDFI, CDFI provides financing and 
technical assistance while the BEA program awards banks and 
such for providing similar services. We know that you are doing 
a new market program, and we want to hear about that. We know 
that you are working hard on performance measures and your 
experience in the private sector.
    We are particularly pleased that there is a Native American 
initiative, so that the only money coming in is not more of the 
old Federal stuff that has not worked or casino money. And I am 
not knocking casino money, but there needs to be other forms of 
empowerment for our Native American community.
    For both of you, I know that you have done significant work 
in the rural communities. And this is really an outstanding 
achievement because often they do not have access to technical 
assistance, foundations. The Big Macs do not always want to 
come to the little nuggets in the rural communities.

                           PREPARED STATEMENT

    So we look forward to hearing from you about your work, 
about what you need to do your work, and is the resource that 
is being proposed adequate and, at the same time, really 
remaining the stewards on taxpayers' funds. Not only what you 
do, Mr. Brown, for example, better management of the legacy of 
CDFI, but really to make sure that--there are those out in the 
neighborhoods, not the poor themselves, but who gouge the poor 
and gouge our taxpayers, and that kind of fraud really I find 
doubly despicable.
    [The statement follows:]

               Prepared Statement of Barbara A. Mikulski

    Today we welcome two witnesses to testify on their fiscal year 
budget submissions: Ellen Lazar, the Executive Director of Neighborhood 
Reinvestment Corporation, and former director of the CDFI Fund, and 
Tony Brown, the new Director of the CDFI Fund.
    We are delighted to have you both here. Both Neighborhood 
Reinvestment and the CDFI Fund seek to improve conditions in low-income 
communities. Neighborhood Reinvestment trains nonprofits and builds 
capacity, while CDFI provides grants and loans to financial 
institutions serving low-income neighborhoods
    In the area of community development, we want to know: what is 
working out there, what isn't, and what are the lessons learned? I am 
especially interested in two areas--how you certify your members, and 
what you are doing to stop predatory lending.
    If we are asking nonprofits to take on more responsibility, then we 
must make sure they are ready. Last year, Neighborhood Reinvestment 
provided over 200,000 training hours to nonprofits and community 
leaders in support of this goal. As the federal government sends more 
money to nonprofits, we need to make sure that they are ready for prime 
time. But we also need to remember that community based groups are not 
a substitute for government--they are a partner to government.
    We also want to know what Neighborhood Reinvestment and CDFI are 
doing to help communities fight predatory lending. In my own hometown 
of Baltimore, non-profits like St. Ambrose Housing Aid Center are on 
the front lines fighting flipping. This is an area that I know your 
members have spent a lot of time on, whether its providing loans, 
homeownership counseling or doing damage control in the neighborhoods 
hardest hit by the predators. We really need you to tell us what can be 
done to prevent these scum--be it lenders, appraisers or investors--
from destroying neighborhoods and dreams. And also, how do we help 
neighborhoods devastated by these practices to pick up the pieces.
    My own goals for community development have grown out of my own 
experiences, as a community activist, a social worker, and an 
appropriator. I believe there are three types of neighborhoods: stable, 
stress and siege. I believe we are best off focusing our resources on 
neighborhoods under stress that are teeter-tottering on the edge of 
siege. We want to move them into the stable column and fight to make 
sure they don't come under siege. I know that both Neighborhood 
Reinvestment and CDFI support this goal. Neighborhood Reinvestment 
builds capacity of community-based nonprofits by providing capital and 
``training the trainers'' and CDFI gets capital to underserved 
communities where there has been little investment.
    These two agencies are in a unique position. They play a support 
role for community-based groups on the front lines in their 
neighborhoods. So they are able to respond to the unique needs of each 
community. Too often we make the mistake of confusing program 
development with community development when we know that no two 
neighborhoods are the same, and no two neighborhoods have the same 
needs. Low-income neighborhoods can't afford to navigate giant 
bureaucracies and the federal government can't afford to maintain them, 
which is why we need to target resources carefully.
    In considering the President's budget, we want to learn from you 
what the impact of the fiscal year 2003 budget submission will be. The 
President has proposed level funding of $105 million for Neighborhood 
Reinvestment and funds CDFI at $68 million, a $12 million, or 15 
percent cut from last year. I am disappointed by this because I know 
how important community development funds are to our neighborhoods. We 
want to know what the consequences of this cut will be and how CDFI is 
working to better measure the impact it's having in communities.
    Today we hope to learn what is working to revitalize our 
communities, and what is not working as well. We need to ensure that 
Neighborhood Reinvestment and the CDFI Fund make the best use of scarce 
resources to create communities where families can live, work, worship 
and shop. We look forward to your testimony.

    Senator Mikulski. So I am going to turn to my very able and 
dear friend, Senator Bond, for any comments he wishes to make.

                STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Thank you very much, Madam Chair. And I share 
the concerns that you raised.
    As I am sure that you all know, this committee operates in 
a very bipartisan way and we are very proud of the work that 
the agencies under this committee's jurisdiction have 
performed, and we share the concerns to make sure they continue 
to serve as they should.
    I join in welcoming Ellen Lazar and Tony Brown. I think, 
Mr. Brown, this is your first appearance before the 
subcommittee. Fasten your seat belt. It is always interesting. 
We never know what is going to happen next.
    Ms. Lazar is probably on the verge of breaking a 
subcommittee record in the number of appearances that she has 
testified as head of CDFI in the past.
    NRC and CDFI are two of the smaller agencies within the VA-
HUD jurisdiction. But clearly, they are not forgotten, and we 
do not want to overlook them. You do not have the same level of 
resources of other Federal agencies and departments with which 
we work, but both of your agencies play a vital role in serving 
the needs of distressed communities. And that is why this 
separate hearing is designed to focus on your work.
    It would be very difficult for me to forget Neighborhood 
Reinvestment due to the great work it has done and is doing in 
my home State of Missouri. NRC affiliates in St. Louis and 
Kansas City have been working in some of the most distressed 
communities and have been instrumental in revitalizing the 
neighborhoods. I am proud of the work they have done. I have 
seen the value that they have added.
    I am also excited about the merger between Neighborhood 
Housing Services of St. Louis and another successful 
organization called Beyond Housing. These are two of the 
leading CDCs in the St. Louis area. And it seems to me that the 
combining of their talents is a great move. I hope this merger 
may become a model for other CDCs in St. Louis, where there are 
dozens of small-sized, specialized organizations that may not 
have the capacity to take on much-needed, larger-scale housing 
and economic development projects.
    Today I would be interested in hearing more about NRC's 
activities, especially in affordable housing programs. 
Addressing the shortage of affordable housing is one of my 
highest priorities. It has to be one of the highest priorities 
of this committee. It is obviously clear that we need to 
stimulate and support the production of more affordable 
housing, especially for extremely low income families.
    We have a situation in St. Louis County, Missouri, where we 
do not even apply for more Section 8 vouchers, because there is 
no place for them to be used. A voucher without a house to go 
with it is not very useful.
    In the 2002 VA-HUD appropriations bill, I worked to add $5 
million for Neighborhood Reinvestment to expand their multi-
family housing programs. However, the administration and OMB, 
in their wisdom, did not continue this important initiative in 
the budget request. I am disappointed. I do not agree. But I am 
not deterred. And we will continue to seek support for multi-
family production.
    Further, we need to know how NRC has been involved in 
helping HUD dispose of its single-family assets and administer 
the new Section 8 home ownership program. Like the Chair, I 
have questions about some of these things.
    First, HUD's decision to impose a moratorium on the asset 
control program, I think it makes a lot of sense to suspend 
those organizations that have not performed or have not 
complied with program rules. But punishing good nonprofits 
puzzles me. It is sort of like throwing the baby out with the 
bath water.
    The alternative of HUD using its own resources to dispose 
of the assets is definitely a worse option. And as the Chair 
said, we want to make sure that the home ownership, the Section 
8 home ownership program, does not become a trap for families 
that are not prepared to assume the responsibility of home 
ownership.
    Now with regard to the CDFI, I commend Treasury Secretary 
O'Neill's initiative to have the fund develop real outcome 
measurements of its program and past reports. It has focused 
too much on the outputs or how much money it spent rather than 
the outcomes. I hope that this effort will help us understand 
how cost-effective and efficient the CDFI programs are, 
especially in comparison to other similar Federal activities. 
If you are not giving more value-added for the buck, then we 
are going to cut it back. We want to see programs and agencies 
that work. And we need to be convinced that they are making the 
kind of difference that warrants the allocation of resources to 
them.
    There are two other issues I need to highlight. One, again, 
I am disappointed by the administration's decision not to fund 
the Native American CDFI technical assistance program. It is a 
modest $5 million program for a population that has significant 
needs. The Treasury Department's own study identified 
significant barriers to capital access for Native Americans. 
And it recently released the Native American lending study, 
which found that many communities located in Indian lands face 
economic and social challenges that place them significantly 
behind the rest of the U.S. economy. To me, it is clear from 
the report that CDFI should be playing a role in Native 
American lands.
    The second issue I would like to raise is the future of 
CDFI. What are you, fish or fowl? With the addition of the new 
markets tax credit program, I want to know whether this program 
will be the fund's primary activity. In other words, should 
CDFI focus its activities on grant-making, as it has in the 
past, or is it going to be an allocated tax credit to meet its 
mission? Which one is it going to be? And I am concerned that 
there may be different skills needs. And I want to see where 
you can get the most effective result of the resources 
allocated.

                           PREPARED STATEMENT

    Lastly, I am concerned about the fund's effort in 
addressing distressed communities in rural areas. I happen to 
live in a rural area. And I know many of our colleagues do, and 
they share my concerns. I would like to hear how the fund has 
proposed and has been addressing this issue, because this 
clearly is a concern as much as the concern about distressed 
communities in urban areas.
    With that, Madam Chair, I thank you and look forward to 
hearing the testimony of our two good friends and witnesses.
    [The statement follows:]

           Prepared Statement of Senator Christopher S. Bond

    Thank you, Madam Chair. I also welcome Ms. Ellen Lazar from 
Neighborhood Reinvestment and Mr. Tony Brown from the CDFI. This is Mr. 
Brown's first appearance before the Subcommittee but I think that Ms. 
Lazar may be on the verge of breaking a Subcommittee record in number 
of appearances since she has also testified as the head of the CDFI.
    NRC and the CDFI are two of the smaller agencies within the VA/HUD 
jurisdiction but they are not forgotten. While these agencies may not 
have the same level of resources of other Federal agencies and 
departments such as HUD, both agencies play a vital role in serving the 
needs of distressed communities.
    It is especially difficult for me to forget Neighborhood 
Reinvestment due to the great work it has performed in my home state of 
Missouri. NRC affiliates in St. Louis and Kansas City have been working 
in some of the most distressed communities and have been instrumental 
in revitalizing neighborhoods. I am proud of the work they have done 
and I have seen the value they have added. I am also excited about the 
merger between the Neighborhood Housing Services of St. Louis and 
another successful organization called Beyond Housing. These are two of 
the leading CDCs in the St. Louis area and combining their talents is a 
great move. I hope that this merger will become a model for other CDCs 
in St. Louis where there are dozens of small-sized, specialized 
organizations that do not have the capacity to take on much needed 
larger scale housing and economic development projects.
    Today, I would like to hear more about NRC's activities, especially 
its affordable housing programs. Addressing the shortage of affordable 
housing is one of my highest priorities. It is obviously clear that we 
need to stimulate and support the production of more affordable 
housing, especially for extremely low-income families. In the fiscal 
year 2002 VA/HUD appropriations bill, I sponsored the addition of $5 
million for Neighborhood Reinvestment to expand their multifamily 
housing programs. However, the Administration and OMB did not continue 
this important initiative in its budget request. I am disappointed but 
not deterred, and I will continue to advocate for multifamily 
production.
    Further, I would like to hear how NRC has been involved in helping 
HUD dispose of its single-family assets and administer its new Section 
8 homeownership program. I have questions about HUD's decision to 
impose a moratorium on the Asset Control Area program. While I support 
the suspension of those organizations that have not performed or 
complied with program rules, punishing good non-profits is puzzling to 
me. HUD's decision is like ``throwing the baby out with the bath 
water.'' And, the alternative of HUD using its own resources to dispose 
of its assets is definitely a worse option.
    In regards to the CDFI, I support Treasury Secretary O'Neil's 
initiative to have the Fund develop real outcome measurements on its 
programs. In past reports, GAO found that its programs emphasized 
outputs rather than outcomes. I hope that this effort is able to help 
us understand how cost-effective and efficient the CDFI programs are, 
especially in comparison to other similar Federal activities.
    There are two other issues I would like to highlight. One, I am 
disappointed with the Administration's decision to not fund the Native 
American CDFI Technical Assistance program. This is a modest $5 million 
program for a population that has significant needs. The Treasury 
Department's own study identified significant barriers to capital 
access for Native Americans. Its recently released Native American 
Lending Study found that ``many communities located in Indian Lands 
face economic and social challenges that place them significantly 
behind the rest of the U.S. economy.'' It is clear from this report 
that the CDFI must play a role in Native American lands.
    The second issue I would like to raise is the future of the CDFI. 
With the addition of the New Markets Tax Credit program to the CDFI 
portfolio, I am interested in whether this program will become the 
Fund's primary activity. In other words, should the CDFI focus its 
activities on grant-making or the allocation of tax credits to better 
meet its mission?
    Lastly, I am concerned about the Fund's efforts in addressing 
distressed communities in rural areas. Many members of this 
Subcommittee share this concern. I would like to hear how the Fund has 
addressed this issue.
    Thank you.

    Senator Mikulski. Well, we welcome both of our witnesses. 
And we ask them to proceed with their testimony. Ms. Lazar, you 
come with considerable background in public service. And we 
would just ask you to proceed.
    Ms. Lazar. Thank you. Good morning, Madam Chair Mikulski, 
and Ranking Member Bond. My name is Ellen Lazar, and I am the 
Executive Director of Neighborhood Reinvestment Corporation.
    I am joined today by Margo Kelly and Clarence Snuggs, who 
are my Deputy Executive Directors, and Jeff Bryson, our General 
Counsel.
    This past year, we were fortunate to have very strong 
leadership from our board of directors. Governor Edward 
Gramlich of the Federal Reserve, serves as our chair. John M. 
Reich, Director of the Federal Deposit Insurance Corporation, 
serves as our vice-chair. Among the other members of our board 
are James E. Gilleran, the Director of the Office of Thrift 
Supervision; Deborah Matz, Director of the National Credit 
Union Administration; John C. Weicher, Assistant Secretary for 
Housing and the Federal Housing Commissioner; and Julie 
Williams, the Deputy Comptroller from the Office of the 
Comptroller of the Currency.
    I am here today to talk about Neighborhood Reinvestment and 
the experience of over 225 affiliated community development 
nonprofits, known as the NeighborWorks network, that serves 
over 2,000 urban, suburban, and rural communities in 49 States, 
the District of Columbia, and Puerto Rico, and to talk about 
the work these organizations are doing to revitalize 
communities and help low- and moderate-income families achieve 
a personal stake in the renewal of their communities.
    Neighborhood Reinvestment supports and strengthens 
NeighborWorks affiliates through technical assistance, 
training, direct funding through grants, program review and 
oversight, and access to a unique secondary market. I ask you 
to support Neighborhood Reinvestment's budget request of $105 
million. There are three reasons why a continued investment by 
Congress in Neighborhood Reinvestment----
    Senator Mikulski. Wait a minute. I am lost here in 
testimony, Ms. Lazar.
    Ms. Lazar. I am sorry.
    Senator Mikulski. I have an oral testimony. And then it 
talks about Neighborhood Reinvestment. And then I have your 
formal testimony. What are you--where are we here?
    Ms. Lazar. I am on the second page of the oral testimony.
    Senator Mikulski. I have it now. Thank you.
    Ms. Lazar. Okay. Thank you.
    There are three reasons why a continued investment in 
Neighborhood Reinvestment is a wise use of this Nation's 
Federal resources.

                    STEWARDSHIP OF FEDERAL RESOURCES

    First, Neighborhood Reinvestment takes very seriously its 
stewardship of its Federal appropriation by maximizing the 
effectiveness and efficiency of the NeighborWorks network. We 
use Federal funding to attract private sector resources. For 
every dollar appropriated to Neighborhood Reinvestment, the 
NeighborWorks system generated more than $15 from private 
sector and other sources, resulting in a direct investment of 
nearly $1.4 billion.
    We can achieve this level of impact because our programs 
and services are highly flexible and tailored to fit the credit 
and resource gaps that cannot be filled otherwise. We use a 
community-based approach to direct our activities. Essentially, 
we ask each NeighborWorks organization to identify the specific 
challenges in their communities. We respond with a unique 
combination of training, technical assistance, and financial 
support.
    As you know, two-thirds of our budget goes out to 
NeighborWorks organizations as direct grants, but we provide 
much more than just funding to local community development 
organizations. Our capacity-building services include technical 
assistance, which responds to intricate and timely 
organizational issues; our risk management system, which 
monitors the organization and its financial health, 
productivity, and viability; and our training institutes, which 
help to educate and ensure that local staff are well informed.
    In fiscal year 2001, we trained more than 4,200 people. Our 
training institutes not only serve our network, but the broader 
community development and housing field. Our services improve 
the local organization, mitigate long-term risk, and maximize 
the impact of the Federal resources we use.
    Secondly, Neighborhood Reinvestment continually looks 
toward the horizon, seeking new opportunities to address 
persistent challenges, thereby serving as the laboratory 
environment Congress intended. The challenges facing this 
country are ever changing. Neighborhood Reinvestment was 
chartered and directed to serve as a laboratory for the 
community development field.
    HUD's Section 8 home ownership option is a good example. 
NeighborWorks organizations provide a bridge between private 
lenders and public housing authorities to make home ownership a 
reality. Organizations receive technical and grant support from 
Neighborhood Reinvestment. And this subcommittee has provided 
the resources that have created this laboratory and seeded this 
effort.
    We have assisted 21 NeighborWorks organizations, working 
with 26 public housing authorities, and have trained over 1,000 
professionals on this option through courses we offer.
    Our multi-family funding has been another significant area 
for us. Last year we received $5 million, which was designated 
to explore ways to serve families with incomes below 30 percent 
of area median income in mixed income rental housing. This is 
especially difficult since low-income families' income is often 
unable to cover the operating costs of the rental unit.
    The majority of the allocation that we received is going 
out to NeighborWorks organizations to fund the development of 
mixed income properties that house families with incomes below 
30 percent of median income. The organizations will employ a 
variety of strategies. We will gather information on how these 
properties and others will financially support a wide mix of 
incomes. We appreciate the opportunity to examine viable 
options in this important area and to report our results to 
you.
    Our most visible laboratory effort to date is the 
NeighborWorks Campaign for Home Ownership. In fiscal year 1998, 
Congress seeded our home ownership efforts with a $25 million 
set-aside. That funding has helped produce some remarkable 
results. The average income of the families we serve is nearly 
half of the national average, $29,300. Ninety-five percent of 
these folks are first-time home buyers. Fifty-two percent are 
ethnic minorities. Forty two percent are female buyers.
    We have produced a series of integrated strategies, 
including comprehensive home buyer education, NeighborWorks 
Home Ownership Centers, and a financial literacy initiative. We 
are on target to surpass our 5-year goal to create 40,000 new 
home buyers.
    Lastly, Neighborhood Reinvestment provides strategies for a 
range of housing and community development challenges. The one-
size-fits-all approach does not work. We are addressing the 
needs of under-served communities and populations with a 
particular sensitivity to the needs of low-income families, 
immigrants, the disabled, and the elderly. This requires more 
than grants. We need strong organizations led by strong 
community leaders, local resident leaders, leading to greater 
civic involvement, which helps effectuate positive change.

                               CONCLUSION

    Let me close by thanking Madam Chair Mikulski and Ranking 
Member Bond for the wonderful opportunity you and the 
subcommittee have given this organization to serve America's 
communities and by asking for your continued support.
    At the $105 million level, we will leverage $1.6 billion in 
direct total investment in distressed rural, suburban, and 
urban communities. We will assist more than 71,000 families 
obtain and maintain safe and affordable rental and home 
ownership housing. We will provide pre-and post-purchase home 
ownership counseling and financial literacy to nearly 70,000 
families.
    You have encouraged us to be flexible, creative, nimble, 
and responsive in designing and delivering our services and 
resources. And this flexibility and your demonstrated 
confidence in us has created remarkable results. We know that 
your investment in Neighborhood Reinvestment is an investment 
and expression of confidence in America's communities. And all 
of America benefits when its communities are healthy, strong, 
and safe.

                           PREPARED STATEMENT

    Thank you. And I am happy to take any questions.
    Senator Mikulski. Thank you very much, Ms. Lazar. And with 
unanimous consent of the committee, your entire testimony will 
be included in the record.
    [The statement follows:]

                   Prepared Statement of Ellen Lazar

    Good morning, Chairman Mikulski, Ranking Member Bond, and members 
of the subcommittee. My name is Ellen Lazar and I am the Executive 
Director of the Neighborhood Reinvestment Corporation. I am here this 
morning to talk with you about the work that Neighborhood Reinvestment 
is doing to revitalize communities and help low- and moderate-income 
families achieve a personal stake in the renewal of their communities.
    My testimony is based on the experience and considerable successes 
of 225 community development organizations serving more than 2,000 
urban, suburban, and rural communities. These nonprofits are 
collectively known as the NeighborWorks network and operate 
in 49 States, the District of Columbia, and Puerto Rico.
    The Neighborhood Reinvestment Corporation was created by Congress 
in 1978. Since that time, Neighborhood Reinvestment and its affiliated 
NeighborWorks network have continuously evolved to become 
increasingly effective and efficient in leveraging significant private-
sector resources for community revitalization and affordable housing. 
This could not have been accomplished without this subcommittee's 
commitment of Federal funds. In fiscal year 2001, the 
NeighborWorks system generated nearly $1.4 billion in direct 
investment, helping nearly 64,000 families obtain and maintain safe and 
affordable rental and homeownership housing.
    I thank the subcommittee for supporting Neighborhood Reinvestment 
through the fiscal year 2002 budget appropriation of $105 million. 
Neighborhood Reinvestment's fiscal year 2003 Budget Justification 
outlines proposed activities at a $105 million budget level. This 
includes $10 million to further expand a groundbreaking effort to 
utilize the HUD Section 8 program in support of home ownership for low-
income families.
    Before I move further into the details, I would like to express my 
immense pride, and my good fortune, in leading a Corporation that works 
to build community and public-private cooperation as its fundamental, 
day-to-day business. Throughout the Corporation and the 
NeighborWorks network, we feel an increased responsibility to 
the concepts of positive action, purposeful change, and communitywide 
commitment that is so critical to our country today.
                   the neighborworks system
The NeighborWorks system is three-pronged
    Neighborhood Reinvestment Corporation.--Is a Congressionally 
chartered, public nonprofit corporation, headquartered in Washington, 
D.C., and staffed in nine regional offices. Neighborhood Reinvestment 
has five core activities:
    We charter new NeighborWorks organizations through an 
extensive educational and partnership-building effort, involving 
residents, business leaders and government representatives.
    We provide funding for capital projects and operating grants to 
NeighborWorks organizations, enabling them to create and 
build their own community-revitalization initiatives from a solid asset 
base.
    We provide a high degree of management and technical assistance to 
NeighborWorks members and the broader community development 
field, in order to expand their delivery programs and better serve 
their communities.
    We conduct extensive reviews of NeighborWorks 
organizations, focusing on their capacity to successfully manage their 
resources and programmatic risks. These program reviews monitor 
performance on an ongoing basis and serve as a platform for providing 
management and technical assistance. They also unearth best practices 
at the street level. Our goal is to increase the health, performance, 
productivity and effectiveness of the entire NeighborWorks 
network.
    We conduct national Training Institutes in major cities throughout 
the United States for anyone interested in affordable housing and 
community revitalization, particularly private- and public-sector 
practitioners and community leaders. Typically, 70 courses centered on 
such topics as management and leadership, community building, community 
economic development, neighborhood revitalization and affordable 
housing are offered at each Training Institute. We conduct at least 
five Training Institutes each year, attracting up to 1,200 participants 
at each venue. We also offer other training opportunities such as 
specialized resident leadership workshops and regional trainings.
    These activities individually and collectively help build the 
productivity and strength of local community development organizations.
    The NeighborWorks network.--Was founded by Neighborhood 
Reinvestment. This network of community-based nonprofits has evolved 
from 34 organizations operating in about a dozen States in the 1970s to 
the impressive 225-member network working today in more than 2,000 
communities across the country. NeighborWorks organizations 
operate in our Nation's largest cities and in some of its smallest 
rural communities. Regardless of their target communities, 
NeighborWorks organizations function as partnerships of local 
residents, lenders and other business leaders, and local government 
representatives. They produce creative strategies, share best 
practices, and develop flexible financing mechanisms.
    Neighborhood Housing Services of America (NHSA).--Is a secondary 
market for a range of investment vehicles originated by 
NeighborWorks organizations. It is funded primarily by social 
investors that purchase loans made by NeighborWorks 
organizations, thus replenishing local revolving loan funds and 
enabling them to finance even more homeownership, rehabilitation and 
multifamily housing. NHSA's services focus on lower-income borrowers; 
the median borrower income is $24,652. Over the years, NHSA has 
purchased more than $461 million in loans from local 
NeighborWorks organizations and their local lending partners.
    The NeighborWorks system is the only coordinated effort 
of its type in the Nation. It is unique in that it:
  --Provides a national delivery system built on locally-directed, 
        community-based partnerships;
  --Fosters local and regional leveraging of scarce Federal resources;
  --Serves as a laboratory for developing and testing creative 
        solutions to problems that impede affordable housing production 
        and neighborhood revitalization;
  --Sets high standards for participating in the network and maintains 
        them through a strenuous approval process and a comprehensive 
        system of ongoing performance reviews; and
  --Facilitates a learning environment for benchmarking and 
        disseminating best practices in the field.
    The system's unique qualities pay off in increased reinvestment. 
Through the guidance of the Corporation's Board of Directors, the 
experience of Neighborhood Reinvestment staff, and the willingness of 
NeighborWorks organizations to share the fruits of their 
labors, the NeighborWorks system will, with your support, 
continue to strengthen communities and improve lives throughout America 
in the year ahead.
                    stewardship of federal resources
    As a recipient of congressional appropriations, Neighborhood 
Reinvestment recognizes its responsibility for proper stewardship. 
Neighborhood Reinvestment has an established track record for using the 
resources granted to us by Congress in a productive and efficient 
manner. Further, Neighborhood Reinvestment extends its stewardship by 
maximizing the effectiveness and efficiency of the 
NeighborWorks network in ways that strengthen communities, 
transform lives and bring more of America's families into the economic 
mainstream.
    Neighborhood Reinvestment and the NeighborWorks network 
use Federal funding to attract private resources. The typical 
NeighborWorks organization receives most of its funding 
support from private sources and fees. Private investors have viewed 
the NeighborWorks network as an increasingly sound 
investment. In fiscal year 2001, for every $1 appropriated to 
Neighborhood Reinvestment, the NeighborWorks system generated 
more than $15 from private sector and other sources, resulting in a 
direct investment of nearly $1.4 billion in communities served by 
NeighborWorks organizations. We can achieve this level of 
impact because our programs and services are highly flexible and 
tailored to fill credit and resource gaps.
    Neighborhood Reinvestment bridges the gap between public and 
private funding by integrating public and private support. One critical 
financing vehicle that we provide to NeighborWorks 
organizations is equity capital, for real-estate development and 
lending grants, and for local revolving loan funds. The 
NeighborWorks organizations, in turn, use these funds to draw 
private capital in a variety of ways, including:
  --Equity and gap financing for home purchase loans, including down 
        payment and closing costs;
  --Capital for property rehabilitation, micro-enterprise and small 
        business loans; and
  --Capital costs associated with the acquisition and development of 
        residential and commercial real estate for long-term ownership 
        by NeighborWorks organizations.
    Locally directed revolving loan funds are essential to the 
network's success. Revolving loan funds provide flexible funding for 
community priorities, such as homeownership, rehabilitation, 
multifamily housing, and commercial and economic development. 
Neighborhood Reinvestment Corporation supports these revolving loan 
funds through technical expertise, training, and funding. NHSA aids the 
liquidity of the local revolving loan funds by buying revolving loan 
fund loans.
    Most of the funding for revolving loan funds comes from local 
sources--loans and grants made by banks, insurance companies, 
foundations, local governments and other local investors. Loan 
recipients are typically underserved families. Seventy-one percent of 
loans made through NeighborWorks revolving loan funds are 
made to very low- or low-income households, 53 percent to minority-
headed households, and 43 percent to female-headed households. Loans 
carry a rate and term that the borrower can afford to pay back.
    The NeighborWorks system is the only national nonprofit 
network with expertise in designing, originating and servicing small 
non-conventional loans to lower-income families. These loans help 
create first-time homebuyers, often prevent mortgage delinquencies, 
provide money for repairs, and may ensure accessibility for those with 
disabilities. Generally, the loans offered by local 
NeighborWorks organizations provide a blanket of security for 
neighborhoods of modest means. By designing loans to fill the gap 
between the capacity of the borrowers and the parameters of 
conventional lenders, the NeighborWorks organizations 
complete transactions that could not otherwise be prudently realized.
    Neighborhood Reinvestment employs a grassroots-directed approach to 
our service design or service delivery. We ask each 
NeighborWorks organization to identify the specific 
challenges they face in attempting to ensure strong, safe neighborhoods 
of choice. Neighborhood Reinvestment responds with a tailored and 
solution-oriented combination of training and technical assistance in 
balance with any necessary financial support, including:
  --Our national Training Institutes, which provide education and 
        practitioner-focused training, to ensure that local staff is 
        well-equipped and informed. Last year, more than 4,200 
        community development professionals and others attended the 
        Training Institutes.
  --On-site specialized technical assistance in areas such as lending, 
        loss mitigation, resource development and marketing, community 
        revitalization, and business planning. This on-site assistance 
        is coordinated with and augmented by the extensive array of 
        formal training conducted at our Institutes and in other 
        trainings.
  --On-going and responsive program reviews through our Risk Management 
        Unit that monitors the organizational and financial health of 
        each NeighborWorks organization. We make a site visit 
        to each NeighborWorks organization at least every 24-
        36 months.
    Together, these supportive services help ensure that funding is 
used responsibly, efficiently and effectively at the local level.
    Over the years, Neighborhood Reinvestment has earned a reputation 
for helping communities achieve their revitalization goals. I am 
convinced we can further improve. We have undertaken a corporate-wide 
strategic planning process that will better position our organization 
and our network to meet the challenges of America's communities with 
even greater creativity and success. Emerging goals for our future 
include bringing more private investment into our neighborhoods, 
building stronger community leaders and civic commitment, collaborating 
with new partners and building new alliances with long-standing 
friends, continuing our dramatic success in creating homeownership 
opportunities, and assisting in the effort to create safe, affordable, 
attractive housing for low- and moderate-income families.
    The plan encompasses our commitment to do several things:
  --Increase the capacity of NeighborWorks organizations to 
        help underserved communities meet their revitalization goals;
  --Expand the impact and reach of the NeighborWorks network;
  --Increase private-sector resources for the work of the 
        NeighborWorks network;
  --Provide responsive, integrated, seamless and efficient customer-
        oriented services; and
  --Be in the vanguard of the community development field.
                    community development laboratory
    Neighborhood Reinvestment continuously looks toward the horizon, 
seeking new opportunities to address persistent and emerging challenges 
facing America's communities. The constant evolution of communities did 
not escape the notice of Congress when Neighborhood Reinvestment was 
chartered and directed to serve as a laboratory for the community 
development field.
    The flexibility of our dollars and the broad reach of the 
NeighborWorks network allows the Corporation to directly 
tackle some of the serious issues that impact communities, as well as 
contribute to broader public policy discussions. Neighborhood 
Reinvestment and the NeighborWorks network have played a 
creative, collaborative role in effecting positive community change--
and we are well positioned to continue our efforts in fiscal year 2003 
and beyond.
    I would like to share with you some of the successes of our 
laboratory environment, and how they have helped strengthen the 
community development field and America's communities.
    Section 8 Homeownership.--A good example of our laboratory 
environment can be seen in Neighborhood Reinvestment's work with HUD's 
new Section 8 homeownership option. With strong technical support from 
Neighborhood Reinvestment, local NeighborWorks organizations 
have been able to serve as an efficient and effective bridge between 
private lenders and public housing authorities to make homeownership a 
reality for qualified Section 8 recipients. This subcommittee provided 
the resources that seeded our effort, allowing the 
NeighborWorks network to provide high-quality counseling and 
small second mortgages that are paid off by the Section 8 voucher.
    The $5 million that you allocated in our fiscal year 2001 
appropriation allowed us to expand our efforts--from four to 21 
NeighborWorks organizations. The funds helped capitalize the 
revolving loan funds of these NeighborWorks organizations, 
which served as a source for second mortgages. A portion of the set-
aside was used for capacity building, which helped some 
NeighborWorks organizations tailor their housing counseling 
services to the specific needs of their Section 8 population, and to 
work with public housing authorities.
    Of the families assisted by NeighborWorks organizations 
in fiscal year 2001, 85 percent of the borrowers are single, female-
headed households, and 35 percent are very-low income. The median 
purchase price of the homes is $85,000.
    The Administration and this subcommittee were supportive of the 
strides made in fiscal year 2001; subsequently this subcommittee 
allocated $10 million of Neighborhood Reinvestment's fiscal year 2002 
budget to continue our work on helping Section 8 voucher holders move 
into homeownership. Over $9.2 million of this allocation is going to 
NeighborWorks organizations as grants and we expect to 
announce grantees in early May. In fiscal year 2002, we expect to 
attract a number of new public housing authority partners to this 
option, as well as assist experienced Section 8 homeownership 
NeighborWorks organizations in their partnerships to include 
additional public housing authorities. Through your support, 
Neighborhood Reinvestment and the NeighborWorks network have 
become sophisticated in our approach to this option. We have and will 
continue to share or successful strategies with others in the field.
    We have concentrated heavily on sharing what we have learned 
through our Section 8 homeownership laboratory with the broader field. 
We have developed a course for the Neighborhood Reinvestment Training 
Institute solely on this program that attracts many beyond the 
NeighborWorks network. Through the Neighborhood Reinvestment 
Training Institute and other training partnerships, we have conducted 
over 28 outreach sessions, which educated more that 1,000 public 
housing authority professionals, nonprofit staff, and lender partners. 
We are also coordinating our training and information efforts with HUD 
and public housing trade groups. We will continue these efforts 
throughout fiscal year 2002 and 2003.
    The NeighborWorks system has made significant headway in 
establishing positive, productive relationships with public housing 
authorities across the country and has made scholarships available for 
public housing officials to attend Section 8 courses at our Training 
Institutes. The strong partnerships established between 
NeighborWorks organizations and their local public housing 
authorities is expected to open the doors of homeownership to more than 
500 families that were previously dependent on ongoing Section 8 rental 
subsidies. With continued support from this subcommittee, Neighborhood 
Reinvestment will continue to play a leadership role in making the 
Section 8 homeownership option available to voucher recipients across 
the country.
    Mixed-Income Rental Housing.--Last year, this subcommittee provided 
Neighborhood Reinvestment with a $5 million set-aside to support our 
work in establishing mixed-income, multifamily rental developments and 
explore ways to serve families with incomes below 30 percent of area 
median income. This allocation recognizes that the challenge of 
affordably housing this Nation's extremely low-income families is 
complicated. We appreciate the opportunity to test a range of 
approaches and eventually report our results to you.
    Understanding the importance of multifamily rental housing in a 
comprehensive neighborhood revitalization strategy, a group of 
NeighborWorks organizations formed the NeighborWorks 
Multifamily Initiative in 1999. Together, these organizations own more 
than 30,000 rental housing units that provide attractive and affordable 
housing for families where renting is currently a more appropriate 
option than owning. The members of the NeighborWorks 
Multifamily Initiative make it their mission to provide sustainable 
multifamily homes, which are marked over the long-term by:
  --Affordability;
  --Well-maintained and attractive physical condition;
  --Access to on-site learning centers designed to support the 
        technological and social infrastructure of educational success; 
        and
  --Ongoing economic viability.
    Research by the NeighborWorks Multifamily Initiative has 
demonstrated that in all markets, the fundamental economics of serving 
families with incomes under 40 percent of area median income requires 
some level of on-going subsidy. A housing cost equal to 30 percent of 
this household's income yields a rent payment that is less than the 
operating expenses for their unit--leaving no funds for the payment of 
debt service. Similarly, in many markets, creating new housing for 
those at 60 to 100 percent of area median income is equally difficult, 
since many existing subsidies are targeted to households with incomes 
below 60 percent of area median income. Nevertheless, with creativity, 
tenacity and resolve, the Multifamily Initiative members are creating 
mixed-income properties that serve families under 30 percent of area 
median income in a variety of ways.
    We have used the $5 million set-aside to promote mixed income 
properties that dedicate a portion of their units to extremely low-
income families. The elements of this program include:
    Mixed Income Property Development Grant Incentive Set-Aside. Our 
goal under this component of the allocation was to promote the 
production of units affordable to extremely low-income families within 
mixed-income properties. We have received 17 applications from 
NeighborWorks organizations for this allocation, totaling 
$6.1 million for 191 units affordable to those at or below 30 percent 
of the area median income, in developments that total 1,400 units. We 
will select a set of demonstration projects that serve diverse market 
settings and employ a variety of subsidy strategies. Awards will be 
finalized by the first week of June 2002.
    Neighborhood Capital Corporation. The Multifamily Initiative was 
the catalyst for creating the Neighborhood Capital Corporation (NCC), 
which provides affordable, short-term financing to 
NeighborWorks organizations to acquire multifamily properties 
that are at risk of deterioration or of being lost as affordable units 
available in a community. NeighborWorks organizations and 
other nonprofit developers find the primary obstacle to purchasing a 
property is the lack of flexible pre-development and acquisition 
financing that allows an organization to respond quickly when a 
property becomes available. Neighborhood Reinvestment responded to this 
problem by making an initial investment in NCC. NCC provides essential 
loans so that NeighborWorks organizations can purchase 
multifamily properties, many of which are preservation properties. This 
funding will support the production pipeline of mixed-income properties 
by financing acquisition and preservation of existing properties. The 
Corporation expects that over the next 2 years, NCC will leverage $20 
million from private sector investments.
    Symposium on Mixed-Income Properties.--A symposium was conducted in 
April 2002 to foster dialogue among experienced practitioners from 
across the real estate development, finance, and public agency arenas, 
including housing finance agencies and public housing authorities. This 
symposium examined various real estate development models, operating 
strategies, existing finance tools, and the impact of State and local 
policy and regulations on achieving mixed income properties that can 
house extremely low-income families. The Symposium, which attracted 
some of the best minds in our field, was held on April 4, 2002 during 
Neighborhood Reinvestment's recent Training Institute in Chicago.
    Research Findings.--A portion of this set-aside will also allow us 
to prepare and present a report on strategies and financing currently 
employed to develop mixed-income properties. This report will examine 
properties already in the NeighborWorks portfolio and will 
make observations on those funded through Neighborhood Reinvestment's 
special set-aside for mixed income housing. We expect to have a full 
report to share with you by the end of the year.
    Advanced Training for Experienced Practitioners.--Our national 
Training Institutes are widely acknowledged to be at the cutting edge 
of training for housing and community development practitioners. As we 
have monitored the capacity of the professionals in this field, it has 
become apparent that there are huge benefits to be gained from 
additional training and coaching of the most experienced housing and 
community development practitioners. To respond to this capacity need, 
we are collaborating with Harvard's Hauser Center to develop state-of-
the-art training for seasoned leaders in an intensive learning 
environment. Our goal is to advance the quality of community 
development leadership, analyze more thoroughly the challenges facing 
America's neighborhoods, and develop even more powerful strategies to 
strengthen our communities.
    New Homeowners.--Perhaps our best-known laboratory effort to date 
is the NeighborWorks Campaign for Home Ownership, our very 
successful effort to assist families of modest means become successful 
long-term homeowners. In fiscal year 1998, Congress seeded our 
homeownership efforts with a $25 million set-aside. That funding has 
helped produce remarkable results--the average income of the homebuyer 
is nearly half of the national average, $29,300; 95 percent are first-
time buyers; 52 percent are ethnic minority buyers; and 42 percent are 
female buyers. Currently, we are on target to surpass our 5-year goal 
to create 40,000 new homebuyers.
    The NeighborWorks Campaign for Home Ownership has 
identified a series of well-integrated strategies to help lower income 
Americans become homeowners. These strategies include comprehensive 
homebuyer education, Full-Cycle LendingSM, 
NeighborWorks HomeOwnership Centers, and an emerging 
financial literacy pilot. We are currently planning for the next 5 
years of the Campaign, and I know we will continue to strive to help 
lower-income Americans successfully achieve the American dream.
                   solutions to a range of challenges
    No ``one size fits all'' approach can match the wide range of 
economic markets, housing stock, and employment challenges experienced 
in this Nation's urban, suburban and rural communities. Older rural 
communities vary significantly from first-ring suburbs, which differ 
distinctly from Native American lands.
    The flexibility that you have allowed us in designing strategies 
and targeting our resources has given us the ability to devise 
extraordinarily successful tools and strategies, as well as build a 
network of strong and diverse local community development 
organizations. The power and impact of our grants are directly 
attributable to their flexibility. We are in the business of helping 
develop a network of strong nonprofit organizations that can respond to 
vulnerable neighborhoods in a changing environment. Underserved 
populations need to be connected--to private markets, mainstream 
lenders, and conventional products. Since its inception, Neighborhood 
Reinvestment has always been about addressing the needs of underserved 
communities and populations. This focus has allowed the Corporation and 
its affiliated NeighborWorks organizations to develop a 
particular sensitivity and approach to the specialized needs of low-
income families, immigrants, minorities, the disabled, and the elderly. 
Serving the needs of these populations requires more than grants. We 
are committed to building strong organizations, led by strong community 
leaders. We are especially committed to developing local resident 
leaders because we believe greater civic involvement helps effectuate 
positive change in communities.
    Resident leadership development continues to be a core value in the 
NeighborWorks network's approach to community revitalization. 
To respond to a need for enhanced resident leadership development, we 
sponsor regional Community Leadership Institutes. These programs enable 
resident leaders to share their experiences, hone their leadership 
skills and bring innovative ideas back to their communities. This 
reflects the Corporation's conviction that while new homeowners, 
improved housing and increased investment are essential to 
revitalization, the most essential ingredient for long-term success is 
informed, effective and motivated resident leaders.
    To examine the strategies and best practices of outcome-based 
community organizing, the NeighborWorks network has recently 
developed a community organizing pilot. Twenty NeighborWorks 
organizations have developed action plans and will be documenting their 
progress toward their goals. Over the next year, this pilot will 
develop best practices as well as produce a framework for evaluation of 
community organizing. Our increased focus on the needs of rural 
communities is an example of Neighborhood Reinvestment's commitment to 
diverse communities. In 1990, three NeighborWorks affiliates 
identified their primary service areas as rural communities. By fiscal 
year 2001, that number had grown to 59 organizations, which is 27 
percent of the total number of organizations in the 
NeighborWorks network. The network has proven its efficiency 
in addressing housing needs in rural communities, particularly through 
our partnership with a peer organization, RNA Community Builders. With 
seed funding from Neighborhood Reinvestment and the Northwest Area 
Foundation, rural NeighborWorks organizations have 
transformed this peer-to-peer membership organization into a shared 
revolving loan fund that provides bridge financing for local housing or 
economic development projects at below-market rates.
    Last year, we worked closely with our rural members to deliver a 
week-long sequence of courses at our Training Institute specifically 
focused on the unique barriers to community development in rural areas. 
While the challenges in rural, suburban and urban settings are, in many 
instances, similar, the means to effectively address them are often 
very different. We are engaged in a similar effort to design courses 
that address the very acute barriers to creating homeownership and 
economic development opportunities for Native Americans.
    In fiscal year 2000, more than 50 NeighborWorks 
organizations provided housing for non-elderly persons with 
disabilities, assisting more than 800 families. More than 45 
organizations provided housing services for the elderly, benefiting 
more than 3,300 households. And as the needs in these communities grow, 
our capacity to serve them responds in tandem.
    As you can see by the vast network of services that Neighborhood 
Reinvestment provides--either directly or through integrated channels 
and partnerships--we are committed to building strong communities. The 
needs of underserved communities are as diverse as the Nation itself. 
Therefore, our approach to revitalization must reflect those diverse 
needs.
                               conclusion
    For fiscal year 2003, we are requesting an appropriation of $105 
million, which includes $10 million to further Neighborhood 
Reinvestment's and the network's pioneering efforts in using Section 8 
vouchers to purchase a home. At this funding level, Neighborhood 
Reinvestment will be able to maintain its current level of services to 
the NeighborWorks network and produce modest increases to the 
outputs and measures.
    A $105 million appropriation will assist the 
NeighborWorks network to:
  --Leverage nearly $1.6 billion in direct total investment in 
        distressed rural, suburban and urban communities;
  --Assist more than 71,000 families obtain and maintain safe and 
        affordable rental and homeownership housing;
  --Provide pre- and post-purchase homeownership counseling and 
        financial literacy training to nearly 70,000 families, 
        including many potential Section 8 buyers; and
  --Continue to educate the public housing industry and potential 
        partners on the homeownership option.
    To support and expand these significant accomplishments, the 
Neighborhood Reinvestment Corporation and NHSA expect to:
  --Add 12 new organizations to the network, increasing the 
        NeighborWorks network to 245 organizations serving 
        2,200 communities;
  --Conduct 240 reviews of member organizations;
  --Provide over 190,000 training contact hours to community 
        development leaders and practitioners, not only through the 
        Neighborhood Reinvestment Training Institute but also through 
        local and district training opportunities; and
  --Purchase $60 million in loans from NeighborWorks 
        organizations.
    Let me close by thanking the subcommittee for the wonderful 
opportunity you have given Neighborhood Reinvestment and the 
NeighborWorks network to serve America's communities, and by 
asking for your continued support. Because Neighborhood Reinvestment is 
efficient in the services it provides, communities and residents 
benefit. Because our systems continually evolve to address ever-
changing needs, communities and residents benefit. And because the 
communities and residents are many in number and need, we are 
continually aware of ground-level challenges across this great Nation.
    With your assistance, we will continue to strengthen underserved 
communities and populations across this country. You have encouraged us 
to be flexible, creative, nimble and responsive in designing and 
delivering our services and resources, and this flexibility and your 
demonstrated confidence in us has created remarkable results. In 
addition to transforming lives and neighborhoods in incredibly diverse 
settings, the NeighborWorks network now serves as an 
increasingly effective laboratory for testing new ideas and solutions 
to new and long-standing problems. We know that your investment in 
Neighborhood Reinvestment is an investment and expression of confidence 
in America's communities. And all of America benefits when its 
communities are healthy, strong and safe.
    Neighborhood Reinvestment Corporation is committed to building 
healthy, strong and safe communities all across America. Your continued 
support is vital to us in accomplishing this goal.

                       DEPARTMENT OF THE TREASURY

           Community Development Financial Institutions Fund

STATEMENT OF TONY T. BROWN, DIRECTOR
    Senator Mikulski. We want to welcome for his first time Mr. 
Tony Brown, who began his tenure at CDFI in August. Prior to 
that, he was a senior vice-president for Bank of America in 
Jacksonville, Florida. And he is a graduate of Xavier 
University in Ohio with a master's in business, with a 
specialty in finance and a degree in international affairs in 
business. So he comes with a very strong background, 
educational background, in the area of finance, as well as 
considerable private sector experience, particularly in the 
field of banking.
    And we do know that Bank of America is one of the real 
recognized banks in reaching out, in fulfilling its obligation 
on the Community Reinvestment Act.
    So you come with a lot of experience. And we really do need 
it. So we welcome you for your first time. We look forward to 
getting better acquainted with you. And this is a good way to 
do it. So we ask you to please proceed.
    Mr. Brown. Thank you, Madam Chair, Senator Bond, and 
members of the subcommittee. I thank you for the opportunity to 
testify before you today on behalf of the Department of 
Treasury's CDFI Fund and in support of the President's fiscal 
year 2003 budget. I do apologize. We did not submit a formal 
oral statement. I do request respectfully that the written 
testimony be included for the record. And I will keep my 
remarks brief.
    As Chairwoman Mikulski indicated, I come to the government 
with 20 years' prior banking experience and with over a decade 
of community development experience. Community development has 
been a career. Community development is a passion. And I thank 
the President and Secretary O'Neill for the opportunity to be 
part of the CDFI team. And I know, and I have witnessed 
firsthand, the remarkable work of CDFIs and the value of 
community development lending and investment services in 
improving our low income communities.
    And so when the Secretary asked us to find ways to help 
show how CDFIs improve and have impact in our Nation's low 
income communities, I knew, I know, from firsthand experience 
that that would be an easy undertaking from the standpoint of 
the things I have witnessed firsthand. And I will share some of 
those with you as I speak.
    As you know, the CDFI Fund is a wholly owned government 
corporation within Treasury that promotes access to capital and 
local economic growth in distressed communities and with under-
served populations through community development finance. And 
it is that statement, community development finance, that I 
think best highlights what the value of the fund is and what we 
do.
    CDFIs support and provide loans and investments in 
financial services to improve the economic vitality of our low 
income communities. And they do it in ways that are more 
flexible and innovative than regulated financial institutions. 
To date, we have certified 565 CDFIs covering all 50 States. 
These CDFIs provide a wide range of investment and lending 
activities. And I would like to just highlight a few.
    Our leading fund categories are those that we categorize as 
housing and facility loan funds. These entities provide loans, 
as an example, to nonprofit housing developers to help them 
secure site control or conduct due diligence. Our partnership 
with NeighborWorks and NRC is an example. We have certified 66 
NeighborWorks organization of 565 CDFIs. And as Ellen has 
indicated, they show a tremendous record of providing housing 
loan funds to improve our low income communities.
    Other examples in the housing and facility loan category 
would include loans to nonprofit healthcare providers in order 
to provide healthcare centers in low income communities. And 
again, the distinction is that they do it in ways that are 
innovative and more flexible than our regulated financial 
institutions. They may take second and third mortgage positions 
in order to make those facilities happen.
    Our second leading category are business loan funds.
    Senator Mikulski. What page are you working on?
    Mr. Brown. As I said, I apologize, I did not submit an oral 
statement. So----
    Senator Mikulski. No, but it would helpful if you were 
following in order from your written testimony. It is very 
informative, but it is hard for us to follow, Mr. Brown. If you 
could work off the outline of your testimony, so we know at 
least the topic, sir.
    Mr. Brown. I will do that, then. I will speak from----
    Senator Mikulski. Sure.
    Mr. Brown [continuing]. The written testimony.
    Senator Mikulski. We appreciate that.
    Mr. Brown. Okay. The first two pages.
    As I was explaining, on the first page of my written 
testimony in talking about the CDFI Fund being a wholly owned 
government corporation in that second paragraph, I am 
highlighting information about 565 certified CDFIs by giving 
you a few examples of what they do. I just highlighted 
information on the housing loan funds.
    Another example of the 565 certified CDFIs, 25 percent of 
those CDFIs are engaged in business loan funds. They provide 
financing to low income immigrant, minority, and women 
populations, again with innovative and flexible underwriting 
guidelines.
    Our third category of the CDFIs that I have highlighted in 
that second paragraph on page one are community development 
credit unions. These credit unions are specialized 
neighborhood-based financial service centers. Many of them have 
been formed out of the basement of churches and have come 
together as a result of faith-based initiatives.
    The remaining category of funds are those that have been 
formed by bank holding companies, those that are engaged in 
micro-enterprise lending, and then we have venture capital 
funds.
    On page two of my written testimony, as I indicated, our 
vision for the CDFI Fund is to become a leading vehicle and 
best practice government agency for financing economic and 
community development activities. Our mission is to help make 
America a place where all of its people have affordable access 
to credit, capital, and financial services. This administration 
is committed to shifting the fund from merely a grants-making 
organization to one that addresses the economic ills of low 
income communities through targeted investments and community 
development finance.
    Also on page two, I talk about the vision of the fund for 
2003 and beyond. And in that we make mention of our New Markets 
Tax Credit Program. And highlighting that is the fact that the 
opportunity for the fund to achieve major impact is not 
isolated or sporadic, when you consider that 40 percent of the 
Nation's low income--40 percent of the Nation's census tracks 
are low income areas that qualify for our major programs. What 
that means for the State of Missouri is that nearly half, 48 
percent, of your census tracks qualify for our major programs. 
And in Maryland, that number compares to the national average 
at about 38 percent. So I share that information to let you 
know that we understand how important the CDFI program is to 
you and your constituents. And we are committed to making it a 
world-class organization.
    Some of our successes this past year have included, as you 
indicated, release of the Native American Lending Study. And 
along with that was the first year that we provided our Native 
American CDFI Technical Assistance Program. We are quite 
pleased at both products. And the fact that our NACTA Program, 
our Native American CDFI Technical Assistance Program, has 
brought in 45 applications totaling nearly $6 million in 
requests. And it is a program that we are committed to and 
that, though our budget does not contain a set-aside, it is 
included for 2003. And we do plan to issue another NOFA related 
to our NACTA Program.
    Also, this past year was the first year of our SECA 
program. This is the investment program that we make to small 
and emerging CDFIs. We are pleased to announce that we awarded 
over $8 million to 70 small and emerging CDFIs throughout the 
country.

                     NEW MARKETS TAX CREDIT PROGRAM

    Last year we received comments on the New Markets Tax 
Credit Program. This year, and within the next 30 days, we will 
be issuing our Notice of Allocation Availability, which will 
officially start the application process for the New Markets 
Tax Credit Program. And we are certainly pleased to have the 
opportunity to use tax credits as an incentive to see an 
increase in private sector capital, a goal of $15 billion in 
private sector equity, flowing into low income communities.
    Now our budget does respectfully request $68 million in 
appropriations. This comes in recognition of tight budget 
concerns related to tough priorities for international and 
homeland securities. We feel that the reduction in the budget 
will be made up through increased private sector investments, 
through our New Markets Tax Credit Program. We have retooled 
our organization, and we think that more efficient operations 
with quicker disbursement processes will also aid in providing 
the dollars that our communities so vastly need to work in 
improving their low income neighborhoods.
    Senator Bond, to your question of the value of New Markets 
Tax Credit relative to our other Programs, we see it as being 
an integral part of what we do. I often say that our strategy 
at the Fund is a three-part strategy. One is the investments we 
make, our traditional investment programs, our Core and SECA 
Programs and what we do to help our communities create 
specialized loan funds. It is an important part of the strategy 
and one that we are committed to maintaining.
    The second part of that strategy is the Bank Enterprise 
Award Program. We have substantial financial institutions that 
are willing to leverage their balance sheet, their income 
statements, to make a difference in the communities we serve. 
And many have been the major investors to many of the CDFIs 
that have been formed on the local level.
    And then, obviously, the third part of that strategy is the 
New Markets Tax Credit Program. In order to have sustaining 
economic activity, we must have an increased flow of private 
sector dollars into our low income communities.

                           PREPARED STATEMENT

    So with that, I will end my opening remarks. And, again, 
thank you for the opportunity to testify. And I am available to 
answer any questions you may have.
    [The statement follows:]

                  Prepared Statement of Tony T. Brown

                              introduction
    Madam Chair, Senator Bond and members of the subcommittee, I 
appreciate the opportunity to testify before you today on behalf of the 
Department of Treasury's Community Development Financial Institutions 
(CDFI) Fund and in support of the President's fiscal year 2003 budget. 
I am Tony Brown, the new Director of the CDFI Fund. The Secretary of 
the Treasury selected me as Director in August of last year. I bring a 
20-year prior experience in banking to the CDFI Fund with a decade of 
service in community development where I managed the community 
development program for the largest financial institution in the State 
of Florida. Joining me today are Fred Cooper, Deputy Director for 
Policy and Programs, and Owen Jones, Deputy Director for Management/
CFO.
    As you know, the CDFI Fund is a wholly owned government corporation 
within the United States Department of the Treasury. The Fund promotes 
access to capital and local economic growth by directly investing in 
and supporting community development financial institutions (CDFIs) 
that provide loans, investments, financial services and technical 
assistance to underserved people and economically distressed 
communities. CDFIs are specialized financial institutions operating in 
market niches that have not been adequately served by traditional 
financial institutions. Included in the various types of CDFIs are 
community development banks, credit unions, business loan funds, 
housing/facilities loan funds, microenterprise loan funds, and venture 
capital funds. As of February 15, 2002, the Fund has certified 565 
institutions as CDFIs. These CDFIs operate in all 50 States.
    Our vision for the CDFI Fund is to become a leading vehicle and the 
best practice government agency for financing economic and community 
development activities in low-income areas to improve the standard of 
living for Americans living in distressed and underserved communities. 
Our goal is to help make America a place where all of its people, 
including those in such communities, have access to affordable credit, 
capital and financial services so that they too can realize the 
American dream. We characterize fiscal year 2003 as a transition year 
where the Fund shifts from an organization seen primarily as a grants-
making organization to one that addresses the economic ills of low-
income communities through targeted investments and community 
development finance.
    By so doing we will help the Department of Treasury achieve its 
economic mission of a prosperous and stable America. This ambitious 
undertaking is explained in this testimony.
    My testimony will focus on four key areas: the performance of the 
CDFI Fund in 2003 and beyond; the President's fiscal year 2003 budget; 
management and operations; and CDFI Fund programs.
             performance of the cdfi fund: 2003 and beyond
    Treasury Secretary O'Neill has challenged all employees of the 
Department to make the Treasury a world-class organization. 
Additionally, he has instructed the CDFI Fund to develop procedures to 
provide a meaningful measurement of the impact and results of taxpayer 
dollars awarded through CDFI Fund programs. In order to successfully 
work toward the goals set by the Secretary, I have asked CDFI Fund 
staff to help me establish the CDFI Fund as a leading vehicle for the 
delivery of community development finance, capital and service 
activities within the Federal Government as well as in the Nation, so 
that we have a demonstrable impact on low-income communities. I 
envision the CDFI Fund becoming an ``expert'' source in this regard.
    As we reported last year, Treasury Secretary O'Neill intends that 
performance measures of the CDFI Fund and all Treasury activities be 
more useful and relevant to the decision-making process, and improve 
the timeliness and accuracy of the information systems that capture and 
report performance data. To move forward on this commitment, the 
Secretary has called for a fundamental review within all Treasury 
bureaus of what we do and why we do it, resulting in a determination of 
what measures of outputs and outcomes best capture what we are trying 
to achieve. This points out the need for consistent ways to evaluate 
the effectiveness of the various incentives for investment in low-
income communities so that we have a better understanding of what works 
and what does not work. The CDFI Fund is committed to working with the 
Secretary in this important initiative. Our budget includes $500,000 in 
additional administrative funding so that we can collect loan-level 
data to report performance and impact of CDFI activities similar to the 
administration of the Community Reinvestment Act and the Home Mortgage 
Disclosure Act.
    This initiative will, I believe, enable us to measure the types of 
impact of our funding that Secretary O'Neill is seeking. The CDFI Fund 
is working with the community development industry to build a set of 
performance measures and establish a ``performance matrix'' for our 
awardees. This matrix will rate financial stability and community 
development impact. By using financial and economic factors, we intend 
to assess how CDFIs improve economic conditions of communities that are 
underserved by traditional financial institutions.
    Our plan is to use this rating system to better manage the CDFI 
Fund's portfolio of investments and to identify under performing 
entities and create a compliance ``watch list.'' We believe a 
significant investment to collect and analyze loan-level data will 
enhance our ability to report impact in various forms. These 
initiatives will be incorporated into the CDFI Data Project, making 
that industry-wide data collection effort even more useful to the CDFI 
Fund and others interested in CDFIs.
    Turning to the impact that CDFI Fund awardees are having in their 
communities, the CDFI Fund is keenly interested in the issue of impact 
and how it is measured. The Fund is on the forefront of improving data 
collection and reporting in the CDFI industry and is one of the 
founders of the CDFI Data Project (CDP), a collaborative effort of 13 
entities--including the Ford and MacArthur Foundations and the six 
major CDFI trade associations--to develop a standardized data 
collection system for the CDFI industry. The goal of the CDP is to 
produce comprehensive, high-quality activity and performance data on 
CDFIs. The CDFI Fund and other CDP participants issued their first 
collaborative annual survey last spring; selective results for CDFI 
awardees are described below.
    Measuring community development impact has been a challenge to the 
CDFI Fund and the industry overall. The General Accounting Office (GAO) 
recognized this in its 1998 report, entitled ``CDFI Fund Needs Better 
Systems to Measure, Monitor, and Evaluate Awardees' Performance.'' In 
the next 2 years, the CDFI Fund increasingly will focus on identifying 
additional measures of impact. For example, the Fund has begun an 
initiative to collect loan-level data from CDFIs. This data will show 
exactly where CDFIs are lending relative to more traditional lenders 
and thus give us a better idea of the role CDFIs play in filling the 
gap in affordable financial services. The MacArthur Foundation has 
embraced this initiative, and the CDP has incorporated loan-level data 
collection as well as broader impact measurement research into its 
strategic plan.
    Internally, the CDFI Fund is reviewing the way we collect outcome 
information from our awardees. To date, each awardee's performance 
goals and measures have been tailored to their specific activities. 
While these measures were rich in their uniqueness, the outcomes they 
measured could not be aggregated across CDFIs because they were not 
comparable. The CDFI Fund plans to revise its awardee performance goal 
and measurement system so that it produces standardized information on 
all CDFIs. To the extent possible, we will incorporate the CDFI Fund's 
reporting requirements in the annual survey in order to minimize 
reporting burdens on CDFIs and facilitate data analysis at the Fund.
    Finally, the CDFI Fund is beginning to conduct peer analyses in an 
effort to develop industry performance benchmarks for each type of 
CDFI. We will use this information to ``risk rate'' our portfolio of 
awardees. Once it is tested and proven, we will consider other uses 
such as incorporating it into our award decision-making process. All of 
these efforts respond to findings and recommendations in the 1998 GAO 
report.
    It is incumbent upon the CDFI Fund to continually improve its 
processes and develop a system for accurately measuring the real impact 
of CDFI Fund dollars in the communities served by our customers.
                  president's fiscal year 2003 budget
    The President's fiscal year 2003 budget requests $68 million in 
appropriations for the CDFI Fund. This is the same funding level as 
requested in last year's Presidential budget. The Administration 
request should be considered in light of several factors.
    First, the proposed budget for the CDFI Fund reflects overall 
Federal budget priorities for increased National Security and Homeland 
Security.
    Second, the fiscal year 2003 budget level of $68 million maintains 
a basic level of funding to support CDFI Fund programs and assumes 
significant improvements in how we process applications. To do this we 
hope to successfully streamline our award approval and disbursement 
processes. We believe substantial savings in staff time will occur 
through streamlined efforts. This will enable us to provide the much 
needed community development capital to qualifying organizations with a 
quicker disbursement of funds for those organizations who meet all 
program criteria at the date of application.
    Third, the enactment of the Community Renewal Tax Relief Act of 
2000 will devote substantial additional resources to new incentives for 
investment in low-income communities. This includes the New Markets Tax 
Credit (NMTC) Program, to be administered by the CDFI Fund. The NMTC 
Program is a new and, we believe, an exciting program for the CDFI 
Fund. The NMTCs are expected to generate $15 billion in investments in 
low-income communities over the next 7 years. We are working diligently 
to allocate credits this year and measure their impact in fiscal year 
2003, or as quickly as these credits are used, as an incentive to 
attract equity capital. Although the allocations for NMTCs are expected 
to be announced in the fall of calendar year 2002, we may not see the 
effect of the NMTC-leveraged equity investments in low-income 
communities before calendar year 2004. Obviously, the first year of 
this program will be a work in progress since we have a limited sense 
of the demand or actual appetite of investors for these types of tax 
credit allocations. The successful implementation of the NMTC Program 
is one of our highest priorities. The NMTC Program offers us a unique 
opportunity to measure the increased flow of private capital into low-
income communities. Our resources are mobilized to ensure a successful 
introduction of the NMTC Program this calendar year.
    Lastly, we anticipate that approximately $30 million of the 
proposed fiscal year 2003 budget will be used to fund the Core and 
Intermediary Components of the CDFI Program and Training Program; 
approximately $11 million (including the carryover from the prior year) 
will be made available for the Small and Emerging CDFI Assistance 
(SECA) and the Native American CDFI Technical Assistance (NACTA) 
Components of the CDFI Program; and $20 million will be used to fund 
the Bank Enterprise Award (BEA) Program. The remainder will be used to 
cover the CDFI Fund's administrative costs, including the costs of 
administering the NMTC Program.
    The CDFI Fund will continue to focus efforts on serving those 
markets, including rural and Native American communities, that have 
relatively low levels of CDFI activity and inadequate access to 
financial services. In these areas, we will continue to conduct 
workshops (both in-person and via satellite broadcasts) detailing the 
CDFI certification and funding application processes. We also expect 
that the SECA Component, the NACTA Component, and the Training Program 
will be of particular benefit to CDFIs and CDFIs in formation that 
serve these difficult markets.
                       management and operations
    The CDFI Fund has implemented effective financial and management 
controls as verified by our independent auditors (KPMG, LLP). These 
controls have allowed the CDFI Fund, for the fifth consecutive year, to 
receive an unqualified (clean) audit opinion. Additionally, this marks 
the fourth consecutive year that the independent auditors have 
identified no material weaknesses or reportable conditions. KPMG's 
opinion affirms the CDFI Fund's Statements of Financial Position, 
Operations, and Changes in Net Position and Cash Flow are fairly 
presented. These findings reflect the commitment of the CDFI Fund to 
sustaining and improving upon its internal controls, operating policy 
and procedures, and awards management.
    The CDFI Fund continues to comply with the Federal Managers' 
Financial Integrity Act (FMFIA) and the Federal Financial Management 
Improvement Act (FFMIA). The CDFI Fund's system of internal management, 
accounting and administrative controls are operating effectively.
    During my 7 months as Director, I have spent a significant amount 
of time reviewing the internal operations at the CDFI Fund. It is my 
intention to make necessary changes, which will streamline and make 
more efficient our processes and procedures. It is my hope that, once 
implemented, these changes will accomplish four key goals. First, as 
mentioned above, we need to reduce the amount of time currently 
required for our award processes. This includes reducing time used for 
application reviews, awards obligation and disbursement of funds. 
Second, our plan will successfully integrate the NMTC Program within 
our existing operations without significantly increasing the number of 
new employees above fiscal year 2002 levels. Third, we need to enhance 
the CDFI Fund's ability to perform research, market and portfolio 
analysis to measure the availability of financial services in 
underserved markets and critique the financial and program performance 
of existing CDFIs. Finally, I want to position the CDFI Fund to be 
better prepared and anticipate future responsibilities.
                           cdfi fund programs
    The CDFI Fund supports its economic development mission of 
providing capital to underserved persons and in underserved markets by 
investing in CDFIs, and by providing incentives for mainstream 
financial institutions to invest in CDFIs and increase their activities 
in distressed communities. In addition to three traditional programs 
(the CDFI Program, the Bank Enterprise Award (BEA) Program, and the 
Training Program), the CDFI Fund has introduced two new programs. We 
anticipate these programs will provide additional capital in the 
markets served by our customers. These new programs are the New Markets 
Tax Credit (NMTC) Program, described above, and the Native American 
CDFI Technical Assistance (NACTA) Component of the CDFI Program.
CDFI Program
    The CDFI Program provides financial assistance in the form of 
grants, loans, equity investments or deposits to CDFIs. Since its 
inception, the CDFI Fund has made over 780 CDFI Program awards totaling 
$357 million. The CDFI Program is composed of three separate funding 
components, each attempting to reach a different type of CDFI or 
market: the Core Component; the Small and Emerging CDFI Assistance 
(SECA) Component (formerly the Technical Assistance Component); and the 
NACTA Component.
    CDFIs also provide their clients with training and technical 
assistance that help organizational clients to better manage community 
development projects and help individual clients to improve their 
financial decision-making skills and increase their options for 
accessing credit. This type of borrower education is the foundation for 
mitigating losses in the CDFI industry overall. In fiscal year 2000, 
the CDFI Fund's awardees provided business training, financial 
management education, credit counseling, and homebuyer training to 
51,059 individuals and 6,298 non-profits and other organizations.
    In addition to financing activities, CDFIs are also depository 
institutions; 159 of the 553 certified CDFIs are regulated financial 
institutions (banks, thrifts, and credit unions). In a survey completed 
in 2000, 21 depository awardees--primarily low-income designated credit 
unions and community development banks--provided 141,440 checking and 
savings accounts, with $257 million on deposit for an average of $1,815 
per account. Each of these institutions has a mission of reaching low-
income and underserved populations, and some provide products 
specifically designed to help low-income individuals build wealth, such 
as Individual Development Accounts. In all, 985 Individual Development 
Accounts held savings of $388,545, an average of $395 per low-income 
account holder.
    Finally, CDFI Fund awardees have leveraged significant additional 
capital. A sample of non-depository CDFIs estimated that they were able 
to raise an additional $69 million over and above the required 1:1 
match due to being a CDFI Fund awardee or certified CDFI, representing 
an additional $1.48 raised for every CDFI Fund award dollar. This 
capital has come from banks, foundations, State and local government, 
and others.\1\
---------------------------------------------------------------------------
    \1\ Source: CDFI Fund Fiscal Year 2000 Annual Survey of Core 
Awardees.
---------------------------------------------------------------------------
    The Core Component is directed at building the financial capacity 
of CDFIs by enhancing the capital base. Awardees of the Core Component 
represent some of the Nation's largest loan funds and financial 
institutions. At the end of fiscal year 2000, 122 Core awardees 
reported $2 billion in outstanding loans and investments.
    For the fiscal year 2001 funding round the CDFI Fund provided 51 
Core Component awards totaling $48 million. These 51 awardees are based 
in 27 States. There are now CDFI Program awardees in 49 States, the 
District of Columbia, Puerto Rico and the U.S. Virgin Islands. Of these 
51 awardees, 10 have multi-State or national service areas; 38 serve 
rural markets.
    In addition to geographic diversity, the types of CDFIs assisted 
and the array of loan or investment products provided is broad: 26 
provide loans for housing development or ownership; 20 have micro- or 
small-business loan products; five are credit unions; three are 
community development bank holding companies; and two are venture 
capital funds.
    Entities selected for Core Component awards typically have business 
strategies that support economic stabilization or building wealth in 
low-wealth markets. A few examples include:
    Homeward Inc. of Allison, Iowa, was formed out of a consortium of 
eight rural electric cooperatives to provide loans for housing 
development and for economic development activities.
    Home Headquarters of Syracuse, NY helps to stabilize distressed 
neighborhoods and build assets in Onondaga County through home purchase 
financing targeted to lower income households.
    Kentucky Highlands Investment Corporation is a nonprofit business 
development firm founded in 1968 to provide venture capital and debt 
financing to start-up and expanding businesses. In a nine-county region 
of Appalachia, Kentucky Highlands, through its financial products, has 
helped to create or retain 7,000 jobs. This means that, on average, 12 
percent of the households in this rural nine-county region have a 
family member employed by a company that Kentucky Highlands assisted. 
In the local Empowerment Zone, which is located within the nine-county 
region, this CDFI's impact is even greater: since 1994, Kentucky 
Highlands helped create or retain 3,086 jobs in the area that is now 
part of the Empowerment Zone. This translates into an average of 39.7 
percent of EZ households with a family member employed by a company 
that Kentucky Highlands helped.
    On September 24, 2001, the CDFI Fund published a Notice of Funds 
Availability (NOFA) announcing the availability of $36.9 million in 
Core Component awards for fiscal year 2002. The application deadline 
was December 11, 2001; we received 136 applications, requesting a total 
of $198 million.
    The Intermediary Component allows the CDFI Fund to invest in CDFIs 
through intermediary organizations that support other CDFIs and 
emerging CDFIs. These intermediary entities, which are also CDFIs, 
generally provide financial and technical assistance to small and 
growing CDFIs. Like Core awardees, Intermediary awardees are required 
to obtain matching funds in comparable form and value to the financial 
assistance they receive from the CDFI Fund.
    Since inception, the CDFI Fund has obligated awards totaling over 
$20 million to 11 different intermediary institutions. Beginning with 
the fiscal year 2001 funding round, the Intermediary Component has been 
announced and evaluated as part of the Core Component and CDFI 
Intermediaries now compete directly with other Core Program applicants.
    The Small and Emerging CDFI Assistance (SECA) Component was 
initiated in fiscal year 2001. It replaces the Technical Assistance 
(TA) Component, which was first introduced in 1998 to build the 
capacity of CDFIs to serve their target markets--particularly ``start-
up,'' young and small institutions. Under the TA Component, the CDFI 
Fund directed relatively small amounts of funds--generally $50,000 or 
less--to CDFIs that could demonstrate significant potential for 
generating community development impact, but whose institutional 
capacity needed to be strengthened in order to fully realize this 
potential. Some typical uses of TA grants included: computer system 
upgrades and software acquisition; developing loan underwriting 
policies and procedures; evaluating current loan products and 
developing new ones; and training staff. Under the SECA Component, the 
CDFI Fund has augmented the range of assistance provided under the 
predecessor TA Component. In addition to TA grants, eligible applicants 
can also request Financial Assistance, generally used for enhancing the 
applicant's lending capital, up to $150,000. Small and emerging CDFIs 
generally have less than $5 million in assets and have never received 
Financial Assistance from the CDFI Fund. Requests for Financial 
Assistance must be matched dollar-for-dollar with other non-Federal 
funds.
    In fiscal year 2001, the Fund provided 70 SECA/TA Component awards 
totaling $8 million. Of the fiscal year 2001 awardees, 32 (45 percent) 
are start-ups. We are pleased to report that the SECA Component has 
been particularly responsive to the needs of community development 
credit unions: 20 (or almost 30 percent) of the fiscal year 2001 SECA 
awardees are credit unions. The SECA Component also has proved to have 
national reach: the 70 SECA awardees are located in 26 States, 
Washington, D.C., and Puerto Rico. Of these 70 awardees, about half 
(37) include rural markets within their service areas.
    On September 24, 2001, the CDFI Fund published a NOFA announcing 
the availability of $5.6 million under the SECA Component for fiscal 
year 2002. A total of 120 applications was received, for $18 million.
    SECA Component awardees are serving some of the Nation's most 
economically distressed and hardest to serve markets and are exhibiting 
important programmatic innovations. The CDFI Fund's SECA Component 
awards are helping to build the organizational infrastructure to 
increase the flow of capital in economically distressed areas and to 
low-wealth populations:
    The Bushwick Federal Credit Union is a recently chartered start-up 
serving the economically distressed Bushwick neighborhood of Brooklyn, 
New York. It provides financially literacy to a largely unbanked 
population. It proposes to use its award to capitalize a micro loan 
product and to expand its ATM services.
    Nevada Microenterprise Initiative, based in Reno, provides training 
and financing to lower income entrepreneurs that lack sufficient 
collateral for conventional financial institutions and proposes to use 
the award to obtain staff training and to refine its business plan.
    Azteca Community Loan Fund of San Juan, Texas, proposes to build 
its capacity to help build assets among very low-income people through 
development services and loans that will increase the rate of 
homeownership in colonias in the south Texas border region.
The Bank Enterprise Award (BEA) Program
    The Bank Enterprise Award (BEA) Program is the principal means by 
which the CDFI Fund achieves its strategic goal of expanding financial 
service organizations' community development lending and investments 
through regulated institutions. The BEA Program recognizes the key role 
played by mainstream depository institutions in promoting the growth of 
CDFIs and the revitalization of distressed communities.
    The BEA Program provides monetary incentives for banks and thrifts 
to expand investments in CDFIs and/or to increase lending, investment 
and service activities in distressed communities. BEA Program awards 
vary in size, depending upon the type and amount of assistance provided 
by the bank and the activities being funded through the bank's 
investments. In general, banks that provide equity investments to CDFIs 
are likely to receive the largest awards relative to the size of their 
investments.
    Through 2001, 577 BEA Program awards totaling over $182 million 
have been provided to banks and thrifts. Banks and thrifts receiving 
BEA Program awards have provided $959 million directly to CDFIs, and 
$2.5 billion to distressed communities \2\ in the form of direct loans, 
investments and services.
---------------------------------------------------------------------------
    \2\ Distressed Community is a defined area that must have a poverty 
rate of at least 30 percent and an unemployment rate that is at least 
1.5 times greater than the national rate.
---------------------------------------------------------------------------
    Of the fiscal year 2001 funding round awardees, the CDFI Fund made 
139 BEA Program awards totaling $46 million. On September 24, 2001, the 
CDFI Fund published a NOFA announcing the availability of $16.5 million 
in BEA Program funds for fiscal year 2002. The application deadline for 
this NOFA was November 13, 2001.
    The CDFI Fund has made BEA Program awards to 386 different 
institutions since 1996. The average Total Assets of the 386 BEA 
Program awardees is just under $10 billion. BEA Program awardees range 
in size from $585 billion in assets to $8 million. BEA Program awardees 
have an average Return on Assets of 1.1 percent and average Tier One 
Capital of $407 million. The BEA Program award as a percentage of Tier 
One Capital is less than 3 percent on average. All BEA awardees whose 
BEA Program award represents more then 10 percent of Tier One Capital 
are certified CDFIs.
    All but two BEA Program awardees have Satisfactory or Outstanding 
Community Reinvestment Act (CRA) ratings. About one-third have 
Outstanding CRA ratings and about 60 percent have Satisfactory ratings. 
The BEA Program awardees with Outstanding CRA ratings have an average 
size (in terms of assets) of $17 billion, while awardees with 
Satisfactory Ratings have an average of $6 billion in Total Assets.
    A few examples of BEA Program awardees include:
    AmSouth Bank of Birmingham, Alabama received an award of $221,600 
for providing $300,000 in grants and $1.6 million in loans to ten 
CDFIs: Affordable Housing Resources; Community Equity Investments; 
Enterprise Corporation of the Delta; Florida Community Loan Fund; Local 
Initiatives Support Corporation; Neighborhood Housing Services; 
Southern Development Bancorporation; Nashville Housing Fund; 
Chattanooga Neighborhood Enterprise; Structured Employment Economic 
Development Corporation; and Technology 2020 Finance Corporation. The 
awardee is a State chartered bank with total assets of $39 billion.
    Providian National Bank of Tilton, New Hampshire, received a BEA 
Program award of $1,110,000 for making a $7.5 million equity like loan 
to the National Community Capital Association, a certified CDFI. 
Providian's investment will help fund the first national childcare 
facilities fund, which will provide financial assistance to childcare 
providers and thereby increase the availability of affordable childcare 
slots for disadvantaged families and communities in New Hampshire and 
throughout the country. The awardee is a national bank with total 
assets of $15 billion.
    Since first participating in the BEA Program in 1996, KeyBank, a 
national bank based in Cleveland, Ohio, has received a total of $2.3 
million for providing over $22 million in financial support (including 
grant, equity-like loans, and loans) to several CDFIs: Cascadia 
Revolving Loan Fund, Coastal Enterprises, Coastal Ventures Limited 
Partnership, Coastal Ventures II, LLC, Cincinnati Development Fund, 
Columbus Growth Fund, Community Capital Development, Capital District 
Loan Fund, Community Preservation Corporation, Denver Neighborhood 
Housing Fund, The Enterprise Foundation, Funding Partners for Housing 
Solutions, the Housing Partnership Development Fund, Growth Finance 
Corporation of Oxford Hills, Housing Partner Development Fund, Impact 
Capital, Jubilee Community Loan Fund, Local Initiatives Support 
Corporation, Mutual Financial Services, NHS of Toledo, Northern 
Community Investment Corporation, Progressive Neighborhood Federal 
Credit Union, Rural Opportunities Enterprise, Vermont Community 
Development Loan Fund, and Western Maine Finance. The awardee is a 
national bank with total assets of $76 billion.
The Training Program
    The Training Program, begun in fiscal year 1999, is aimed at 
supporting the CDFI Fund's strategic goal of strengthening the 
organizational capacity and expertise of CDFIs and other Financial 
Service Organizations. The Training Program provides funds that support 
the development and delivery of training products to CDFIs and other 
entities engaged in community development finance. Training is 
addressed via classroom instruction, web-based distance learning, and 
other electronic formats. The CDFI Fund is particularly excited about 
providing the support to help build the electronic teaching capacity of 
the CDFI industry. Through distance learning, the cost of accessing 
training is reduced for the CDFIs (elimination of the time and cost of 
travel) and the ability of CDFIs that are either of limited resources 
or of remote locations to access training is enhanced.
    In fiscal year 2001, the CDFI Fund awarded contracts to four 
training providers for curriculum development and the delivery of three 
courses: How to Do a Market Analysis; How to Prepare Financial 
Projections; and How to Develop and Operate a Community Development 
Lending Program. Training has already begun under each of these 
courses. Through February 2002, there have been 60 offerings of the 
three courses supported by the Fund. Each class usually serves up to 30 
participants. Through February 2002, it is estimated that 1,200 
individuals will have participated in Fund-supported training. Of the 
four training providers, two providers (the National Community Capital 
Association and the National Federation of Community Development Credit 
Unions) are CDFI trade associations. Support to their members and 
others is provided through advisory services, which is now enhanced 
through these training products. The CDFI Fund has found these trade 
associations and other contractors to be good partners in helping to 
build the capacity of CDFIs in serving their communities--they couple a 
deep knowledge of the circumstances of the industry with a mission to 
serve.
New Markets Tax Credit (NMTC) Program
    Congress enacted this program in December of 2000 to attract 
private sector investment in businesses located in low-income 
communities to improve economic conditions in such communities. Under 
the NMTC Program, taxpayers will be provided a credit against Federal 
income taxes for qualified investments made to acquire stock or other 
equity interests in designated Community Development Entities (CDEs). 
In turn, substantially all of the proceeds of qualified investments 
must be used by the CDE to make qualified investments in low-income 
communities. These qualified low-income community investments include 
loans to or equity investments in, businesses or CDEs operating in low-
income communities. The credit provided to the investor covers a 7-year 
period. In each of the first 3 years, the investor receives a credit 
totaling 5 percent of the total value of the stock or equity interest 
at the time of purchase. For the final 4 years, the value of the credit 
is 6 percent annually.
    This calendar year, NMTCs will be allocated annually by the CDFI 
Fund to for-profit CDEs under a competitive application process. These 
CDEs in turn will pass the credits to investors (such as banks, 
corporations, mutual funds, and/or individuals). To qualify for CDE 
designation by the Fund, an entity must be a domestic corporation or 
partnership that: (1) has the primary mission of serving, or providing 
investment capital for low-income communities or low income persons; 
and (2) maintains accountability to residents of low income communities 
through representation on a governing or an advisory board.
    On April 20, 2001, meeting its statutory mandate, the CDFI Fund 
issued Guidance relating to the certification of CDEs and the 
competitive allocation of NMTCs. The Guidance was published in the 
Federal Register on May 1, 2001--the same day that the IRS issued an 
Advanced Notice of Proposed Rule Making (ANPRM) announcing its 
intention to develop regulations covering all tax-related aspects of 
the NMTC Program. Both the Guidance and the ANPRM requested public 
comments, which were due to the Fund and IRS, respectively, on July 2, 
2001. The CDFI Fund received public comments from over 40 different 
organizations and trade associations.
    On December 20, 2001, less than 1 year after Congress enacted the 
NMTC Program, the CDFI Fund released application materials enabling 
organizations to apply to the Fund for designation as CDEs--effectively 
launching the NMTC Program. The CDFI Fund has fully implemented rules 
to permit entities to becoming certified CDEs. To date, approximately 
211 organizations have been certified as CDEs or currently have CDE 
applications pending with the CDFI Fund.
    The CDFI Fund's objectives for the remainder of the year are to 
publish an NMTC allocation application, select qualified CDEs to 
receive an allocation of tax credits, and complete the awards 
allocation process for 2001/2002 tax credits. The CDFI Fund expects to 
issue a Notice of Allocation Availability (NOAA) next month announcing 
the availability of tax credits supporting up to $2.5 billion worth of 
equity investments in CDEs. The CDFI Fund will review applications from 
CDEs under a competitive review process, with the goal of finalizing 
award decisions by the fall of 2002. In this manner, investors making 
equity investments into eligible CDEs would be able to claim tax 
credits during this calendar year.
    By offering a tax credit, the NMTC Program encourages private 
investment in underserved communities. If investors embrace the 
program, it will be a significant source of new capital that could help 
to stimulate new industries and entrepreneurs, diversify the local 
economy, and generate new jobs in low-income communities. Our fiscal 
year 2003 budget requests $2.7 million in administrative funds to 
operate this program. This request accounts for 24 percent of our 
administrative budget.
Native American CDFI Technical Assistance (NACTA) Component
    A second recent initiative at the Fund is focused on Native 
American communities. This initiative includes the Native American CDFI 
Technical Assistance (NACTA) Component of the CDFI Program and the 
Native American CDFI Training Program. The CDFI Fund's fiscal year 2001 
and 2002 appropriations bills each include a $5 million set-aside for 
this effort. The purpose of this initiative is to increase access to 
capital in Native communities. In response to the set-aside contained 
in the fiscal year 2001 budget, the Fund issued a Notice of Funds 
Availability (NOFA) on September 24, 2001, requesting applications 
under the NACTA Component. Approximately $3.5 million of the $5 million 
set-aside will be available for this round.
    The CDFI Fund has received 46 applications for assistance under the 
NACTA Component. The applications, which are currently under review, 
represent 21 States. A second NACTA NOFA will draw from the set-aside 
contained in the fiscal year 2002 CDFI Fund appropriations. Funds will 
be allocated under the NACTA Component through direct grants to Native 
CDFIs, Tribal organizations, and other financial institutions and 
organizations serving these communities. It is anticipated that these 
funds will: (i) enable financial institutions to enhance their capacity 
to provide access to capital and credit to these communities; and (ii) 
assist such communities in establishing their own CDFIs.
    Another $1.5 million of the set-aside is being used to develop a 
training program. This training program will be designed to help Native 
American communities build leadership skills enabling them to create 
and manage CDFIs.
    The need for this new initiative was identified during the 
workshops organized by the CDFI Fund in conjunction with the 
development of the Native American Lending Study/Action Plan. This 
Study examines the key barriers to accessing debt capital and equity 
investments in Native American communities. Numerous actions that could 
be taken by Tribes, lenders, and local and national policy makers were 
identified. These ranged from the adoption of the Uniform Commercial 
Code by Tribal governments to the capacity-building efforts now 
underway at the CDFI Fund. The final report was distributed in December 
2001 to the House and Senate Committees who hold jurisdiction over the 
CDFI Fund and Native American issues, as well as to the President.
    In developing this study, the CDFI Fund conducted 13 regional 
workshops across the country and two roundtable meetings. The CDFI Fund 
also administered a national survey of 860 tribal organizations and 750 
financial institutions located near Indian reservations, Alaska Native 
Villages, and Native Hawaiian Communities. The survey collected data 
such as barriers to accessing capital, accessibility of bank services 
and products, availability of technical assistance, industrial sector 
financing gaps and strength of internal tribal resources and policies. 
The CDFI Fund also administered an equity investment research project 
to assess the gap and potential opportunities for Native Americans to 
access this kind of investment.
Rural Community Assistance
    Lastly, the fiscal year 2002 appropriations for the CDFI Fund 
contained report language requesting an update on rural lending 
practices as part of the fiscal year 2003 budget submission. Core 
Component and BEA Program awardees are indeed reaching rural areas. Of 
123 surveyed Core awardees, 21 (17 percent) estimated that 100 percent 
of their activities went to rural areas and an additional 15 (12 
percent) estimated that 51 to 99 percent of their activities went to 
rural areas. Out of 160 surveyed BEA awardees, 11 (7 percent) said that 
100 percent of their business activities went to rural areas, and an 
additional 18 (11 percent) said that 51 to 99 percent of their business 
went to rural areas. Considering that 22 percent of U.S. households 
reside in non-metropolitan areas, the percentage of Core awardees that 
target more than half their activities to rural areas (29 percent) 
compares favorably, while BEA falls slightly short at 18 percent.
    The CDFIs focusing on rural areas tend to be smaller than their 
urban counterparts and the actual dollar amount that awardees' lend to 
rural areas is proportionally less than the percent that serve rural 
areas. An estimated 17 percent ($351 million) of Core Component 
awardees' lending and 11 percent ($161 million) of BEA awardees' 
lending went to non-metropolitan counties \3\. The CDFI Fund has 
identified several options that may increase the flow of CDFI Program 
and BEA Program awardees' dollars to rural areas. For the BEA Program, 
the most significant of these would require changes to the Fund's 
authorizing statute. For example, under the BEA Program, a ``distressed 
area'' must have a population of at least 4,000. Distressed areas are 
composed of census tracts. Many rural census tracts do not have 4,000 
people, which in many cases precludes their eligibility as BEA 
distressed areas. Eliminating the BEA Program population requirement 
for rural areas would result in more people becoming eligible for 
consideration under the BEA Program.
---------------------------------------------------------------------------
    \3\ Core Component awardee dollar amounts were estimated by 
applying the awardees' estimated percentage of fiscal year 2000 
customers located in rural areas to the awardees' total financing 
closed in fiscal year 2000. BEA Program awardee dollars were estimated 
by applying the awardees' estimated percentage of total lending in 
rural areas to the sum of their total community development and service 
activities, and CDFI support activities during the BEA assessment 
period.
---------------------------------------------------------------------------
    In addition, almost all of the new NACTA Component dollars are 
expected to flow to rural areas: 46 of 47 current NACTA applicants 
target rural areas.
                                summary
    Treasury Secretary O'Neill and the Administration have set the bar 
high for the expected performance from us at Treasury as well as the 
entire Federal Government. As you can see, I have laid out a blueprint 
for the CDFI Fund to enable us to reach goals that will improve and 
enhance our performance and service to our customers. These goals will 
hopefully provide an increased efficiency in the use of taxpayer 
dollars. Our goals are numerous and in some instances, very ambitious. 
It undoubtedly will require a very focused and conscientious effort by 
all of us at the CDFI Fund. During my short time at the CDFI Fund, I 
have developed the utmost confidence in the commitment of our staff 
toward our customers and the communities that they serve. I am certain 
that we will all rise to the occasion to meet our goals and do so in a 
timely and professional manner. I look forward to working with the 
members of this subcommittee towards achieving these goals. Again, I 
thank you for the opportunity to present my testimony in support of the 
President's 2003 budget request and look forward to answering any 
questions you may have for me.

    Senator Mikulski. Well, thank you. You did very well, Mr. 
Brown and Ms. Lazar.
    Let us move right to the questions. And I am going to start 
first with really the President's budget. Ms. Lazar, you talked 
about in your testimony what you would do with the $105 
million, which, of course, are both the goals and specific 
objectives that you wish to achieve. What can you not do that 
you would like to do this year?
    Ms. Lazar. We would like to do more the multi-family work. 
I am cognizant of how desperately we need more rental housing 
opportunities in this country for low-income people. Our 
groups, through our multi-family initiative, have capacity, and 
their capacity is growing, to explore a variety of means of 
developing and preserving affordable rental housing. So that is 
certainly a piece that we only have limited funds to explore.
    Senator Mikulski. And what would it take to keep that 
momentum going? Because one of the issues that both the 
Chairman and I share is our great concern for the lack of 
production in the area of rental housing for people of very 
modest incomes. And also, the success in some neighborhoods 
means that people no longer really want to take Section 8. We 
keep funding Section 8 and now there is a backlog of unused 
vouchers in many of our communities, because people just will 
not accept them.
    Do you have--so is it----
    Ms. Lazar. I have----
    Senator Mikulski. Go ahead.
    Ms. Lazar. I have a sense that if we were to receive an 
additional $5 million to $10 million for multi-family housing, 
for the work that we began this year, we could continue to 
expand that activity. I would want to make sure, before I gave 
you a firm number, that that money would really be able to be--
--
    Senator Mikulski. But that is generally the area of the 
priority that you would like to continue to keep the momentum 
going----
    Ms. Lazar. Yes, absolutely.
    Senator Mikulski [continuing]. That you have undertaken. 
And I am going to come back to some of the policy questions, 
but I wanted to get that on the record.
    Ms. Lazar. Sure.
    Senator Mikulski. Mr. Brown, in your first appearance 
before the community, you certainly are a good administration 
soldier. You said 15 percent does not bother you a bit. It is 
going to be made up in private sector investment. And you 
outlined the 3 priorities. So Secretary O'Neill, he did the 
right thing.
    But let us go to really the CDFI and two issues that arose 
that I would like to raise in both the expenditure. First of 
all, we want to compliment you on focusing on internal 
controls. And there has been a lot of issues in the transition 
over the last year.
    And the second issue that you raised, though, is CDFI is 
now involved in funding healthcare centers. This is something 
the committee was not aware of. We want to hear your views. 
Number one, what are you talking about? Number two, why did you 
get into this? And are you being a healthcare bonding authority 
by proxy? And number three, why do you think this is an 
appropriate role for CDFI, because just the demands in housing, 
micro-enterprise, and that venture capital that we have talked 
about, where you, too, are an incubator agency?
    Could you share with us this healthcare? And then I will go 
on to some other questions, if my time permits.
    Mr. Brown. Senator, what I was merely doing was giving you 
an example of the types of things our CDFIs do. I think that 
the value of the CDFI program, and one of the things that I 
think is remarkable about the program is that our funds are 
driven based on what the needs are in the local community.
    And in the category of housing and facility funds, 
obviously the major needs in our communities, low income 
communities, are what we call community facilities. Examples of 
community facilities could be a retail shopping center that our 
CDFIs may fund. Some have provided assistance to helping create 
charter schools. Others in my example I gave have helped to see 
that there is the availability of healthcare centers. One in 
particular that has demonstrated what I consider to be a world-
class example is in New York City. And we highlighted them in 
our last newsletter, that they have played a leading role----
    Senator Mikulski. Tell me what you did. And why did you do 
it?
    Mr. Brown. We did it because we matched the funding, 
because there was a need to provide services to low, very low, 
income people who are in dire need of medical or healthcare 
services. The money----
    Senator Mikulski. But what did you do? Did you provide 
funds for a building? Did you match funds?
    Mr. Brown. We matched funds for the financing of the 
building. In several examples, the organization provided 
financing to a nonprofit healthcare provider who renovated a 
grocery store that had left the community. So it provided the 
value of turning a vacant storefront facility into a medical 
center for residents that were in need of healthcare services.
    Our money was matched to help that organization to continue 
to provide financing for nonprofit healthcare providers, in 
this case in New York City.
    Senator Mikulski. So just to be clear, this was one 
initiative. But it is not one of your core things. This is just 
an example of trying to be creative and respond to local 
community need.
    Mr. Brown. Yes.
    Senator Mikulski. And where really the conversion of that 
grocery store into a supermarket of healthcare, if you will, I 
mean, this is not like a hospital, like a Hopkins or a Mercy or 
a Sinai going to get bonding authority to build a new wing.
    Mr. Brown. That is correct.
    Senator Mikulski. This is really very small. It is almost 
like a micro-enterprise healthcare. Am I correct?
    Mr. Brown. And in this example, maybe to clarify further, 
in the example that I am giving in this case, the organization 
helped finance what I would consider a full-care medical 
service center in not only providing family care, but they had 
an office for dentistry, psychiatric assistance.
    Senator Mikulski. Yes. I understand the services that would 
go on. I just wanted to know what CDFI was doing.
    Mr. Brown. Yes.
    Senator Mikulski. I have other questions that I am going to 
pursue on predatory lending and so on. But let me turn to my 
colleague for his questions.
    Senator Bond. Thank you, Madam Chair.
    Mr. Brown, following up on that question, there is no 
question that many of our communities need accessible 
healthcare. As a matter of fact, one of my major initiatives in 
another subcommittee has been to, along with Senator Hollings, 
double the funding for community health centers, because 
community health centers are the ultimate safety net. We are 
trying to make sure that those are robustly funded, that we 
have funds available for capital improvements.
    So I do not doubt that a community needs, health centers. 
And we are working hard to fill more of the gaps. But I get a 
little concerned when I try to figure out what your focus is. 
And you are getting over into other areas.
    I think that we need to get a better handle on what the 
focus will be. You have said that it is all part of one 
strategy. We are going to be handing out grants, and we are 
going to be allocating tax credits. But which do you see as the 
main focus? Do you need more staff? What do you have on board? 
Do you have the staff that is proficient in allocating credit? 
What is going to be your focus?
    This is a small agency. There is a lot of work to do. To 
make an impact, you have to focus and do a job well. What job 
are you doing? And what is the staff you are utilizing to do 
it?
    Mr. Brown. And Senator, again, to clarify, our primary 
mission, our core competency is to help eliminate impediments 
that deal with the flow of capital, and particularly the flow 
of capital in low income communities. So if the need in your 
community is jobs and small business, and the flow of that 
capital has been an impediment to help businesses with their 
financing needs, then our role at the CDFI Fund and working 
with your local communities is to provide the cash by which 
those loans can be made to small businesses.
    Senator Bond. I have another hat. I also am ranking member 
on the Small Business. What is the difference between the 7A 
program and the micro-loan program and the small business 
investment company? You are in that area now.
    Mr. Brown. You are asking the same type of questions that 
Secretary O'Neill has asked. How does our mission and the 
mission of the fund, relative to the Treasury, coincide with 
SBA, with HUD, who does housing, NRC and their community-
based----
    Senator Mikulski. The community development block grant 
money.
    Mr. Brown. All the above. But if you have been engaged in 
community development, you understand that you need equity, you 
need bank financing, you may need the SBA. And then maybe in 
some cases, that is not enough. You might need the financial 
assistance of your local CDFI, or the loan may have been done 
in a way, as I mentioned in my opening remarks, that is more 
innovative and flexible than perhaps the SBA guidelines, as 
well as what you may get from your local lender.
    So that is in general the best way I can categorize the 
unique role that our specialized, certified, community 
development financial institutions play. And they have created 
a niche, a market, in providing the type of financing that is 
needed to get the types of specialized services in low income 
communities.
    The second part of your question relative to our budget and 
our staffing needs is one that we have concentrated on here at 
the fund. As I mentioned earlier, we have reorganized our 
staffing in order to take on a very important program of new 
markets tax credits. Our budget request includes a significant 
amount to help with our performance measuring systems and our 
ability to collect low level data to report on the types of 
loans in rural communities, in prominent areas, et cetera, that 
CDFIs are doing in conjunction with and complementary with 
traditional financial institutions.
    We are currently undergoing our strategy plan in 
preparation of our 2004 budget that, when I come to you next 
year, will be more directional in terms of what we need in 
order to maintain compliance with the New Markets Tax Credit 
program, as well as other programmatic changes we may propose 
at that time.
    Senator Bond. Thank you very much, Mr. Brown. I am 
delighted that you would come and testify before our committee. 
We may have to have you testify before the full committee. It 
seems that your breadth of activity is as broad as Governor 
Ridge. And we are certain to have a coordinating entity like 
CDFI that covers the waterfront from Health and Human Services 
and CHCs to small business to lending.
    So, Madam Chair, I am impressed.
    Mr. Brown. Senator, I would add it seems that was the 
vision of the fund when it was formed. As a reminder, our 
advisory board does include representatives from Commerce, HUD, 
SBA, Interior, and Treasury.
    Senator Mikulski. Mr. Brown, we are not being critical. You 
have $16 million. HUD has $32 billion. And both of you are 
meant really to be incubators. And I think what Senator Bond is 
saying is, how do we get maximum coordination and yet not for 
CDFI become these other programs by proxy because of a variety 
of reasons. We pass no judgment on it. We just are looking for 
focus.
    But let me go to a focus that this committee has had. And I 
must, again, thank my colleague for his bipartisan support on 
this. And that is the issue of predatory lending.
    As you know, for a number of years now I have been raising 
the issue of predatory lending and also on the issue of what we 
call in Baltimore flipping, where someone buys a house, even a 
HUD house, for a very low, flips it with just a patina of 
repair, sells it to the poor at really exaggerated prices, but 
they think they are paying $500 a month. And then they end up 
with like balloon payments at the end of 15 years of $70,000.
    I would like to know from both of you what is the 
leadership, as well as concrete action that you are taking to 
deal with the issue of predatory lending. The committee is 
particularly interested in where you are promoting home 
ownership. So that home ownership, when people enter into that, 
like the Section 8, that they can sustain it.
    So we really want to know what you are doing and your view 
of the problem. What are you doing about it? And do you have 
the adequate resources to really do this, because it gouges the 
poor. It gouges the taxpayer.
    Ms. Lazar. I am happy to start and tell you about what we 
are doing, both through the NeighborWorks organizations and 
what Neighborhood Reinvestment is doing in partnership with 
others. We have been very, very focused on public education, as 
well as product development. And we are working on both paths 
to make sure that we can address predatory lending issues.
    Neighborhood Reinvestment has established a national 
financial literacy pilot to promote financial literacy 
education for consumers in 24 cities across the country. This 
work will help us establish baseline for financial literacy 
training for individuals, which we hope will give them the----
    Senator Mikulski. What do you mean by that?
    Ms. Lazar. What I mean by that is the resources to 
understand what their obligations are as a homeowner.
    Senator Mikulski. How will this work? How will this work at 
the neighborhood level?
    Ms. Lazar. At the neighborhood level, our NeighborWorks 
organizations have classes on a regular basis, financial 
literacy classes. People sign up for them. They make a 
commitment to come. We also do fairly intensive training of the 
trainers for those classes. We just entered into a partnership 
last week with the Federal Deposit Insurance Corporation to use 
their Money Smart curriculum as part of our financial literacy 
training.
    Through our HomeOwnership Centers, we have the facilities 
where there is always ongoing classes to help get people better 
acquainted with their----
    Senator Mikulski. Okay. Now how does this work with your 
Section 8 program? Secretary Martinez has a great passion for 
promoting home ownership as well. And he has been really great 
to work with on many of these issues. Again, how does this go 
to the Section 8 program that you have.
    Ms. Lazar. Sure.
    Senator Mikulski. And how does that work?
    Ms. Lazar. For the Section 8 program, we again bring 
families into our HomeOwnership Centers for financial literacy 
and other home ownership counseling services. What we have been 
finding is that we have to work much more directly on a one-on-
one basis with the individuals who have already gotten some 
training through the Family Self-Sufficiency Program, through 
the PHAs that they have been working with.
    So we bring them in and really get them acquainted with the 
housing, housing finance, home ownership maintenance issues, 
the long-term obligation----
    Senator Mikulski. How are you different than HUD with what 
they want to do on such Section 8?
    Ms. Lazar. Our home ownership campaign has developed a set 
of counseling curricula that we use on a regular basis. It has 
been fairly well recognized around the country as a strong 
basis and a strong curriculum for bringing families into home 
ownership and helping them maintain sustainability over the 
long term.
    Senator Mikulski. Well, I would like to be able to come 
back to that. But, Mr. Brown, could you just comment on 
predatory lending? Because I know you do not want to 
inadvertently end up underwriting it.
    Mr. Brown. Yes. Well, as you know from Treasury, addressing 
predatory lending is one of Secretary O'Neill's highest 
priorities. In fact, his focus is on financial literacy, and 
how do we make credit education an integral part of our 
education system in that regard, as well as Assistant Secretary 
Bayer has been promoting a national code of ethics in 
addressing a lot of the lending ills related that could lead to 
predatory practices.
    What we have done at CDFI has been a number of different 
things. Many of our certified community development financial 
institutions, banks, thrifts, credit unions provide IDA type of 
accounts. Many of our CDFIs provide, as part of their service, 
credit counseling to potential borrowers.
    One particular leading example is an organization out of 
North Carolina, a self-help credit union, which has been on the 
forefront of addressing predatory lending practices and getting 
legislative changes in North Carolina that have led to other 
State----
    Senator Mikulski. We appreciate North Carolina, but what do 
you at your headquarters do in terms of having an organized, 
systematic message out to all CDFIs on this issue of predatory 
lending? I know you are big on data collection. And we love 
that. Do you have a watch list that you are watching trends? 
And are you doing training for CDFIs and so on?
    Mr. Brown. Senator, specifically to that question, we have 
not collected data specifically to how CDFIs have addressed the 
impact of predatory lending. But what we have measured and 
recovered is the types of loans that our organizations make to 
provide affordable credit to low income communities.
    Examples, our bank enterprise award program provides a 
major incentive for financial institutions to target their 
mortgage products in low income communities. And many do 
provide those loans at below market rates in order to get loans 
to low income people at affordable rates. The example I was 
going to provide with self-help is that one of the issues of 
some of the traditional financial institutions that, as they 
underwrite these loans, a typical sub-prime loan historically 
has not met the underwriting or the secondary market guidelines 
for Fannie and Freddie. So as a result, many of the CDFIs have 
perhaps negotiated with local banks to do portfolio lending.
    In the self-help example is that they have created a 
secondary mechanism so that those banks that are doing 
portfolio lending, in order to provide affordable mortgage 
loans to low income communities, have found a way to buy those 
loans and to put those loans out in the secondary market. And I 
think that that is an example of a model that we are looking 
at. And, in fact, we are currently conducting a study to see if 
there is a way that we can create a whole loan or a secondary 
market mechanism that could allow for loans that do not meet 
Fannie or Freddie guidelines, as well as other community 
development loans, if they can be sold in the secondary market.
    Senator Mikulski. I have to think about this. First of all, 
I am going to come back to my original point. Number one, I 
would encourage you at CDFI to have some type of national way 
of watching the trends on predatory lending that the CDFIs 
might inadvertently be getting into or become aware of, because 
predatory lending has the right name. It is about predators. 
And they look at every opportunity to gouge. They are 
predators. And we have gotten lots of programs that I find the 
predators have really milked, squeezed, and so on, that then 
did not result in value for the poor, a different way of life, 
a different opportunity.
    We need you to really be watching this. So that is number 
one.
    Number two, CDFI was meant to come into small areas where 
banks or others would not have come in. And what I want you to 
be very careful about what you underwrite that does not meet 
other guidelines, so we do not end up with a whole set of 
bankruptcies on our hand or defaults. I really am going to 
insist on this, because we have gone down the line of promoting 
home ownership. We have gone down the line of FHA. And we have 
been pushing FHA and home ownership.
    And I have in Baltimore City in FHA 50 percent of the 
people in default. Now something is real wrong somewhere. So 
before we get into how do we underwrite and so on where there 
are not even usual and customary guidelines, I just want you to 
be very careful because the predators will come in. That is 
number one. Or number two, the whole issue of financial 
literacy, which I really think could be one of the most 
important areas for both of you to pursue, using the 
appropriate tools available to you.
    And I know this goes to the civil rights organizations are 
interested in it. Reverend Jackson and others have spoken to 
this. Financial literacy is the way to have people clean up 
their credit, get ready for another opportunity, make sure that 
opportunity is sustainable.
    But anyway, I have gone over my time. Senator Bond, why do 
you not----
    Senator Bond. Thank you, Madam Chair.
    Ms. Lazar, to follow up on a question that the Chair asked 
earlier about production, what kind of experience has NRC had 
in producing rental housing for extremely low-income families 
while maintaining the property's long-term viability? Is it 
possible to structure properties with only up-front capital so 
that ongoing subsidy needs are not necessary? And how much 
money is NRC dedicating to the multi-family activities? And 
what other resources are you using?
    Ms. Lazar. Senator, as you know, last year this committee 
provided us with $5 million to look at the possibility of 
maintaining, and creating mixed income properties that serve 
some families below 30 percent of area median income. We have 
just received the applications for the grants that we are going 
to make in June. Some of the uses that have been proposed 
include reducing a property's mortgage debt, which will then 
allow the property to charge lower rents for percentage of 
units, rents that are affordable to extremely low-income 
people.
    Other applicants are working with local housing authorities 
to make a percentage of units available to extremely low-income 
holders of housing choice vouchers and using the grants to 
support the additional resident services and more intensive 
management as appropriate to support a mixed income profile.
    We are continuing to look through the applications for 
funding that we received this year at a range of options to 
create mixed income housing. We just sponsored a symposium in 
Chicago a couple of weeks ago, where we brought the best 
thinkers around the country to think and talk----
    Senator Bond. You are still in the planning stage.
    Ms. Lazar. We are still in the planning stage on pursuing--
--
    Senator Bond. You have not done it.
    Ms. Lazar [continuing]. The work that we had been funded 
for this past year. We are working on a study that we will have 
probably for you later in the fall, early winter, on mixed 
income housing opportunities. We are doing a wide range of 
activities that will help us develop more of an educational 
base of what is possible.
    Senator Bond. In sum, it is all planning.
    Ms. Lazar. Most of it is in the planning stage right now. 
We will be getting grants out in June. And it will start going 
into real properties in the summer.
    Senator Bond. Well, being from Missouri, I would like for 
you to show me.
    Ms. Lazar. I will.
    Senator Bond. Planning is great.
    Ms. Lazar. I will be glad to.
    Senator Bond. Yes. Planning is fine and all that, but we 
want to know not what you plan, but what you do.
    Ms. Lazar. We expect to have the grant list available in 
June. We will come up and share it with you, so that you know 
what is on the board.
    Senator Bond. Okay. Appreciate that.
    Let me turn back to an area that is very closely related to 
the problems that my colleague has indicated may be existing in 
Baltimore. NRC and other organizations are involved in 
disposition of HUD assets located in designated distressed 
neighborhoods called asset control areas. Recently you 
conducted a review of the program. One of the studies' major 
findings was that the use of other Federal programs, such as 
HOME, CDBG, HUD, neighborhood initiative grants, and Hope 3, 
went into the ACA program.
    At least from my standpoint, I do not know about anybody 
else in Congress, but I never contemplated that this 
disposition program would involve the use of other funds. We 
put the other funds out there for other programs.
    What has been NRC's experience with HUD's asset control 
program? Do you have any suggestions on how to improve it? And 
why is there a need for other Federal subsidies? Something is 
amiss here.
    Ms. Lazar. I think I could answer that question concisely. 
The asset control area program has been an effective tool, 
particularly for our NHS organization in Chicago, to gain back 
positive momentum in the Back of the Yards and the Chicago Lawn 
neighborhoods. There has been an increase in sub-prime and 
predatory lending in that community. And there has been some 
very serious resultant foreclosures.
    When neighbors see rehab activities on homes that have been 
vacant for months or even years, they are more inclined to 
invest in the upkeep of their own properties. This activity has 
helped preserve the values of other homes in the neighborhood 
rather effectively.
    Now the ACA program in Chicago had some additional funding 
put in it to help close the appraisal gap. When we are rehabing 
houses throughout the NeighborWorks network, we want to make 
sure that the rehabilitation creates a safe, sound unit that is 
going to be housing for that family over the long term. What we 
were finding was that the cost of the house, plus what was 
necessary for the rehab costs, went beyond the appraised value 
of the property. The additional funding that the NHS was able 
to negotiate through Congressman Gutierrez's office has really 
helped bridge that appraisal gap.
    Saying that, I think if my colleague, Bruce Gotchall from 
the NHS, were here, he would say that if he had gotten the 
house for $1, had been able to make the necessary repairs to it 
and then split the proceeds with HUD, they would have had a 
much more successful transaction.
    Senator Bond. Yes. I think that is the 50-percent 
requirement. That seems to be the real problem.
    Madam Chair, if I may just ask one final question.
    Senator Mikulski. Please keep going.
    Senator Bond. I would like to hear from both of you what 
your agencies are doing in rural communities and how are you 
working with USDA and HUD and other Federal agencies. Let us 
start with Mr. Brown. How is your rural effort?
    Mr. Brown. Our rural effort is a significant part, Senator, 
of what we do. And it is important to the CDFI Fund. What we 
have done in the past is we have surveyed our core recipients 
to get an understanding specifically of the markets that they 
serve and the types of services that they provide into our 
rural communities.
    What we do know is that when we surveyed our core 
recipients from 1996, the lending activity between 1996 and 
1999, they reported that over half of their products and 
services were in rural communities. And when we surveyed the 
banks that are participating in our bank enterprise award 
program, they indicated that 60 percent of their services and 
loans were made in rural communities.
    We are putting the finishing touches on our rural findings 
and survey as part of the appropriation language that was 
attached last year. And we will provide you and staff a full 
copy of that report.
    [The information follows:]

Community Development Financial Institutions Fund Activities: Tracking 
                             Rural Outcomes

    The conference report for the fiscal year 2002 VA, HUD, and 
Independent Agencies appropriations bill requested that the CDFI Fund 
report on its rural activities:
    The Committee remains concerned about [the CDFI Fund's] lending 
activities in rural areas, especially the Fund's use of its Bank 
Enterprise Award (BEA) Program. The Committee urges [the CDFI Fund] to 
increase its activities in rural areas, especially in light of the 
abundance of Federal programs already dedicated to urban areas. 
Further, CDFI is directed to include details on its rural lending 
activities in its fiscal year 2003 budget justifications. These details 
should include the number of CDFIs approved [for funding] in rural 
areas by State and the amount of funds provided to each rural area by 
program activity [Core/Intermediary Component, Small and Emerging CDFI 
Assistance (SECA) Component, and the Bank Enterprise Award (BEA) 
Program].
Findings
    Thirty-two percent ($73.5 million) of all the CDFI Program dollars 
awarded to the 121 1996-2000 Core Component Awardees went to CDFIs for 
whom a majority of their customers are located in rural areas.
    Seventeen percent of the 542 certified CDFIs (as of December 2001) 
are headquartered in rural areas.
    The CDFI Fund has made $62.5 million in awards (12 percent of 1996-
2001 total awards) to CDFIs and banks headquartered in rural areas.
Eligible Census Tracts
    Forty-one percent of the Nation's census tracts qualify as eligible 
Target Markets under the CDFI Program's Investment Area test.\1\ Of 
these total eligible tracts, 25 percent are defined as non-metropolitan 
areas (see Table 1). Large expanses of rural areas are eligible, 
including most of central Appalachia, the Mississippi Delta, most of 
the non-metropolitan counties along the Mexican border, and Native 
American lands. Certified CDFIs provide services to a minimum of 38 
percent of the Nation's eligible tracts, including 25 percent of 
eligible tracts in non-metropolitan areas. It should be noted that 
these coverage figures understate the actual coverage of certified 
CDFIs because they include only the 355 CDFIs that designated 
Investment Areas. It does not include the 187 CDFIs that designated a 
Low-Income Targeted Population or an Other Targeted Population. Neither 
does it include the 18 CDFIs that report a national service area. If 
the national service areas had been included, the table would show 100 
percent coverage in both non-metropolitan and metropolitan areas. We 
did not include these because we cannot validate that the national 
CDFIs have had actual lending or investment activity in every eligible 
census tract in the country.
---------------------------------------------------------------------------
    \1\ This does not include those non-metropolitan census tracts 
that, based on the census data for those census tracts, do not qualify 
on their own but would qualify if included in a county that qualified 
based on county-wide census data. (CDFI Fund regulations allow non-
metropolitan counties or census tracts to qualify as Investment Areas; 
however, metropolitan areas may only qualify based on census tracts).
---------------------------------------------------------------------------
    The Fund recognizes the importance of tracking the precise location 
of CDFIs' lending activity. Therefore, in fiscal year 2003 the Fund 
plans to collect detailed loan-level data that will show which census 
tracts CDFIs are lending and investing in. When the Fund has that loan 
level data, it will be able to report exactly how many loans and 
investments CDFIs made in eligible census tracts, which resulted from 
the leverage of our direct investments.
CDFI Fund Awards
    The Fund can provide a more detailed analysis of rural coverage for 
a subset of all awardees. These are the 121 CDFIs that received Core 
Component awards from 1996 through 2000. These awardees respond to a 
detailed annual survey, from which this data is analyzed. As Table 2 
shows, nearly one-third of all the CDFI Program dollars awarded to 
these 121 CDFIs went to CDFIs for whom a majority of their customers 
are located in rural areas. An additional 8 percent went to CDFIs for 
whom 25 percent to 50 percent of their customers are located in rural 
areas. For a complete list of surveyed CDFIs and their locations by 
State, see Table 3.
    The 121 Core Component Awardees report that an estimated 24 percent 
of their financing went to customers in rural areas. This estimate is 
based on the percentage of customers that each CDFI reported as located 
in rural areas and the CDFI's financing outstanding at the end of 
fiscal year 2000. This estimate is the closest the Fund can get given 
the data we now collect. Once loan-level data is collected, the Fund 
will be able to report exactly how many loans and investments CDFIs 
made in rural areas and what the total dollar amount was.
    Another, less accurate, measure of rural activity is the location 
of the institutions' headquarters. As Table 4 shows, 17 percent of all 
certified CDFIs are headquartered in rural areas. From 1996 through 
2001, 19 percent of all SECA/TA Component award dollars went to rural-
based CDFIs. 15 percent of Core Component and 4 percent of Bank 
Enterprise Award (BEA) Program dollars have been awarded to 
institutions headquartered in rural areas. However, many CDFIs that are 
headquartered in urban areas provide services to rural areas and may 
even have rural branch offices. Table 4 does not include that data.
    We cannot estimate BEA Awardee services provided to rural areas 
because of the unavailability of data. The statutorily prescribed 
definition of ``Distressed Community'' under the BEA Program restricts 
award dollars to rural communities. First, rural areas have difficulty 
meeting the program's 30 percent poverty requirement because 
populations in rural areas are often scattered, with Low-Income 
households mixed with households of higher incomes, and have fewer 
concentrations of poverty than is often found in urban areas. Second, 
over 40 percent of the Nation's rural population resides in communities 
with fewer than 2,500 people but located in metropolitan areas. These 
communities are too small to meet the BEA Program's statutorily 
required population minimum of 4,000 people in metropolitan areas. 
Further, in non-metropolitan counties there is a minimum population 
requirement of 1,000 people in a qualifying census tract. This figure 
also precludes otherwise qualifying economically distressed rural areas 
from BEA Program eligibility.

    Senator Bond. Well, we look forward to seeing that.
    The other, for the NRC, Ms. Lazar, what do you----
    Ms. Lazar. We have a rural initiative, which is one of our 
four major initiative programs, that has had steady growth. 
Fifty-nine of our 225 NeighborWorks organizations, or 27 
percent of the network, is serving rural areas. We are a 
resource for training and technical assistance provider to 
these organizations.
    We provide them with grant funding. We established an 
organization called RNA Community Builders, which is a national 
CDFI intermediary, which is supporting the work of rural 
practitioners around the country.
    We are working closely with the Department of Agriculture, 
through the Department of Agriculture's 504 program. We are 
looking at other ways of using Agriculture's programs in 
helping to deliver services to these rural communities. We do a 
great deal of work through our education programs. Next week we 
are hosting a conference in Oak Ridge, Tennessee, for our rural 
organizations, to help them do some problem solving together. 
We do specialized courses and programs of study at our training 
Institute. And we have actually a very unique partnership in 
Montana, which is a model for statewide activity, where we work 
with our organization in Montana to increase home ownership 
through a statewide counseling program. We have gone from 134 
home buyers in 1998 to 409 new home buyers in 2001.
    As you know, Montana is a good example of great geographic 
distances and a very, very hard place to do community-based 
work. The Great Falls NHS has done a fabulous job partnering 
with a variety of agencies and with a variety of players on the 
State and local level to really provide services all across the 
State.
    Senator Bond. Thank you very much, Ms. Lazar.
    Thank you.
    Senator Mikulski. I want to support those initiatives that 
you have just discussed and also my colleague's area of 
questioning in that area. My observations as a Senator, having 
been a city councilwoman and a congresswoman from one of the 
poorest areas of our State, is that rural poverty is so 
different. And often, people in rural areas do not have the 
resources, as I said, to technical assistance, foundations, the 
kinds of things that are available in a St. Louis or a 
Baltimore or a Bethesda. And so we really want to encourage you 
on this.
    I want to ask a question about faith-based engagement. 
Wherever I go in my State, people are saying to me, 
particularly institutions, where the leadership are people of 
color, are saying, ``Senator, what is this faith-based 
initiative, and how can I get in on it?'' That is one thing.
    The second thing is, everywhere I go I am seeing the 
merging of community development corporations, which were a 
very important tool at the grassroots, but they are popping up 
like flowerbeds and that they vary in capacity. And I am 
concerned about the issue of capacity building, is that new 
people coming into new organizations, with new access to funds, 
without the capacity to move into sound financial management.
    My observation of community development is often it is a 
charismatic leader, who gets involved in solving a neighborhood 
problem. The people come together in a very dynamic and 
exciting and wonderful, energetic way. They become a CDC. They 
start to get grants. And that charismatic leader's experience 
has been on household finance, not organizational finance. And 
then we get into all kinds of other issues.
    Could you share with the subcommittee, because both of you 
are there, what you see, number one, in your work in faith-
based organizations, because these will not necessarily be the 
big churches. They might be mid-sized. And for whatever we do, 
we want it to work. We really want it to work and not have 
either homeowners in default or CDCs in default.
    As you know, Washington, D.C., has had some really bad 
experiences of late. And we do not want this to be throughout 
the country. Could you share with us that?
    Ms. Lazar. I will be glad to get started.
    Senator Mikulski. And am I raising very real issues?
    Ms. Lazar. Oh, absolutely. I would like to invite Margo 
Kelly, my deputy, to join me, because she has had a great deal 
of experience with this and how we have been working with 
faith-based organizations over time.
    When the administration came in last year and brought a lot 
of focus on faith-based organizations, our first reaction was, 
so what is new? Those of us working in the CDC field for many 
years had had experiences with leaders, particularly through 
Catholic Charities and other faith-based organizations, for 
very many years. I know that the earliest organizations I 
worked with were all an outgrowth of faith-based organizations.
    Within our network, we have a number of organizations that 
are rooted in faith communities. We treat them like we treat 
everybody else wanting to make sure----
    Senator Mikulski. Well, what do you do about capacity 
building? We are really talking about the African-American 
churches, the Latino communities. Because the big associates, 
like the Catholic Charities associations, they know how to work 
with agencies. They are constitutionally compliant. But this is 
a new thing that the President wants to start. And we think it 
is worth taking a look at, as long as there is constitutional 
compliance and capacity, particularly because these are new 
startups.
    Ms. Kelly. I began my career in this organization doing 
start-up organizations. I know that one of the first places you 
go when you are in a new community is to the churches, because 
that is where the leadership is.
    I think Neighborhood Reinvestment has provided four aspects 
of capacity building that have worked, both with the faith-
based organizations that are in our network and with our other 
organizations. The first one is technical assistance. When an 
organization is interested in joining the network, we take a 
close look at their performances in six key areas that we refer 
to as PROMPT planning, resource development, oversight, 
management system, financial systems, et cetera. We help them 
to develop in the areas where they are weak.
    The second place we provide assistance is in training 
through our national training institutes and on-site. This is 
another critical aspect of building capacity. We also, in 
conjunction with our training and technical assistance, provide 
grants. In some cases with a small organization, one of the 
critical needs that they have is for financial management 
systems. Sometimes it is for computers, hardware or software. 
Sometimes it is for training for their staff who need to learn 
those systems and how to operate them.
    And our fourth area, which is very critical, is an area 
that we refer to as risk management or program review. This is 
an annual process, where a unit that works with Clarence 
Snuggs, our other deputy, spends time on-site reviewing these 
organization and gives them a report card. It tells them how 
they are doing in these areas. If there are serious 
shortcomings, we ask them to develop a corrective action plan 
with our assistance and to address them.
    So it is a multifaceted approach. It works very well on the 
ground. And I think it has kept our network quite strong.
    Senator Mikulski. Well, that is outstanding. I am going to 
turn to Mr. Brown. But does HUD do this, also?
    Ms. Kelly. Madam Chair, I do not know exactly what HUD 
does. I think that the training, the resources and the tools 
that we use are available. Actually, our training institutes 
are a really good opportunity for people to access those tools 
and apply them for themselves.
    Senator Mikulski. Thank you very much. What we like to have 
is really that specific description of PROMPT. I like that. And 
I think we want to also discuss this with Secretary Martinez. 
We do not want the taxpayers gouged and, you know, the 
capacity--Mr. Brown, and then I am going to turn to Senator 
Bond. This will then conclude our testimony.
    Yes?
    Mr. Brown. Senator Mikulski, building capacity and 
technical assistance is the cornerstone of the CDFI program. As 
I mentioned earlier, 100 of our 550-some-odd certified 
community development financial institutions are community 
development credit unions. Our SECA program this past year, 20 
percent of the awards were made to community-based credit 
unions.
    And as I stated in my opening testimony, many of the credit 
unions were formed and came out of church basements. And so our 
SECA program, as an example, particularly in your State, we 
funded the Faith Fund of Baltimore, which is a startup, multi-
faith entity with a technical assistance award.
    So we dedicate 20 percent of our budget to building 
capacity and expertise of CDFIs. And our SECA program has been 
one of the ways in which local community-based, faith-based 
initiatives have been able to take advantage of our funding.
    Senator Mikulski. Well, thank you. We could pursue this. 
The little white light means that there is a vote.
    But we will let this point of light ask his questions here.
    Senator Bond. Well, my bulb is dimmed. And I am going to 
put the rest of my questions in for the record, Madam Chair. We 
have miles to go before sunset. And we have another couple 
things going.
    So I appreciate very much your testimony. It is two small 
agencies with very big responsibilities. And we appreciate your 
dedication to trying to bring all these things together. You 
certainly have broad scopes of interest that mirror in many 
ways this committee. And we thank you for your testimony and 
look forward to reading your written responses to the questions 
we submit.
    Thank you, Madam Chair.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Mikulski. I, too, will have written questions. We 
want to thank you, first of all, for appearing today and the 
work that you do in every way. I think we have articulated the 
areas that we have concern about. But most of all, it is that 
American dreams really are American dreams, whether they are an 
individual buying a home or a community development 
corporation.
    And we will be having further discussions with you. And we 
look forward to working with you in this year's appropriation.
    [The following questions were not asked at the hearing, but 
were submitted to the Agencies for response subsequent to the 
hearing:]

   Questions Submitted to the Neighborhood Reinvestments Corporation

           Questions Submitted by Senator Barbara A. Mikulski

                           predatory lending
    Question. Describe what your membership is doing to combat 
predatory lending?
    Answer. We have been increasingly concerned with the growth of 
predatory lending practices. The concern focuses on protecting new 
homebuyers the NeighborWorks network has assisted, but our 
concern also extends to the threat predatory lending poses to entire 
communities and to the safety and soundness of regulated financial 
institutions and its impact on their ongoing work in expanding 
responsible ownership opportunities for low- and moderate-income 
families. We have pursued a number of efforts to document and analyze 
predatory-lending practices and create a series of strategies to combat 
abusive lending practices.
Financial Literacy Training
    Neighborhood Reinvestment has established a national pilot program 
to promote financial literacy education for consumers in 24 cities 
across the country using the FDIC's Money Smart curriculum. The purpose 
of this program is to assist the NeighborWorks network to 
establish a high-quality financial literacy training program for lower-
income families across the Nation. In 2001, the 24 
NeighborWorks organization participating in this pilot 
accomplished the following:
  --2,491 graduates of program;
  --Average of 10 contact hours per participant (total of 27,400 
        contact hours);
  --Average income of participants is $22,927;
  --93 percent of program participants are renters;
  --67 percent of participants are female;
  --39 percent of participants are very-low income households;
  --36 percent of participants are African-Americans; and
  --21 percent of participants are Latino or Hispanic.
``Don't Borrow Trouble'' Campaign
    Neighborhood Reinvestment is participating with Freddie Mac to 
expand a consumer education program called ``Don't Borrow Trouble''. 
With Freddie Mac's support, the campaign has been expanded to 12 major 
cities to launch local campaigns that will alert millions of Americans 
about the dangers of predatory lending and set up special hotlines they 
can call to get advice and report problems. The innovative campaign 
uses a combination of ads, billboards, Web sites, and public service 
announcements in English and Spanish to educate borrowers about 
predatory lending practices and encourage them to call a toll-free 
number for referrals to local government and non-profit agencies to 
help them understand and resolve specific lending problems.
NeighborWorks HELP Program
    In response to an increase in predatory lending activities, 
Neighborhood Reinvestment Corporation has worked with Freddie Mac to 
develop a product that is currently being tested in 10 communities. The 
NeighborWorks Home Equity Loss Prevention (HELP) product 
offers victims of predatory lenders an opportunity to refinance out of 
their predatory mortgage to a reasonable and fair mortgage product, 
thereby helping targeted homeowners avoid imminent foreclosure.
    The product is designed to help homeowners with impaired credit and 
excessive debt to refinance on affordable terms. Freddie Mac is using 
the HELP initiative to buttress the ``Don't Borrow Trouble'' ad 
campaign in select cities, where the HELP program is introduced as a 
possible refinance program with local government participating in the 
marketing effort.
    Through this pilot effort, Freddie Mac will purchase up to $20 
million in HELP loans, which will be originated by Wells Fargo Mortgage 
Corporation and insured by Mortgage Guaranty Insurance Corporation of 
Milwaukee and PMI Mortgage Insurance Company. The 
NeighborWorks HELP loan is a fixed-rate, 30-year market rate 
mortgage.
    As part of the refinancing, homeowners will obtain intensive and 
personalized financial counseling and may use up to 10 percent or 
$10,000 of the new refinanced mortgage--whichever is greater--for 
property improvements or debt consolidation, provided borrowers meet 
certain requirements. Borrower debt-to-income ratio is limited to 42 
percent and may go up to 50 percent provided that the borrower's 
overall monthly payments after the debt consolidation are less than 
before the refinance.
Research and Education
    Neighborhood Reinvestment has funded and participated in research 
studies of the growth of subprime lending and foreclosures in several 
cities and regions. The studies have been conducted in Atlanta, 
Chicago, Boston and Connecticut. Abt Associates, the research firm that 
conducted some of these studies, has done follow-up research and 
analyses with HUD on the impact of subprime lending in Baltimore, 
Atlanta, Chicago and Boston.
    Neighborhood Reinvestment also conducted a symposium--``Tools and 
Tactics to Combat Predatory Lending: A Practitioners' Forum.'' Major 
speakers represented Fannie Mae, Freddie Mac, Atlanta Legal Aid 
Society, Center for Community Self-Help and the Office of Thrift 
Supervision. Workshops presented a range of cutting-edge tools on 
prevention, education, analysis and intervention. More than 200 
community-development practitioners attended.
    Neighborhood Reinvestment and the Joint Center for Housing Studies 
of Harvard University together published a research paper, 
``Understanding Predatory Lending: Moving Toward a Common Definition 
and Workable Solutions,'' that explored the range of predatory-lending 
practices and proposed three potential regulatory and legislative 
solutions.
Post-Purchase Services
    Counseling prospective buyers and following up new homeowners with 
post-purchase education are key elements of the proven system for 
promoting affordable home ownership that local NeighborWorks 
organizations pursue, in partnership with residents, local business and 
government. Post-purchase services build the capacity of new 
homebuyers, strengthen the neighborhoods they move into, and reinforce 
the effectiveness of their local NeighborWorks organizations.
    In Chicago, for instance, Neighborhood Housing Services of Chicago 
has initiated a comprehensive neighborhood stabilization program that 
fights predatory lending and its almost-inevitable consequence, 
foreclosure. The Neighborhood Ownership-Recovery Mortgage-Assistance 
Loan (NORMAL) program is a partnership among lenders, the city and 
Neighborhood Housing Services of Chicago. One main goal is to create a 
loan fund to refinance qualified borrowers who have been victims of 
predatory-lending practices.
    Question. What success has Neighborhood Reinvestment Corporation 
had in its collaboration with Freddie Mac? How many loans have you 
restructured? Is the program replicable on a national scale?
    Answer. The HELP program is an aggressive, innovative mortgage 
product that can provide relief to those who have been victimized or 
are vulnerable to the practice of predatory lending. It is the first 
national program that incorporates the assistance of the secondary 
market to combat predatory lending.
    In order to restructure loans, a lender partner had to be 
identified at a national level; after a concerted search, Wells Fargo 
Mortgage Corporation was selected as the loan originator nationally. 
All partners recognized that this was a groundbreaking effort--one that 
would include changing systems, and labor-intensive counseling that 
could last up to a year.
    The customer service system is currently being refined, and the 
pipeline homebuyers in need of refinancing is being built. Under HELP, 
225 homeowners have received credit counseling and foreclosure 
intervention services. Unfortunately, the number of owners that have 
closed on a HELP loan is negligible. We continue to work with Wells 
Fargo and Freddie Mac on customer service, and NeighborWorks 
organizations on technical assistance and best practices. We are 
hopeful that HELP will provide an appropriate route for victims of 
predatory lenders in keeping their homes, and it will be readily 
replicable nationally; however, at this time, we continue to work with 
our partners in refining the product.
    Question. Are you developing any training materials on predatory 
lending, or putting together a report for use in other communities?
    Answer. Since 1999, a total of 184 practitioners have completed a 
special course offered at our national Training Institutes on 
preventing predatory lending called ``Helping Homeowners Avoid 
Delinquency and Predatory Lenders.'' This two-day course covers:
  --Delinquency prevention and financial trends;
  --Debt warning signs for homeowners;
  --Outreach and programs for debt management;
  --Post-purchase delinquency and debt management counseling;
  --Recognizing lending abuses; and
  --Strategies for success.
    Additionally, over the past year we have been working with a number 
of NeighborWorks organizations to assess their ability to act 
as mortgage brokers in their communities. Many of these organizations 
are pursuing this activity as a way to prevent further predatory 
lending from occurring in their markets. The ``NeighborWorks 
Network Mortgage Broker Handbook'' publication details a range of 
issues that organizations should consider prior to launching a mortgage 
brokerage. In particular, the Handbook contains two assessment tools 
that help organization measure the feasibility of assuming the broker 
role.
    The broker feasibility tool was created to assist 
NeighborWorks organizations with initial planning activities 
for an in-house mortgage brokerage. The feasibility tool uses a series 
of questions to help network members evaluate issues related to the 
mortgage operation. The resolution of these questions provides the 
organization with a framework to pursue the mortgage broker activity, 
or the justification to decline it.
    We developed the broker production tool to assess the financial 
benefits of developing an in-house mortgage brokerage. The production 
tool projects income, expenses, and production for a 24-month period. 
It is meant to provide nonprofit organizations with projections that 
supplement the decision-making process.
          affiliation of neighborworks organizations
    Question. Explain the process, step-by-step, that Neighborhood 
Reinvestment Corporation uses to make a non-profit a part of the 
NeighborWorks network?
    Answer. Interested organizations must apply to Neighborhood 
Reinvestment for membership. Since the application process is a 
competitive and membership is extended to a limited number of 
organizations every year, meeting all national criteria and district 
priorities does not automatically guarantee an organization will be 
extended the opportunity for membership in the network.
    The national threshold criteria for membership include:
  --The organization must be a partnership of residents, the private 
        sector, and the public sector;
  --The organization must be resident led;
  --The organization must engage in community revitalization and 
        housing production;
  --The organization must have garnered broad support in the community;
  --Potential affiliates must have the organizational capacity to 
        accomplish the mission, strong financial support from local 
        sources, and a high quality financial management and internal 
        operating systems.
    Neighborhood Reinvestment reaches under-served communities and 
populations by bringing organizations into the NeighborWorks 
network. In all cases applicant organizations must have a clear 
understanding of the expectations and benefits of membership and have a 
demonstrated enthusiasm for becoming an active network member.
    The average length of time from submission of application to 
charter eligibility is 12 to 18 months. The length of time does vary 
depending on the scope of development work that an organization must do 
to comply with all of the chartering requirements. The length of time 
is also dependent on the capacity--staff and resources--of Neighborhood 
Reinvestment to work with the organization throughout the process.
    Once interested organizations have submitted an application, the 
review process for membership in the NeighborWorks network 
begins with a careful evaluation and screening of all applications. At 
present, the current growth strategy for the NeighborWorks 
network is focusing priority attention on:
  --States and cities with populations over 500,000 where we have no 
        current presence,
  --Sites that are significantly underserved in terms of community 
        development efforts and resources,
  --A blend of organizations representing single and multi-family 
        producers who work within the context of neighborhood or 
        community revitalization,
  --Sites where the specific needs identified are a good match for the 
        specific resources we currently offer, and
  --A geographic mix that represents rural, small city, large city and 
        suburban sites.
    A select group of applicant organizations that meet specific 
membership criteria and are considered to be competitive for membership 
participate in a rigorous review and assessment process. The assessment 
process may include an initial site visit, a detailed field assessment, 
and an analysis by Neighborhood Reinvestment.
    Requirements of NeighborWorks membership include an 
unqualified annual audit and compliance with a variety of other 
operating standards that we regularly review. We are the only network 
of community development organizations that has implemented a series of 
formal conditions and standards of operations as a prerequisite for 
membership. Any NeighborWorks organization that wishes to 
benefit from the Corporation's resources must subscribe and continue to 
meet these conditions and standards.
                           capacity building
    Question. How do you increase the capacity of non-profits?
    Answer. Neighborhood Reinvestment Corporation engages in five key 
activities specific to increasing the capacity of 
NeighborWorks organizations:
    We charter new NeighborWorks organizations through an 
extensive educational and partnership-building effort, involving 
residents, business leaders and government representatives.
    We provide funding for capital projects and operating grants to 
NeighborWorks organizations, enabling them to create and 
build their own community-revitalization initiatives from a solid asset 
base.
    We provide a high degree of management and technical assistance to 
NeighborWorks members and the broader community development 
field, in order to expand their delivery programs and better serve 
their communities.
    We conduct extensive reviews of NeighborWorks 
organizations, focusing on their capacity to successfully manage their 
resources and programmatic risks. These program reviews monitor 
performance on an ongoing basis and serve as a platform for providing 
management and technical assistance. They also unearth best practices 
at the street level. Our goal is to increase the health, performance, 
productivity and effectiveness of the entire NeighborWorks 
network.
    We conduct national Training Institutes in major cities throughout 
the United States for anyone interested in affordable housing and 
community revitalization, particularly private- and public-sector 
practitioners and community leaders. Typically, 70 courses centered on 
such topics as management and leadership, community building, community 
economic development, neighborhood revitalization, home ownership and 
community lending and affordable housing are offered at each Training 
Institute. We conduct up to five Training Institutes each year, 
attracting up to 1,200 participants at each venue. We also offer other 
training opportunities such as specialized resident leadership 
workshops and regional trainings.
    We are undertaking advanced training to build capacity of the most 
seasoned practitioners for the future. We have accepted 45 executive 
directors into an Achieving Excellence program, which includes 
coursework at Harvard that is specifically focused on community 
development and application of that learning when those directors 
return to their communities.
    These activities individually and collectively help build the 
productivity and strength of local community development organizations.
    Neighborhood Reinvestment also increases organizational capacity by 
bridging the gap between public and private funding through integrating 
public and private support. One critical financing vehicle that we 
provide to NeighborWorks organizations is equity capital, for 
real estate development and lending grants, and for local revolving 
loan funds. The NeighborWorks organizations, in turn, use 
these funds to draw private capital in a variety of ways, including:
  --Equity and gap financing for home purchase loans, including down 
        payment and closing costs;
  --Capital for property rehabilitation, micro-enterprise and small 
        business loans; and
  --Capital costs associated with the acquisition and development of 
        residential and commercial real estate for long-term ownership 
        by NeighborWorks organizations.
    Locally directed revolving loan funds are essential to each 
organization's and the collective network's success. Revolving loan 
funds provide flexible funding for community priorities, such as 
homeownership, rehabilitation, multifamily housing, and commercial and 
economic development. Neighborhood Reinvestment Corporation supports 
these revolving loan funds through technical expertise, training, and 
funding. Neighborhood Housing Services of America aids the liquidity of 
the local revolving loan funds by buying revolving loan fund loans. 
With this increased loan fund capability, NeighborWorks 
organizations experience a tremendous surge in their capacity, and the 
increase is ultimately felt at the community level.
    Network capacity is further enhanced through the flexibility that 
you have allowed us in designing strategies and targeting our 
resources. This has given us the ability to devise extraordinarily 
successful tools and strategies, as well as build a network of strong 
and diverse local community development organizations. The power and 
impact of our grants are directly attributable to their flexibility.
    Question. What is your strategy for working with members who are 
having problems?
    Answer. We manage risk through our standing Risk Analysis 
Committee, which meets quarterly to review NeighborWorks 
members classified as ``vulnerable.'' The Risk Analysis Committee 
examines the results of data collection and analysis, on- and off-site 
program reviews and the ongoing technical assistance and capacity 
building efforts of Neighborhood Reinvestment. The Risk Analysis 
Committee reviews thoroughly all data on targeted organizations and 
maintains an approved risk ranking system.
    Based on an on-site review, organizations failing to meet 
performance standards in any of the eight PROMPTSM 
dimensions will receive a request for ``corrective actions.'' We 
require organizations to file a corrective action plan; Neighborhood 
Reinvestment's technical assistance and grants will be targeted toward 
resolving the conditions underlying the organization's vulnerability. 
Neighborhood Reinvestment staff then ascertain whether corrective 
action has been taken and whether a recommendation can be made to the 
Risk Analysis Committee for a stable or exemplary ranking. We also 
provide many other forms of technical assistance to build capacity in 
organizations. This may be in the areas of financial management and 
accounting, fund-raising and marketing, funding, partnership building 
and the development of resident leaders. Staff may also work with an 
organization's partners to explore mergers with other community 
development organizations in their community. The Corporation also 
provides scholarships to staff and board members of 
NeighborWorks organizations to participate in the 
Neighborhood Reinvestment Training Institute.
    Ultimately, the responsibility for the continued viability and 
successful management of risk in an environment of growth lies with the 
skills and commitment of an organization's board and staff. 
Neighborhood Reinvestment provides strategic funding and assistance for 
organizations to pursue strategies in preserving affordable housing and 
revitalizing communities.
                           board of directors
    Question. Do you train the boards of these non-profits? How? Why is 
this important?
    Answer. Each of our nine districts has at least one staff member 
whose expertise is in organizational development, including training 
and orientation of nonprofit boards of directors. As community 
development organizations have become more complex, we find that to 
maintain an informed, partnership-based board with engaged resident 
participation is a growing challenge. However this kind of board 
composition--one that includes the private, public and community 
sectors--is a cornerstone of Neighborhood Reinvestment's beliefs about 
how credible community development needs to be accomplished.
    We continue to prioritize board orientation, training and 
leadership development as a key area for technical assistance. While 
our national Training Institutes provide an outstanding venue for 
training, it is difficult for many board members to devote time during 
the week, out of town, to take advantage of the courses available. 
Presently we are seeking new ways to provide training to board members, 
including designing joint trainings of several boards at the district 
or regional level.
    In addition to helping board members understand their appropriate 
roles and responsibilities, we also work closely to assist them to 
understand and exert conscientious oversight of program operations. The 
check-and-balance system that can be achieved by an informed and 
empowered local board of directors is irreplaceable. While we wish we 
had more resources to devote to this increasingly challenging and time-
consuming effort, it is an area of endeavor that we will never abandon. 
We will continue to seek new, more effective and efficient ways to use 
our staff skill and resources to create positive, measurable outcomes 
in this area.
                certification of nonprofit organizations
    Question. Do you think other Federal agencies that partner with 
nonprofits should be certifying them?
    Answer. Neighborhood Reinvestment utilizes a process that combines 
both:
  --A formal chartering process; and
  --A methodology for monitoring the ongoing health of an organization, 
        through program reviews and risk evaluation procedures.
    We have developed this system in order to protect the investment of 
the Corporation in local organizations--grants, as well as training, 
technical assistance--to mitigate exposure to risk encountered by 
individual organizations and the NeighborWorks network as a 
whole, and to increase the confidence level of other investors in the 
activities of these organizations.
    This process has worked well for Neighborhood Reinvestment. 
However, for other Federal agencies, circumstances and capacity vary 
greatly. Certifying nonprofit organizations is a labor- and cost-
intensive process. Therefore, the question of other agencies' ability 
and willingness to certify nonprofits would seem to depend on a number 
of considerations, including issues such as:
  --The level of funding being provided;
  --The type of funding relationship--one time funding or a long-term 
        funding arrangement; and
  --The maturity of the organization receiving funding--a more mature, 
        sophisticated organization might take less time to certify, 
        versus an upstart, emerging organization that might not meet 
        certification standards, or might require slight technical 
        assistance to achieve those standards.
    Most Federal programs, particularly those available to nonprofit 
organizations, fund specific programmatic initiatives. In contrast, 
Neighborhood Reinvestment emphasizes underwriting the nonprofit 
organization through its certification process. With a paradigm shift, 
Federal agencies could embrace this model as the first step to 
certifying and more efficiently funding nonprofit organizations. More 
specifically, Federal agencies' underwriting and oversight of any 
specific project could be commensurate with their level of funding in 
that project.
    As an example of today's practices, HUD provides a fairly 
consistent degree of underwriting and oversight for any project 
utilizing HUD grant funds--regardless of whether the total project cost 
includes two percent of its funding from HUD, or 80 percent. In the 
conventional lending environment, it is commonplace for several lenders 
to participate in financing a real estate project. Typically, one 
lender functions as a lead lender. The lead lender typically provides 
the highest percentage of funding in the transaction, and the other 
participating lenders agree to accept the underwriting and project 
oversight decisions and actions provided by the lead lender.
    Similarly, Federal agencies could view their funding in specific 
projects as participation with other investors in the project. If 
another investor is providing a higher level of funding to the project, 
the Federal agency should regard that investor as the lead-lender and 
reduce their level of underwriting/oversight involvement accordingly--
commensurate with their reduced financial exposure and risk.
    To summarize, Neighborhood Reinvestment would not fund an 
organization without thoroughly reviewing the ability of that 
organizations to execute the activities for which its seeking funding. 
While up-front costs would be high, if other Federal agencies were to 
follow the Neighborhood Reinvestment model, the long-term benefits 
would include a reduced risk of fraud, waste, and abuse of Federal 
funds, and a more efficient, streamlined, and user-friendly process for 
certified organizations seeking Federal funds.
             neighborworks multifamily initiative
    Question. Does Neighborhood Reinvestment Corporation's multifamily 
initiative have lessons for communities like Prince George's County, 
that have dilapidating multifamily developments because of delinquent 
landlords?
    Answer. Members of the NeighborWorks Multifamily 
Initiative believe that multifamily properties should be cornerstones 
of community health. To achieve this end, the property must be both 
capitalized and owned/operated according to principles of ``sustained 
excellence.'' We believe the key markers of sustained excellence in 
affordable rental properties should include:
  --Ongoing economic viability
  --Well-maintained and attractive physical condition; and
  --Resident access to learning centers for the technological and 
        social infrastructure of educational success.
    Guided by these principles, NeighborWorks organizations 
attempt to make units affordable without sacrificing the long-term 
economic viability of the property. These principles do not happen 
without a dedicated owner--one who is committed to making the property 
a long-term neighborhood asset, and not solely an income stream. Often 
the choices made by the latter sacrifice the long-term viability in 
favor of short-term gain.
    The lessons of the Multifamily Initiative include:
    Select owners not just properties.--The ownership of multifamily 
properties is critical. Property owners must be motivated to provide a 
long-term housing resource to their community. Strong property owners 
can demonstrate successful portfolio performance over time, have a 
strong track record with regards to capital expenditures on their 
properties, and pay close attention to management and resident 
selection at their properties. These owners are beginning to be called 
``preservation owners''. They stand in stark contrast to those 
motivated strictly by real estate depreciation tax shelter, who are not 
apt to be strong long term owners.
    Capitalize properties for long term success.--We focus on what we 
call ``sustainability'' planning, structuring and financing properties 
so that they will not need future subsidies. One important principle is 
reserves that are adequate to cover the property's expected future 
capital replacement needs--for appliances, carpets, roofs, and so 
forth. The second important principle is to be realistic about what it 
will really cost to operate the property, over the long term, realizing 
that in some years operating conditions may be difficult. This requires 
being particularly careful in our underwriting. However, in practice, 
it is very tempting to under-fund properties, in the name of producing 
more housing right now.
    Services can be an important enhancement.--Depending on the target 
market, services such as employment training, after school academic 
support, or financial literacy and homeownership preparation can go a 
long way to building a resident base as committed to the neighborhood 
as homeowners.
    Use restrictions can protect the public sector investment.--As 
cities, counties or States invest tax credits, HOME or CDBG, the use 
restrictions and liens that are established can establish important 
long term oversight in the hands of the public sector investor. In 
addition to long term affordability restrictions, periodic property 
inspections, crime reviews, and occupancy compliance reviews can be 
required as part of the public investment and can help ensure that the 
community is getting what it was investing to obtain.
    The price of better housing is somewhat deeper equity subsidies.--
To achieve this type of sustainable housing and long-term 
``preservation owners'', public funders may need to fund properties so 
that less mortgage debt is needed. This will mean the units produced 
are far more desirable, and are designed, overseen, owned and operated 
to provide a cornerstone housing resource in the community.
    Question. Can you share the results of the fiscal year 2002 mixed 
income demonstration program? What have you learned?
    Answer. We would like to thank you again for the additional $5 
million to fund the demonstration program in mixed-income housing that 
will serve extremely low-income households. We issued our request for 
grant proposals in February, and funded 14 proposals to produce 1,364 
units, 120 of which would be affordable to extremely low-income 
families. A full analysis of the ``lessons learned'' that can be 
obtained from our demonstration applications will be completed by the 
end of June.
    We also sponsored a national symposium on mixed income rental 
developments in April. This symposium included nationally recognized 
and respected participants from the various parties needed to develop 
and maintain high-quality, affordable rental properties--from State 
housing finance agencies, to nonprofit, for-profit and PHA owners and 
developers, to lenders. Participants explored how to develop and 
sustain these properties in five different market environments. Each 
market environment had its own advantages and challenges. We came away 
from the symposium with a healthy respect for the high level of 
flexibility that is needed to make mixed-income communities work across 
our very diverse country. A primary theme that emerged was that mixed 
income neighborhoods ``trump'' mixed-income properties--implying that 
if the neighborhood has a strong income mix, then the property itself 
might bring (or preserve) a more deeply skewed income mix (more lower-
income residents) and still produce a very healthy property and 
community. In other words, there is no one ``right income mix'' to 
attain the benefits of mixed-income and sustainability. Participants 
also identified a number of areas in which existing programs do not 
promote mixed-income properties as we would want. Our research will 
yield a paper later this summer on the leading barriers to the 
development of mixed income housing.
    The initial feedback on the applicants is that, as we hoped, the 
grant applicants want to pursue a wide variety of approaches.
    Some applicants propose to use the grant to reduce a property's 
mortgage debt, thereby allowing the property to charge lower rents for 
a percentage of the units--rents that are affordable to extremely low-
income households.
    Other applicants are working with the local Housing Authority to 
make a percentage of units available to extremely low-income holders of 
Housing Choice Vouchers, and using the grant funds to support 
additional resident services and more intensive management, as 
appropriate to support a mixed-income resident profile. Using Housing 
Choice Vouchers seems particularly useful in areas in which the Housing 
Authority reports a shortage of units available to voucher holders.
    One applicant is seeking to extend the income range upwards as well 
as downwards--to incorporate additional higher-income households as 
well as additional extremely low-income households, to provide for both 
a healthier income mix, and create a cross-subsidy aimed at reducing 
the housing cost burden of the extremely low-income families.
    Applicants have identified a variety of management and operations 
innovations, to provide the more intensive management that mixed-income 
communities often require. We are very excited about putting this money 
to work to serve extremely low-income households, and about using the 
demonstration grants to learn more about what it takes to develop and 
sustain successful mixed-income communities in a diverse range of 
communities.
    Question. Will the lessons learned in the mixed-income demo be 
applicable to HOPE VI developments?
    Answer. We believe most of the lessons learned from the $5 million 
demonstration will have broad application, including to projects such 
as HOPE VI.
                                 aging
    Question. What sort of strategies are your members using to address 
the needs of our aging population?
    Answer. NeighborWorks organizations plan, develop and 
execute programs based on the needs of local populations. Their work 
involves people from all backgrounds, genders, ages and abilities. The 
NeighborWorks network is primarily ``place-based'', rather 
than ``population-based''; in other words, Neighborhood Reinvestment 
does not typically seek particular populations such as the elderly or 
the disabled. The focus for our attention and resources is on 
strengthening communities-- and most of the communities served by our 
network include the elderly and the disabled. While working with the 
aging or with disabled populations may not be a planned initiative, 
NeighborWorks organizations routinely provide rehabilitation 
counseling, work write-ups and loans to elderly homeowners on fixed 
incomes and to disabled homeowners who are seeking to make their units 
more accessible.
    Other than when required by Federal or State eligibility standards, 
NeighborWorks organizations respect the privacy of customers 
and do not require applicants to disclose physical disability as a 
condition of service. Because of this sensitivity, 
NeighborWorks organizations may be underreporting their 
involvement with disabled populations and the elderly. Nonetheless, we 
know that in 2000, more than 30 NeighborWorks organizations 
provided housing for non-elderly persons with disabilities, assisting 
more than 1,000 families. More than 30 organizations provided housing 
services for the elderly, benefiting nearly 2,800 households.
    Neighborhood Reinvestment provides financial resources, leadership, 
research and information that benefit the aging and the disabled. 
Expendable and capital grants help fund housing and support 
NeighborWorks organizations' efforts to assist residents. 
Neighborhood Reinvestment publishes information, such as a recent paper 
written in conjunction with the Joint Center on Housing, Aging and 
Health Care and ``Winning Strategies'', best practices from the 
NeighborWorks network. The Corporation convenes forums for 
discussion such as the upcoming Neighborhood Reinvestment Training 
Institute that will include a symposium on ``Aging in Place''. 
Neighborhood Reinvestment is also exploring opportunities for 
collaboration with AARP.
    The following is merely a sampling of the ways that 
NeighborWorks organizations are assisting the elderly and 
persons with disabilities to meet their particular housing needs.
Chattanooga, Tennessee
    Chattanooga Neighborhood Enterprise in partnership with the Alexian 
Village of Tennessee has begun construction on a $4.5 million 
conversion of the St. Elmo Elementary school into an apartment complex 
for the elderly to be known as the Alexian Court apartments. Financing 
the conversion of the 95-year old building is one of the most complex 
deals Chattanooga Neighborhood Enterprise ever put together, which 
included eight sources of funds. Funding includes historic preservation 
and low-income tax credits, partners' equity, grants and a mortgage. 
Neighborhood Reinvestment's flexible $200,000 capital grant covering a 
portion of the pre-development and development costs was critical to 
making the deal work. The City of Chattanooga donated the school 
property (vacant since 1989) for the project, but did not provide any 
tax money to the effort.
    Alexian Court, future home of residents age 62 and older, will 
contain 47 units. Rents will range from $450 to $600. Resident income 
will be limited to a maximum of 60 percent of median income. The 
development was planned with input from neighborhood residents, who 
wanted to preserve the structures and bring back the original look of 
this Victorian neighborhood. The complex is composed of two school 
buildings plus eight duplex bungalows. A third building, formerly the 
cafeteria and gymnasium, will become a community center for residents 
of the entire St. Elmo neighborhood.
New Haven, Connecticut
    The Mutual Housing Association of South Central Connecticut (MHA) 
is committed to developing economically, ethically and culturally 
diverse communities that are accessible and affordable. This commitment 
adheres to the principles of equal-opportunity housing, which ensures 
access and inclusion for people with disabilities. MHA strives to 
comply with and exceed regulations set forth by the Americans with 
Disabilities Act to accommodate people with disabilities at Mutual 
Housing properties. This is reinforced through organizational policies 
that include an affirmative fair housing marketing plan and fair 
housing policy, an affirmative-action policy, and an ADA notice and 
grievance policy that provides prompt and equitable solutions to 
complaints. In addition, MHA's resident-selection process was approved 
by the Connecticut Department of Housing in 1994.
    MHA staff, board members and residents participate in ongoing 
training to keep apprised of fair housing developments, and planning, 
monitoring and evaluation to insure accessibility for people with 
disabilities at Mutual Housing properties. Current activities include 
evaluation and audit of structural design and compliance with housing 
code, marketing to people with disabilities, and supporting disabled 
residents in securing rental assistance through Section 8. Because of 
coordination with social service, church and community agencies such as 
the Center for Disability Rights, and Shoreline Association for 
Retarded and Handicapped Citizens, MHA receives guidance in ensuring 
properties are accessible, marketing to people with disabilities and 
providing support for disabled residents.
Chicago, Illinois
    Roseland Ridge Apartments is a $6.4-million, affordable-housing 
development in Roseland, a neighborhood on the far South side of 
Chicago. Roseland Ridge provides 40 units of high-quality housing for 
people making less than 60 percent of the area median ($40,750 for a 
family of four). The development contains one- and two-bedroom, garden-
style units and two- and three-bedroom duplexes. Each unit features 
such amenities as central air conditioning, washers and dryers, off-
street parking, security systems, and patios or balconies. Rents range 
from $525 to $665.
    The development was a collaborative effort of Neighborhood Housing 
Services of Chicago, government agencies, other nonprofits and business 
partners. The city Department of Housing provided more than $2 million 
in low-interest loans and $445,270 in Federal low-income housing tax 
credits, which generated nearly $3 million in equity. The project 
received additional financing and support from Bank of America, the 
Illinois Department of Commerce and Community Affairs, State Farm 
Insurance, and others.
Rutland, Vermont
    Rutland West Neighborhood Housing Services won a Housing 
Preservation Grant from Rural Development in 2000 to rehabilitate 20 
homes belonging to very low-income residents in a tri-county region. 
The grant proposal featured a partnership between Rutland West 
Neighborhood Housing Services and the Vermont Center for Independent 
Living and gives immediate priority to very low-income individuals/
households with special needs. Examples of typical projects include 
access modifications for individuals discharged from the regional 
medical center and for mentally retarded/mentally ill individuals 
attempting to live independently.
                     section 8 homeownership option
    Question. The Administration's 2003 request funds the Section 8 to 
Homeownership program at nearly 10 percent of Neighborhood Reinvestment 
Corporation's budget. Is it working? What will be achieved with the new 
funds?
    Answer. Overall, we consider the initiative to be going very well 
and there continues to be great interest among the 
NeighborWorks network as well as public housing authorities 
and lender partners.
    Nationally, through the end of December 2001, HUD's Section 8 
Homeownership Option had assisted 135 Section 8 families to purchase a 
home using the Section 8 homeownership option. Ninety-two of those 
families--representing 68 percent of all of the Section 8 families 
assisted nationally--were in sites where there was assistance from a 
NeighborWorks organization. Nearly 1,600 Section 8 families 
are in the homeownership pipeline of the 21 NeighborWorks 
sites, and 560 of these families have already completed a pre-purchase 
counseling course. The 21 funded NeighborWorks organizations 
have partnered with 27 public housing authorities in providing this 
option to Section 8 families, with an additional 15 
NeighborWorks/public housing authority partnerships currently 
under development. Certainly, the 2003 request would enable us to cast 
our net even further to more communities, more public housing 
authorities and more Section 8 families.
    We are meeting our established production goals for this 
initiative. We are also collecting data on the families assisted by 
NeighborWorks organizations and developing best practices. 
Our most important work is reaching out to public housing authorities, 
to inform their decisions on this option and to encourage partnerships 
among local public housing authorities, community-based nonprofit 
organizations and lenders in implementing the homeownership option. Our 
experience has demonstrated that to be successful at creating 
sustainable homeowners through this option, such partnerships are 
critical.
    There have been a number of challenges that we would like to share 
with you.
    There are limited opportunities for our NeighborWorks 
organizations to recapture the higher administrative and counseling 
costs associated with this initiative. High-quality pre- and post-
purchase counseling is important to creating successful and sustainable 
homeowners. This is particularly true for families of modest means. 
NeighborWorks organizations have invested substantial 
resources thus far in preparing a pipeline of mortgage-ready Section 8 
buyers. In some markets it is taking up to three times longer in 
preparing a Section 8 buyer than what we find with a typical 
NeighborWorks first-time homebuyer.
    Lenders have responded positively to providing the first mortgages, 
which are accompanied by a second mortgage provided by another source, 
such as a NeighborWorks organization, and paid down by the 
Section 8 voucher. However, few national lenders are positioned to 
manage multiple payments for mortgage--e.g., one from the public 
housing authority and one from the family. Loan servicing is more 
complicated--and therefore more costly--with two payments for one 
mortgage, which poses a challenge for most conventional lenders.
    Knowing the growing expertise among selected 
NeighborWorks organizations, public housing authorities have 
approached NeighborWorks organizations for assistance in 
developing and implementing a Section 8 homeownership option. 
Neighborhood Reinvestment is challenged to help NeighborWorks 
organizations address these exciting opportunities and expand where 
appropriate.
    We feel it is important that we share the learning of the funded 
sites with other interested NeighborWorks organizations and 
the broader community development field. We developed a course offered 
at the Neighborhood Reinvestment Training Institute on the 
homeownership option. Further, we distribute best practices on this 
option.
                                 ______
                                 

           Questions Submitted by Senator Christopher S. Bond

                          multifamily housing
    Question. What kind of experience has your organization had in 
producing rental housing for extremely low-income families while 
maintaining the property's long-term viability? Is it possible to 
structure properties with only up-front capital so that on-going 
subsidy needs are not necessary? Lastly, how much money is Neighborhood 
Reinvestment Corporation dedicating to its multifamily activities and 
what other resources it is using?
    In 1999, Neighborhood Reinvestment and the NeighborWorks 
network launched the NeighborWorks Multifamily Initiative in 
order to bring high standards in asset management and peer learning to 
those NeighborWorks organizations that own or manage 
multifamily rental properties. The members of the Multifamily 
Initiative own nearly 30,000 units and make it their mission to provide 
multifamily homes, which are marked over the long-term by:
  --Affordability;
  --Well-maintained and attractive physical condition;
  --Access to learning centers for the technological and social 
        infrastructure of educational success; and
  --Ongoing economic viability.
    Guided by these principles, NeighborWorks organizations 
attempt to make units affordable without sacrificing the long-term 
economic viability of the property. In support of these principles, 
Neighborhood Reinvestment grants are provided, which help increase the 
equity position of the NeighborWorks organizations in the 
properties, thereby reducing the need for debt. Lower debt is key to 
these goals, freeing the operating budget to support higher levels of 
replacement reserves, asset management fees, and much needed services.
    The following are some observations NeighborWorks 
organizations and Neighborhood Reinvestment have found in serving 
extremely low-income families.
    Forty percent of area median income is the ``breaking point''.--In 
most markets, the fundamental economics of serving families with 
incomes under 40 percent of area median income is infeasible without 
subsidy. A housing burden of 30 percent of household income yields a 
rent payment that is less than operating expenses--those costs 
necessary to maintain the unit and keep it on-line--leaving no cash to 
repay loans.
    Market areas vary widely.--The communities served--rural, low-
income urban, and higher-income suburban, for example--vary in 
character and social dynamic, which therefore affect the property's 
market appeal and market rent. Development and operating costs vary 
greatly across markets. Designing a Federal program that fits the 
varied markets of this country and the varied needs of families is 
exceptionally difficult.
    Mixed income strategies can be used.--To house families in this 
income range some form of subsidy is essential. Theoretically, a 
property with a 100 percent capital grant for development enables 
internal cross subsidization--having units with higher rents cover the 
operating costs and debt service for those units rented to extremely 
low-income families--to some degree. This may be one solution for 
smaller properties in lower income markets, which is often the case for 
revitalization areas. Larger properties in higher income markets may 
need a smaller grant, since it can support perhaps up to 50 percent of 
the development cost of the property.
    Rental subsidy approaches serve as a solution as well.--Section 8 
vouchers and rental assistance from USDA Rural Development enable 
properties to house extremely low-income households in all markets. 
This operating subsidy over the long term also enables use of debt, 
instead of grants.
    Feasibility of older, smaller properties demands realistic 
maintenance, replacement and utility budgeting.--
NeighborWorks properties represent all types of rental 
housing--1 to 3 unit houses, small apartments, and large. They tend to 
be older (over 20 years old), and many of the properties are smaller, 
30-60 units in size. As with all existing, older stock, they carry 
higher expenses in the areas of maintenance, replacements, and 
utilities. Property--and therefore neighborhood--success depends upon 
realism in budgeting for these critical cost areas.
    When housing extremely low-income families, a modest operating 
investment in an amenity package targeting personal asset building 
supports the long-term viability of the properties.--Most extremely 
low-income families have access barriers to the ``economic ladder''. 
These barriers include night jobs, which require older children to step 
into oversight roles for younger children after school; language 
barriers; transportation; and lack of post-secondary or even complete 
high school education at the parental level. As the percentage of 
extremely low-income residents increases in a property, access to 
resident-directed, personal asset-building services becomes critical. 
In addition to advancing resident goals, these services have been shown 
to enhance the long-term viability of the property, in terms of 
improved occupancy and collections; reduced turnover; and lowered 
security and maintenance costs. These costs are built into the budgets 
of a number of the ``live properties'' in amounts which may exceed the 
``minimum levels'' allotted for in the ``model properties''. The 
experience of our NeighborWorks organizations shows that an 
additional operating expense of approximately $25 per unit per month, 
while inadequate to support an intensive welfare-to-work package, is 
adequate to maintain services important to a viable apartment community 
serving extremely low-income households.
    Short-term acquisition loans are needed.--Because the vast majority 
of NeighborWorks properties are existing, 
NeighborWorks organizations are often purchasing them to 
either prevent the loss of affordability or to reverse years of 
neglectful ownership. In either event, the seller oftentimes requires a 
90 to 120 day acquisition timeframe. In such cases, the acquisition may 
need to occur prior to all subsidy layers being in place. Short-term 
acquisition funding has been historically missing from the marketplace, 
and therefore properties that could be preserved have been lost. To 
fill this historic gap in funding, Neighborhood Reinvestment and the 
NeighborWorks network formed the Neighborhood Capital 
Corporation, which provides subordinate loans for up to 25 percent of 
the purchase price. These loans will leverage up to nine times the 
capital from the conventional lenders in the first mortgage position.
    Because of this Subcommittee's leadership on multifamily rental 
issues, we were able to nearly double our planned budget for 
multifamily activities in fiscal year 2002. Combined with the $5 
million set-aside, Neighborhood Reinvestment allocated nearly $10.4 
million to multifamily activities, 85 percent of which were distributed 
in the form of equity grants.
                    assistance for native americans
    Question. Please describe Neighborhood Reinvestment Corporation's 
activities on Indian Lands. Also, please describe the major impediments 
to homeownership you have found.
    Answer. When Neighborhood Reinvestment was created by Congress in 
1978, we primarily focused on urban areas. However, the Corporation's 
commitment to serving underserved markets and populations led us into 
Indian Country. Although the environments are different, the inability 
of low- and moderate-income individuals to gain access to homeownership 
lines of credit is similar.
    Individual NeighborWorks organizations have developed 
programs to meet the needs of local Native American populations. These 
programs are varied according to the geographic region served by an 
organization, the needs of each community, and the organization's 
capacity. At least ten NeighborWorks organizations have 
developed specific programs to assist Native Americans, though many 
more work with Native Americans on a case-by-case basis.
    The Neighborhood Reinvestment Training Institute has offered 
training opportunities for Native Americans and those working in Indian 
Country. One course, ``Developing a Homeownership Program in Indian 
Country,'' was offered at the Minneapolis Institute in October 2001. 
Numerous scholarships have also been offered for Native Americans 
attending other institute classes.
    Neighborhood Reinvestment was a catalyst behind the One Stop 
Mortgage Center Initiative in Indian Country, a 2-year study sponsored 
by HUD and Department of the Treasury that paired Federal agencies, 
financial institutions, and Tribal representatives to jointly identify 
the barriers to mortgage products and solutions to lending in Indian 
Country.
    Focusing exclusively within tribal land, the Navajo Partnership for 
Housing, in Window Rock, Arizona, was created by Neighborhood 
Reinvestment at the request of the Navajo Nation in 1996 to increase 
homeownership opportunities throughout the Navajo Nation, working in 
partnership with a variety of lending institutions and government 
agencies.
    Most NeighborWorks organizations that serve native 
communities also work with non-natives. For example, over 53 percent of 
Fairbanks Neighborhood Housing Services' clients are Alaskan native, to 
whom they provide important and culturally-relevant homebuyer education 
and housing counseling services in partnership with the local Indian 
Housing Authority. Partnerships are critical to these programs. 
Neighborhood Housing Services of Santa Fe is working with four Pueblos 
in northern New Mexico--Santa Ana, San Juan, Santo Domingo and Jemez--
to build the capacity of the tribes to offer high quality homeownership 
opportunities. In Montana, the newly formed statewide Montana 
Homeownership Network, an initiative started by Great Falls 
Neighborhood Housing Services, has included the Assiniboine and Sioux 
Tribal Enterprise Community.
    Neighborhood Reinvestment has provided financial support to Sicangu 
Enterprise Center, an affordable housing and loan provider, for the 
past 13 years. Sicangu Enterprise Center provides services to the 
Rosebud Reservation in southern South Dakota. The Rosebud Reservation 
experiences a 74 percent unemployment rate, and the average income is 
just over $10,000 per year. Housing is at such short supply that the 
Housing Authority on the Reservation maintains a waiting list of 1,000 
families.
    Native American housing and economic development issues are 
fundamentally different than affordable housing needs of other 
populations. Most native communities suffer from very weak economies, 
with few job opportunities and critically low incomes. When these 
market challenges are coupled with unfamiliarity or incompatibility 
with conventional mortgage models and lands held in trust by the Bureau 
of Indian Affairs, the housing needs and issues grow severe and 
complicated.
    Our NeighborWorks organizations also report the impact of 
non-streamlined mortgage lending process across various Federal 
agencies and Government Sponsored Enterprises. The lack of standard 
lease and loan documents presents confusion and breeds distrust and 
reluctance among uninformed buyers.
    NeighborWorks organizations are currently enhancing the 
readiness of Native Americans to become homeowners through financial 
literacy, culturally sensitive homebuyer education, credit repair and 
savings programs. However, other private and public entities need to 
contribute to these efforts in order to significantly improve the 
prospects for homeownership among Native Americans. For example, the 
home-buying process would be eased through the increased availability 
of title insurance and appraisals for Native American buyers, and 
through reducing lender transaction costs, largely a function of the 
time it takes to process loans. Finally, NeighborWorks 
organizations have witnessed the need for local municipalities to 
encourage land use planning and infrastructure development, and for 
more training and support of private non-profits and Indian Housing 
Authorities to deliver mortgage based homeownership programs.
                        section 8 homeownership
    Question. Neighborhood Reinvestment has received $15 million over 
the past 2 years to expand partnerships between NeighborWorks 
organizations and PHAs in implementing the Section 8 homeownership 
option. For fiscal year 2003, you are requesting another $10 million 
set-aside.
    Answer. Why are the NeighborWorks organizations 
participating in the Section 8 option and what value do they add? Do 
you have any suggestions, based on your early experience, to improve 
the program? Lastly, do you anticipate that after you have established 
a track record for the program that conventional lenders may provide 
financing?
    We believe that NeighborWorks organizations bring three 
competencies to this option that will help make it a long term 
success--the deep expertise in preparing families of modest means for 
the responsibilities to be homeowners, the experience of bridging the 
gap between the private market and public funding, and the dedication 
to the long term success of neighborhood revitalization and individual 
family stabilization.
    Neighborhood Reinvestment Corporation and the 
NeighborWorks network bring years of experience in helping 
families of modest means become successful long-term homeowners. For 
the past 10 years, many NeighborWorks organizations have 
consciously focused on homeownership as a strategy to further 
neighborhood revitalization. And we have done so with remarkable 
results--since 1992, the NeighborWorks network has created 
more than 53,000 homebuyers of modest means.
    Since 1998, the median income of the typical buyer through a 
NeighborWorks organization is $29,472, while the median 
income of the typical U.S. buyer is $51,642. Ninety-five percent of the 
NeighborWorks buyers are first-time buyers, over 52 percent 
are ethnic minority--compared to 19 percent by the conventional 
mortgage market--and 43 percent are female buyers.
    As a result of assisting so many underserved families, the 
NeighborWorks system brings with it a unique set of tools 
that are targeted to families similar to those found in the Section 8 
homeownership program. The Section 8 homeownership option allows the 
NeighborWorks system to apply its deep experience to lower 
income population.
    The foundation of NeighborWorks organizations' 
significant experience and success in creating homeownership 
opportunities for those of modest means is their expertise in Full-
Cycle LendingSM, which emphasizes pre- and post- purchase 
counseling. Neighborhood Reinvestment has set rigorous standards in 
terms of curriculum content and hours. NeighborWorks 
organizations also have experience with nontraditional mortgage 
products, such as USDA Rural Development and State housing finance 
agency products, and second mortgages--all of which have proven to be 
critical pieces in building successful Section 8 homeownership programs 
across the country.
    Many NeighborWorks organizations have as their mission to 
provide homeownership opportunities for low- and moderate-income 
families--often acting as a bridge between the public and private 
sector in order to meet their mission. This long-standing partnership 
approach is critical in the success of Section 8 homeownership 
programs.
    The under-girth of neighborhood revitalization and employing 
homeownership as a strategy is that of long-term stability. 
Neighborhood Reinvestment and the NeighborWorks organization 
network believe that homeownership is a successful revitalization 
strategy only if it is sustainable. As such, intensive and, at times, 
lengthy homebuyer education and counseling are necessary. We have 
developed partnerships to begin a financial literacy pilot to further 
ready potential homebuyers and strengthen the existing asset base of 
existing homeowners. We believe the Section 8 homeownership option will 
be as successful as the individual homebuyers themselves.
    A key to making successful homeowners is intensive preparation and 
counseling. In some markets NeighborWorks organizations have 
had to triple their pre-purchase education and counseling efforts, in 
comparison to the time a typical first time homebuyer requires. To the 
extent that more resources could be dedicated to sustaining counseling 
services, we believe that the need for aggressive post-purchase 
counseling will be necessary. Certainly assisting new Section 8 
homeowners maintain the asset of their new home and avoid any predatory 
lending risk is as critical as the time and effort put into the pre-
purchase efforts.
    Already the private market has been a strong and essential partner 
in this effort. In some cases, the private market is providing the 
entire mortgage and accepting the Section 8 voucher as income. In many 
cases, we have seen smaller, regional banks becomes the first lending 
institutions to participate, as they seem to be more nimble in 
responding to the unconventional mortgage structures. We hope that the 
activity from these banks will spur bigger financial institutions to 
become active partners in this program. Although the single mortgage 
model is fairly rare in our experience, it is an important step toward 
higher privatization of the financing for the Section 8 clients. Fannie 
Mae has been particularly accommodating with its guidelines, 
particularly in considering the voucher income in progressive ways. 
Freddie Mac has also been responsive to this program in looking for new 
ways for Section 8 mortgages to be originated.
                      overlapping federal programs
    Question. I am concerned about overlapping Federal programs. It is 
clear that Neighborhood Reinvestment Corporation works with the same 
communities and institutions that HUD and other Federal agencies work 
with.
    Answer. Please tell me about any informal and formal efforts to 
coordinate Federal activities in assisting distressed communities. How 
do your organizations ensure that its activities are not duplicative of 
other Federal activities?
    Neighborhood Reinvestment has worked to establish and maintain 
strong working relationships and communication with senior staff at 
HUD, Department of Agriculture, various offices within the Treasury 
Department, and other appropriate Federal agencies. Neighborhood 
Reinvestment staff also serve on various work groups, task forces and 
committees established by Federal agencies around specific issues. 
Through these communications, we are able to keep representatives of 
the appropriate Federal agencies informed of corporate directions and 
initiatives, and abreast of successes and challenges being encountered 
by its local affiliates at the community level. The Corporation also 
disseminates information to its affiliates regarding proposed statutory 
and regulatory changes that might significantly affect their work and/
or the communities they serve. The Corporation submits, as appropriate, 
written comments to various Federal agencies regarding the impact that 
proposed statutory or regulatory changes may have on our affiliated 
NeighborWorks organizations or the communities they serve.
    Other Federal activities provide important complementary support to 
the work of Neighborhood Reinvestment and its local affiliates, but the 
NeighborWorks system is the only coordinated effort of its 
type in the country.
    While it is true that like HUD, Neighborhood Reinvestment focuses 
on expanding affordable housing opportunities for low- and moderate-
income households and on community revitalization, there is in fact a 
tremendous level of difference between the mission and programmatic 
approaches of Neighborhood Reinvestment and HUD--and other Federal 
programs. Most Federal programs, particularly those available to 
nonprofit organizations, essentially fund projects or specific 
programmatic initiatives.
    Neighborhood Reinvestment does not fund freestanding projects. We 
support a national network of community-based nonprofit organizations 
through a tapestry of services. Other Federal entities may provide some 
of these services, but Neighborhood Reinvestment is the only entity 
that provides, in a systematic way:
  --A formal chartering process that requires adherence to an 
        established set of vigorous requirements regarding things as 
        diverse as board make-up, financial management and internal 
        controls, programmatic delivery and production standards, 
        quarterly reports and annual audits;
  --Comprehensive training, through the nationally recognized 
        Neighborhood Reinvestment Training Institutes and other 
        vehicles;
  --On-site technical assistance to staff and boards of local 
        NeighborWorks organizations;
  --Quality control of all NeighborWorks organizations, 
        through on-site program reviews, risk management approaches and 
        review of annual audits;
  --Connectivity among NeighborWorks organizations through 
        actualized peer-to-peer initiatives--such as the 
        NeighborWorks Campaign for Home Ownership; the Rural 
        NeighborWorks Alliance; the NeighborWorks 
        National Insurance Task Force; the NeighborWorks 
        Multifamily Initiative; the NeighborWorks Resident 
        Leadership Initiative--and through publications, a members-only 
        Web site, computer-based listserves, and other vehicles; and
  --Access to a specialized secondary market that enables 
        NeighborWorks organizations to sell loans that they 
        have made from their own revolving loan funds.
    Woven throughout the various organizational and programmatic 
tactics supported by Neighborhood Reinvestment is a steadfast belief 
that approaches that dictate to communities, or decide what is in the 
best interest of communities, or attempt to ``parachute'' help into 
communities, are inevitably doomed to failure. The Corporation firmly 
believes that community residents, armed with appropriate information 
and tools, are the only ones who truly have the ability to change their 
neighborhoods.
    By statute, our Board of Directors includes representatives from 
the five Federal banking regulators--Board of Governors of the Federal 
Reserve System, Comptroller of the Currency, National Credit Union 
Administration, Federal Deposit Insurance Corporation, and Office of 
Thrift Supervision--and HUD. This relationship uniquely situates 
Neighborhood Reinvestment to act as a bridge between the all-too-
separate worlds of housing and the financial services industry, as well 
as between government, the for-profit and nonprofit environments. For 
example, a recent partnership with the Federal Deposit Insurance 
Corporation resulted in the NeighborWorks network using the 
FDIC's Money Smart financial literacy program. This curriculum will 
help train adult educators and teach money management skills to 
thousands of people. In addition, our work with HUD on the Section 8 
homeownership option allowed for coordination of efforts, and created a 
delivery system for advancing the homeownership option.
    As a result of these and other efforts, no organization can match 
the demonstrated track record of Neighborhood Reinvestment and its 
affiliates when it comes to leveraging Federal resources--and 
attracting private capital in support of distressed urban, suburban and 
rural communities across America.
    After more than two decades of experience, the 
NeighborWorks network now serves approximately 2,100 urban, 
suburban and rural communities across America--and is uniquely 
positioned to not only continue to serve as a laboratory, but also 
serve as a fast track implementation testing ground for new approaches.
    Further, the Corporation has always believed its public 
responsibility goes far beyond the direct services we provide to the 
NeighborWorks network--and as such, we have always attempted 
to share our learnings and experiences to support and strengthen the 
broader housing and community development field.
                               oversight
    Question. Ms. Lazar, could you tell us how Neighborhood 
Reinvestment Corporation is able to provide adequate oversight and 
ensure accountability within the NeighborWorks system?
    Could you also discuss what sort of risk-management system you have 
in place to monitor your affiliates?
    Answer. We are strongly committed to promoting and maintaining a 
network of productive, well-managed, nonprofit community development 
corporations that deliver high quality services responsive to local 
needs and have a measurable impact on communities. One of the tools 
employed in doing this is a uniform program review and assessment 
system. The purposes of this system are to assist in:
  --Enhancing the performance and productivity of network 
        organizations;
  --Assessing the health and risk-taking capacity of individual network 
        organizations and the network as a whole;
  --Determining organizational compliance with Neighborhood 
        Reinvestment Corporation, Neighborhood Housing Services of 
        America and related contract and network standards;
  --Evaluating whether organizations are using Federal funding from 
        Neighborhood Reinvestment appropriately; and
  --Assessing newly developed or potential affiliate organizations to 
        ensure their capacity to meet NeighborWorks network 
        membership standards and performance objectives.
    The heart of the system is a set of performance standards used to 
assess a NeighborWorks organization's health and how well it 
manages risk. Recognized by the PROMPTSM acronym, 
organizations are evaluated using performance standards in eight areas:
P--PLANNING
    How well does the organization's mission accord with Neighborhood 
Reinvestment's and to what degree does strategic and business planning 
support this mission?
R--RESOURCE DEVELOPMENT
    Does the organization have sufficient operating and capital 
resources to support organizational needs and an active oversight 
process to monitor fund-raising progress and the status of the budget?
O--ORGANIZATIONAL OVERSIGHT
    How well is the Board meeting its fiduciary responsibility in 
overseeing an organization's operations, its finances, its production 
and contract management, and its planning? How well is resident 
participation enabled through the Board?
M--MANAGEMENT
    Financial Management.--How well does the accounting and financial 
management system provide current and accurate records of the 
organization? Does the Board receive timely financial reports that are 
understandable?
    Contract Management.--Is the organization meeting its contractual 
obligations with funders including production and reporting and how 
satisfied are funders with the organization's performance?
    Personnel Management.--Are there legally sound and updated 
personnel policies in place that are followed? What is the status of 
the performance appraisal system and is the executive director 
regularly appraised?
P--PRODUCTION/PROGRAM SERVICES
    How congruent is production and provision of services with the 
wants of the community and is the level of production consistent with 
the resources available to the organization?
T--TECHNICAL OPERATING SYSTEMS
    Are standard operating procedures and practices consistent with 
legal and funding source requirements and do they promote an effective 
and efficient delivery of services?
    Through a system of continuous monitoring, each 
NeighborWorks organization is subject to an annual risk 
assessment through either off-site or on-site program reviews.
    Off-site reviews involve the collection and analysis of all data 
available about the organization from within Neighborhood Reinvestment 
and from Neighborhood Housing Services of America. Data for each 
organization is analyzed quarterly in terms of eight risk areas. If a 
risk alert is identified, we determine whether the organization has the 
capacity to manage the risk. In cases where more information is needed 
or where the risk is deemed to be serious, an on-site review is 
scheduled.
    On-site reviews of organizations are conducted in addition to off-
site reviews for approximately two-fifths of the 
NeighborWorks organizations each year. There are several 
conditions that would lead to an on-site review. An on-site review may 
be an outcome of an off-site review where serious risk was discovered. 
All new applicants for membership are evaluated on-site before being 
offered a charter as a NeighborWorks member. An on-site 
membership review is conducted for new network members within 2 years 
of chartering.
    A typical on-site review involves three phases: preparing for a 
review, conducting the review, and reporting review results. In 
preparation for a review, the review team evaluates documents that have 
been requested from the organization, analyzes all available data 
within Neighborhood Reinvestment about the organization, and reviews 
outcomes from the previous on-site review. The actual site-visit 
involves typically one to three reviewers depending on the size and 
complexity of the organization. Most visits last three days and the 
review team employs interview, documentation, and observation 
techniques in assessing capacity and risk management in the 
organization. Finally, the review team prepares a site-visit profile 
that will be used by Neighborhood Reinvestment's Risk Management Unit 
in its continuous risk monitoring system until the next on-site review.
    Question. When you identify an organization as ``troubled,'' what 
actions do you take?
    Answer. For a complete response to how we address troubled 
organizations, please see our response to the Chairman on page 8.
    Question. I understand that you revoked the NHS of St. Joseph, 
Missouri. What happened to them?
    Answer. Neighborhood Housing Services of St. Joseph has recorded 
many accomplishments over its 10-year history. It has done much to 
revitalize neighborhoods and offer homeownership opportunities to an 
under-served segment of the community. It can be proud of what it has 
created.
    However, the last few years have been extremely difficult for this 
organization. The City of St. Joseph withdrew its financial support of 
the Neighborhood Housing Services in early 1999. Loss of a major 
funding partner can be a devastating blow to an organization working in 
a relatively small community. Along with this loss of funding came a 
continuing decrease in support from the insurance and lending 
institutions.
    The organization had a number of directors who had served on the 
Board for many years. Their dedication allowed Neighborhood Housing 
Services of St. Joseph to significantly improve neighborhoods over the 
years. In spite of their fervor, the Board was unable to pull together 
and successfully compete for additional resources to fill the void left 
by the City's withdrawal of support.
    Faced with seemingly overwhelming issues, the Board numbers 
continued to decrease to its present seven directors. Reduced revenues 
resulted in elimination of staff positions and, with them, significant 
reduction in programs and services. Neighborhood Housing Services of 
St. Joseph no longer provides lending services, nor does it have the 
capacity to offer post-purchase counseling or foreclosure prevention.
    Further, with a soft real estate market, the organization found 
itself in a situation in which it can no longer be assured of 
recapturing its investment in properties it purchased with the intent 
of rehabbing for resale. These uninhabitable properties are generating 
no income, but are a continuing drain on the organization's limited 
resources because of required maintenance and security.
    Our last program review concluded the following:
  --Neighborhood Housing Services of St. Joseph incurred a major budget 
        deficit last year and lacks the capacity to provide adequate 
        systems to monitor, control and resolve the impact on the 
        organization.
  --The Board's financial oversight and decision-making practices do 
        not ensure compliance with their fiduciary responsibility to 
        safeguard the organization's assets.
  --The organization can no longer pay staff salaries, and medical 
        benefits were withdrawn 2 months ago.
  --Neighborhood Housing Services of St. Joseph no longer has the staff 
        capacity or funds to ensure quality delivery of program 
        services. There is no capacity/procedures to adequately mange 
        rental/lease purchase programs.
    Based on the findings of the review, it is our recommendation that 
the Board work quickly to dissolve Neighborhood Housing Services of St. 
Joseph. It is not an easy decision to make, but the Board can be 
assured that Neighborhood Reinvestment will work closely with them in 
this process. To continue to operate this agency with full awareness of 
its severe funding deficit only increases the continuing liability to 
the organization. The Board can no longer assure the quality of 
programs and services that the organization is providing. The Board 
also can no longer assure accurate and proper reporting or tracking of 
the organization's assets.
                   george knight scholarship program
    Question. Two years ago, we provided $2.5 million to endow a 
``George Knight Scholarship Fund,'' named after our good friend and 
former Executive Director, George Knight. This fund was established to 
allow local leaders, community developers, and residents to receive 
training from your training institute.
    Can you give us an update on this program? Is there a large demand 
for this program?
    Answer. The George Knight Endowment Fund has begun to fill a deep 
need within the community development field--that of providing 
financial support to worthy community development professionals who 
might otherwise not be able to attend the Neighborhood Reinvestment 
Training Institute. Since Congress' initial investment of $2.5 million 
is used as an endowment, the George Knight Endowment Fund will be able 
to provide access to high-quality training for years to come.
    To date, George Knight scholarships have been awarded to 242 
Neighborhood Reinvestment Training Institute participants for a total 
$134,612. As indicated in the chart below, the number of awards granted 
decreased for the Minneapolis and San Francisco Training Institutes 
when interest earnings on the endowment declined.

                      GEORGE KNIGHT ENDOWMENT FUND ACTIVITY SUMMARY--APRIL 2001-APRIL 2002
----------------------------------------------------------------------------------------------------------------
                                                                                    Scholarship
 Neighborhood Reinvestment Training Institute                 Dates                 Recipients        Awards
----------------------------------------------------------------------------------------------------------------
Chicago 2001..................................  April 15-20.....................              44         $22,534
Washington, DC 2001...........................  August 19-24....................              54          32,925
Minneapolis 2001..............................  October 14-19...................              23          14,770
San Francisco 2001............................  December 9-14...................              21          11,293
Atlanta 2002..................................  February 17-22..................              38          17,540
Chicago 2002..................................  April 2-6.......................              62           35,10
                                                                                 -------------------------------
      Total...................................  ................................             242         134,162
----------------------------------------------------------------------------------------------------------------

    As a result of Congress' investment, we have secured $1 million 
from Washington Mutual to capitalize a similar scholarship endowment.
                             elderly needs
    Question. Ms. Lazar, there are tremendous housing needs for the 
elderly and disabled populations in this country. In St. Louis, for 
example, there is a significant shortage of affordable housing that 
meets ADA requirements.
    What are Neighborhood Reinvestment Corporation and its network 
doing to address these needs?
    Answer. For a complete response, please see our answer to the 
Chairman on page 13.
                              cdc mergers
    Question. I am excited about the merger of the St. Louis NHS and 
Beyond Housing. Not only will this merger combine the talents and 
skills of these successful organizations, it will enable them to take 
on larger scale projects.
    What are your views about mergers? Why are mergers important?
    Answer. We have encouraged and assisted an increasing number of 
mergers in our network over the last 5 years. There is no question that 
the proliferation of nonprofit community-based development 
organizations has led, in some instances, to potential duplication of 
effort and stretched resources. There are also instances, like St. 
Louis, where two strong organizations discover new opportunities by 
joining hands. Neighborhood Reinvestment is committed to supporting 
local solutions and local governance. However, we are also committed to 
deploying our precious resources as effectively and efficiently as 
possible. We will continue to respond very positively to inquiries 
about merger partners and we will continue to provide technical 
assistance, evaluation and support for member organizations who seek to 
create additional strength, health or efficiency through mergers. I 
should note that the amount of time, politics and negotiations involved 
in merger activities can never be underestimated.
                              land trusts
    Question. Ms. Lazar, one impediment to developing affordable 
housing is the cost of acquiring land. I am interested in the use of 
land trusts.
    Do you see this as a viable tool for developing and maintaining 
affordable housing? To what extent is Neighborhood Reinvestment 
Corporation promoting the creation of land trusts?
    Answer. While Neighborhood Reinvestment has not promoted the 
creation of land trusts as an affordable housing tool, we have actively 
supported applications from non-profit land trusts seeking to become 
network members. Land trusts appear to be most abundant on the east and 
west coasts. Several of the members of our network in the State of 
Vermont are land trusts, including one of our premiere Section 8 to 
Homeownership pilot sites, the Burlington Community Land Trust. 
Ultimately, the land trust concept appears to be suitable in some 
geographic locations and less appealing in others.
    The Neighborhood Reinvestment Training Institute offers a course on 
``Community Land Trusts: A Tool for Neighborhood Revitalization.'' The 
course describes how community land trusts combine affordable private 
home ownership with community ownership of land to help turn 
deteriorating neighborhoods into neighborhoods of choice and help 
prevent displacement of low-income residents due to gentrification. It 
educates participants on the creation of a land trust, how land trusts 
can be used as part of a comprehensive neighborhood revitalization 
strategy, and how a land trust seeks to balance the seemingly competing 
goals of providing homeowners with a fair return on their housing 
investment while ensuring that housing is kept permanently affordable 
for future occupants.
                          resident involvement
    Question. Neighborhood Reinvestment has always had a focus on 
developing resident leaders as a strategy that leads to neighborhood 
revitalization.
    Can you tell us how you engage residents and develop leaders? Why 
is this an important component for your work?
    Answer. Most community development efforts in this country grew out 
of problem-solving efforts by neighborhood residents at the local 
level. Early in this movement, resident leaders were regularly in the 
driver's seat in determining priorities and strategies for revitalizing 
their neighborhoods. As time passed and community development 
activities became more sophisticated, things began to change. Resident 
leaders on community Boards began to disappear to be replaced by 
professionals with finance, housing development and legal backgrounds. 
Staff recruitment that had once emphasized leadership development 
skills and neighborhood organizing experience, now focused on 
practitioners with the same finance and development skill sought for 
Boards of Directors. And as funders have increasingly emphasized unit 
production as a primary measure of organizational effectiveness, 
technical skill and expertise at the Board and staff level has been in 
even greater demand. The debate about the dwindling number of resident-
led organizations has been fueled by the increased complexity and 
attendant risks that characterize community development activity and 
the honest questions that have been raised about the kind of skill and 
oversight needed at the Board level to manage these sophisticated 
institutions.
    Resident leaders are developed through a variety of strategies:
  --Many NeighborWorks organizations incorporate resident 
        leadership development directly into their staffing and 
        business plans.
  --Our Community Leadership Institutes provide training for resident 
        leaders. Residents return prepared for deeper leadership roles 
        in local NeighborWorks organizations.
  --Our Resident Leadership Initiative is building resources to support 
        community leadership development at the wider neighborhood 
        level, bringing both homeowners and renters into community 
        leadership forums.
  --The Multifamily Initiative provides specialized resident leadership 
        development resources, to ensure that rental residents are 
        trained in asset management, so that they can be knowledgeable 
        participants in Boards, committees, and resident councils.
    Neighborhood Reinvestment grew out of a resident-led effort--one 
that started with residents, and grew to include public and private 
partnerships. This three pronged partnership ensures that the products 
and outcomes remain firmly grounded in and accountable to a legitimate 
customer base. The credibility of our work rests on our commitment to 
insuring that resident leaders are at the heart of the work of our 
network.
                                 ______
                                 

Questions Submitted to the Community Development Financial Institutions 
                                  Fund

           Questions Submitted by Senator Barbara A. Mikulski

    Question. What criteria do you use for certifying new CDFIs?
    Answer. The CDFI certification criteria are prescribed in the 
Fund's regulations and application materials. There are six criteria: 
(1) having a primary mission of community development; (2) serving an 
eligible Target Market; \1\ (3) being a financing entity; (4) being 
accountable to the Target Market; \2\ (5) providing development 
services (training or technical assistance) to borrowers and potential 
borrowers; (6) and being a non-governmental entity. CDFI certification 
does not entail a competitive process, applicants for certification are 
deemed to either meet the criteria or not.
---------------------------------------------------------------------------
    \1\ Target Market is defined as an Investment Area(s) and/or a 
Targeted Population(s).
    \2\ Market Accountability is defined as having area and/or 
population representation on its governing board or otherwise.
---------------------------------------------------------------------------
    Question. What is the process for certification?
    Answer. An entity may apply for CDFI certification to the Fund at 
any time or it may do so in conjunction to applying for funding under 
the CDFI Program. Once a certification application is received, it is 
first reviewed for completeness. When deemed to be complete, a staff 
reviewer determines whether the applicant meets the six tests described 
above. The reviewer makes a certification recommendation, which is then 
reviewed for approval by a Program Manager. If the applicant is 
certified, it receives a letter that describes its Target Market and 
the end of the term of the certification (3 years from date of 
approval). If not certified, the applicant is sent a letter describing 
which of the tests it did not pass. CDFIs must be re-certified every 3 
years. As of February 15, 2002, the Fund has certified 553 CDFIs in all 
50 states, DC, USVI, and PR.
    Question. How do you monitor the performance of CDFIs? Has the Fund 
ever revoked the certification of a CDFI?
    Answer. Annual Reporting.--The Fund requires awardees to submit 
performance and financial reports on a semi-annual and annual basis. 
Performance reports indicates how well an Awardee is achieving the 
goals and measures that it negotiated with the Fund, as incorporated in 
its assistance agreement. Financial reports demonstrate the fiscal 
health of the overall operation of the Awardee organization and/or its 
affiliates. The Compliance Monitoring and Evaluation (CME) staff of the 
Fund reviews these reports.
    Reports are reviewed and awardees rated as compliant, on 
``compliant watch'', non-compliant but not resulting in an event of 
default, or non-compliant. Awardees are automatically deemed 
noncompliant if they fail to submit required reports by the deadlines 
stated in their Assistance Agreements.
    If an Awardee is noncompliant under the terms and conditions of its 
Assistance Agreement, CME staff will contact it to discuss the 
noncompliance and its plans for improvement; CME staff then prepares 
and presents its recommendations to the Fund's Portfolio Committee. 
Corrective actions approved by the Portfolio Committee can range from 
an amendment of the assistance agreement so as to adjust for unforeseen 
conditions, to de-obligation of undisbursed funds, to (in the most 
serious cases) a demand that award funds be returned to the Federal 
Government.
    On-site Reviews.--In the very near future, the CME unit will begin 
conducting on-site visits to examine certain organizations' operations 
more closely, and to ensure their compliance with the CDFI Fund's 
requirements. Organizations will be selected for on-site visits through 
a risk assessment process, with those deemed at higher risk being 
examined first. Some on-site visits are planned to organizations that 
are not considered at higher risk in order to balance the portfolio of 
on-site visits and to establish baseline procedures.
    Program Suspensions.--In certain cases, the Fund has revoked the 
certification of CDFIs. A CDFI certification can be revoked when the 
Fund is notified of material changes in an organization, meaning that 
the entity no longer satisfies all six CDFI certification criteria. The 
manner in which the Fund learns of such changes occurs in several ways, 
including notification by a CDFI's regulator, notification by the CDFI 
itself, notification by an unrelated third party, or upon the Fund's 
review of reports submitted annually by the CDFI.
    Performance Measures.--The Fund is reviewing its current 
methodology for developing performance goals and measures to 
incorporate a more quantitative analysis of the Awardee's community 
development impact, solvency, asset quality and management capacity 
(PLUM \3\). Analysis is being conducted to identify peer groups and 
benchmark data. Based on this information, acceptable levels of 
achievement will be determined and applied to awardees to achieve the 
following: identify CDFI Fund portfolio risk and to identify CDFIs that 
have achieved higher success in fulfilling its community development 
mission. Based on this information, the Fund can conduct targeted 
analysis of its portfolio, highlight best practices that can be shared 
with the CDFI field, and better assess CDFIs' abilities to expand or 
stabilize underserved market areas.
---------------------------------------------------------------------------
    \3\ PLUM is defined to include P (performance effectiveness/
community impact), L (leverage, liquidity, solvency), U (underwriting), 
and M (management).
---------------------------------------------------------------------------
    Yes, the Fund has revoked certification status of a CDFI. As the 
Fund is notified of material changes in a certified CDFI's 
organization, material enough so that the entity no longer satisfies 
all six certification criteria, certification statuses are revoked.
    Question. What strategies have CDFIs used in preventing predatory 
lending?
    Answer. CDFIs have been among the leaders in bringing attention to 
harm caused by predatory lending. For example, Self-Help, a CDFI 
serving North Carolina, was instrumental in documenting the results of 
predatory practices in that state. It measured the ``equity-stripping'' 
effect of predatory lending. An outcome of its efforts was the 
pioneering legislation passed by the state legislature in 1999. That 
legislation decreased the attractiveness of several predatory 
practices.
    Other CDFIs have promoted public policies to reduce the corrosive 
effects of predatory lending on individuals and on neighborhood 
revitalization efforts. The Reinvestment Fund, a Philadelphia-based 
CDFI, launched a predatory lending strategy in that city in 2000; a 
year later the city council passed an anti-predatory lending ordinance. 
CDFIs also provide needed financial counseling to lower income 
households (which is one of the six requirements to be a certified 
CDFI). Knowledge gained from such counseling arms lower-income 
borrowers so that they are not victimized by predatory lending 
practices.
    Question. What strategies have CDFIs used to help victims of 
predatory lending?
    Answer. CDFIs, by definition, engage in consumer-friendly lending. 
They help provide low cost alternatives for financial services. The 
activities of a successful CDFI demonstrate that it is possible to lend 
in a manner that is not abusive. Those CDFIs that lend to individuals 
(rather than solely to businesses) are able to design loan products or 
financial services that either help correct for the damage done by a 
predatory lender or can demonstrate alternatives to abusive lending in 
low-income markets. For example, though ``payday loans'' can service a 
short-term financial need of some customers, Northside Federal Credit 
Union in Chicago developed an alternative to the ``payday loan.'' It 
provides short term, small signature loans to its members that allow 
ready access to needed cash but with interest rates and terms that are 
manageable.
    The Fund's awards have been used by CDFIs to capitalize anti-
predatory loan products designed to help victims of abusive practices. 
NHS of New York is an example of a Fund Awardee whose loan product will 
wrap in a single re-financing first and subordinated mortgage debt, as 
well as consumer debt. This is considered a risky loan in that it 
generally requires providing a loan well in excess of the value of the 
underlying collateral (the house). Without an investment source like 
the CDFI Fund, this entity may not have had sufficient resources to 
launch the product or meet demand without extensive long-term fund-
raising at the local level.
    The Reinvestment Fund, a Philadelphia-based CDFI, and the 
Neighborhood Lending Services, a Chicago CDFI, also have developed 
similar products to assist predatory loan victims. Such loans refinance 
predatory loans and are coupled with intensive counseling. 
Additionally, the work of Self Help (noted above) is creating a large-
scale alternative to predatory loans. It has developed a secondary 
market for non-conforming mortgage loans, thus allowing low-wealth 
households to buy homes with conventional financial institutions 
providing financing, as opposed to meeting interest in ownership 
through the services of sub-prime lenders. Self-Help used the Fund's 
award to capitalize this effort and included a requirement that banks 
from which Self-Help purchased loans had to use the proceeds from these 
loan sales to continue making similar loans serving the low-income, 
first-time homebuyers.
    Through the BEA Program the conventional financial institutions are 
encouraged to provide products and services that would create 
constructive alternates to predatory lenders. For example the BEA 
Program encourages banks to start First Account programs and adding 
ATMs or branches in underserved neighborhoods. Increased access to such 
services foster competition and provides low-cost alternatives to 
compete effectively with check-cashers or payday lenders. Additionally 
banks are rewarded for increased mortgage lending in lower income 
areas, another alternative to non-regulated predatory lenders.
    Question. Do CDFIs ever work with FHA's inventory? Is there a role 
for CDFIs in property disposition?
    Answer. CDFIs are lenders; many CDFIs lend to developers of housing 
that is affordable to lower-income households. Many CDFIs have lent to 
non-profit developers of housing that work with FHA inventory, either 
single family or multi-family. CDFIs can make logical partners for such 
housing developers. Many CDFIs understand working with troubled 
properties and in risky markets. Developers of FHA inventory often need 
such lenders. Further, CDFIs can provide debt with flexible terms, 
allowing for lease-up or marketing periods that may be longer than 
would typically be available for housing targeted to a more affluent 
market or terms more flexible than can be provided by a traditional 
lender.
    Question. Do CDFIs help in restructuring bad loans? If so, what 
percentage of these was FHA insured?
    Answer. CDFIs often serve the most difficult to underwrite 
customers. The provision of development services (credit counseling), 
required in order to be certified as a CDFI, helps to keep these loans 
from going bad. On occasion, a CDFI may need to re-structure its own 
loans, depending on the borrower and its overall portfolio policies and 
procedures. There are only a handful of CDFIs that are FHA-insured 
lenders. Most CDFI mortgage lending is in the form of second, or 
subordinated, mortgages. The first mortgage is typically the one with 
mortgage insurance. The number of CDFI-financed deals that have had 
some FHA lending is not known. The Fund anticipates collecting loan 
level data in the near future. However, until that form of data 
collection is attained, such information is anecdotal. More 
importantly, a CDFI is often the type of lender that would be turned to 
in order to help re-finance a property if the original financing was 
inappropriate or the borrower faced potential foreclosure.
    Question. Explain the timing of the New Markets Tax Credits--when 
will they hit the street?
    Answer. To date, the NMTC Program has achieved a series of critical 
milestones. We successfully launched the allocation application process 
that introduces the New Markets Tax Credit (NMTC) Program on June 7, 
2002. The Fund anticipates that selection of applicants and the making 
of allocations will occur in early winter 2002, possibly allowing 
Allocatees time to secure investor funding and/or make investments in 
2002 with the proceeds of investment in CDEs.
    On April 20, 2001, the Fund issued guidance (which was published in 
the Federal Register on May 1, 2001 at 66 FR 21846) that provided 
general programmatic information, as required by the NMTC Program 
statute. On December 20, 2001, the Fund issued additional guidance in 
the Federal Register (at 66 FR 65806), which provided specific guidance 
on how an entity may apply to be certified as a ``community development 
entity'' (CDE). On December 26, 2001, the Internal Revenue Service 
(IRS) published temporary regulations in the Federal Register (at 66 FR 
66307) that provide guidance to taxpayers claiming New Markets Tax 
Credits (NMTCs). Also, on December 26, 2001, the Fund made CDE 
Certification Applications available through its website, 
www.cdfifund.gov.
    Question. What activities will the New Markets Tax Credits finance? 
How are those activities different from what the CDFI Fund supports?
    Answer. The NMTC Program permits taxpayers to claim a credit 
against Federal income taxes for Qualified Equity Investments (QEIs) 
made to acquire stock or a capital interest in designated Community 
Development Entities (CDEs). Designated CDEs must use substantially all 
of the proceeds from the QEIs to make Qualified Low Income Community 
Investments (QLICIs). The tax credit provided to the investor (either 
the original holder or a subsequent purchaser) is claimed over a 7-year 
credit allowance period. In each of the first 3 years, the investor 
receives a tax credit equal to 5 percent of the total amount paid for 
the stock or capital interest at the time of purchase. For the final 4 
years, the value of the tax credit is 6 percent annually. The Fund 
certifies CDEs on an ongoing basis, and will allocate NMTCs annually to 
CDEs through a competitive application process.
    The CDFI Program, in contrast, helps to capitalize community 
development lenders (CDFIs) through direct investments from the Fund. 
These investments, which take the form of grants, loans, equity 
investments and deposits, are made to qualified institutions that 
provide access to credit and capital in economically distressed and 
underserved markets. We believe that by providing financial investments 
and technical assistance support to CDFIs, they in turn will better 
serve their communities. Providing financial and other services in 
these communities helps low-income families to build wealth (through 
savings and use of financial services less costly than provided by non-
regulated entities), increase economic self-sufficiency, and reduce 
dependence on transfer payments.
    Question. What effect will this multi-billion dollar program have 
on the CDFI fund office? Do you have enough staff to adequately oversee 
this program in addition to the fund?
    Answer. The cost to administer the New Markets Tax Credit Program 
is currently 24 percent of the Fund's administrative budget. It is 
anticipated that with full implementation of this program, from 
application review to NMTC allocation to compliance monitoring, the 
Fund's administrative costs to support NMTC Program will increase. The 
new FTEs requested in the fiscal year 2003 budget request are earmarked 
for the NMTC Program and additional administrative support staff. We 
believe that we have adequate resources to administer both the NMTC 
Program and our award programs through fiscal year 2003.
    Question. Will your management of the Tax Credits take away from 
your focus on managing the CDFI core programs?
    Answer. No. The Fund envisions that the NMTC Program will 
complement the Fund's existing programs that provide direct funds to 
community development financial institutions.
    Question. What steps is the CDFI Fund taking to improve its outcome 
measures and data collection?
    Answer. Our objective is to show how the investments we make in 
CDFIs, and the loans they make in turn, fill gaps in financial services 
for distressed areas and populations. Our program performance measures 
will show the impact CDFIs' loans made to stabilize or improve our 
Nation's underserved communities and target populations through 
community development financing activities.
    The Fund is reviewing its current methodology for developing 
performance goals and measures to incorporate a more quantitative 
analysis of the Awardee's community development impact (improvement in 
community conditions), and it's financial capacity to sustain its 
lending activities--solvency, asset quality and management capacity.
    Question. Do the grants and loans provided by the CDFI fund serve a 
unique purpose? How are they different from what is available through 
the Small Business Administration? Through Community Development Block 
Grants?
    Answer. Yes, the awards administered by the Fund serve a unique 
purpose. Investments by the Fund serve a special purpose in that they 
help to capitalize specialized loan funds that fill voids in the 
conventional capital markets. Such loan funds must serve economically 
distressed places or underserved populations. CDFIs serve a wide array 
of such communities through a wide array of financial services. SBA's 
products generally are for a range of small business loan services with 
limited risk profiles for borrowers than a small business loan fund may 
provide.
    CDFIs may lend in ways that banks, thrifts and other conventional 
lenders find too risky or unprofitable. They may lend in order to make 
major projects happen, such as by providing development loans to non-
profit organizations; they may take subordinate (2nd or 3rd) loan 
positions to convince a bank to lend to bring a major grocery store or 
medical center into a distressed area. These institutions may take the 
first credit risk to ensure that a bank's loan meets safe and sound 
underwriting. CDFIs are distinct from other financial institutions in 
that CDFIs may provide training and technical assistance (development 
services) to borrowers and potential borrowers. This is one way that 
CDFIs build markets where conventional lenders do not see opportunity. 
Support from the Fund may allow a CDFI to absorb the cost of 
development services delivery and innovation that it could not fully 
recover through its lending operations.
    The CDBG Program provides local governments with grants, which they 
design, localized programs to meet needs of their low-income 
populations. It appears that the majority of HUD's CDBG funds are used 
for infrastructure redevelopment (such as installation of water and 
sewer lines and/or road and street improvements). Grants to low-income 
residents may be provided for housing development and rehabilitation. 
These grants sometimes are used in conjunction with loans from CDFIs 
and may be used to reduce the costs of meeting standard zoning 
requirements so as to make homeownership affordable to low-income 
people. A CDFI may make a loan to a non-profit affordable housing 
developer to help meet the project feasibility requirements for a CDBG 
grant or qualify for conventional financing from a traditional lending 
institution. CDFIs can help communities underwrite small-scale or 
scattered site affordable housing units, thus helping to improve and 
increase the Nation's stock of affordable and decent housing. 
Therefore, the capital provided by the Fund to CDFIs, which may in turn 
be used to make loans to non-profit housing developers, and the CDBG 
grants that developers may receive from HUD are in fact two 
complementary efforts that in many cases result in an increase of the 
Nation's stock of decent and affordable housing. CDFIs democratize the 
availability of credit and capital to scores of underserved communities 
and populations.
    Question. What community development activities does the CDFI Fund 
most often fund or underwrite? Please break out the activities by type, 
and grant/loan amount.
    Answer. As the following table shows, in terms of both number and 
dollar amount of awards, the Fund supports CDFIs that engage in 
housing/community facilities most frequently, followed by those engaged 
in business lending and consumer lending/financial services (the latter 
includes credit unions and banks). CDFI Intermediaries, the fourth 
category, support all types of CDFIs. Venture Capital CDFIs provide 
equity to businesses. Multi-bank CDCs are primarily business lenders, 
though some are housing lenders.

               CDFI FUND AWARDS BY TYPE OF AWARDEE--1996-2001 CORE, INTERMEDIARY, & SECA/TA AWARDS
----------------------------------------------------------------------------------------------------------------
                                                                       Award Amounts          Number of Awards
                                                                ------------------------------------------------
          Type of Awardee by Primary Business Activity                            Percent               Percent
                                                                     Dollars      of Total   Numbers    of Total
----------------------------------------------------------------------------------------------------------------
Housing/Facilities.............................................    $152,294,696         42        210         32
Business.......................................................      76,237,083         21        177         27
Consumer Lending and Financial Services........................      49,800,801         14        130         20
CDFI Intermediary..............................................      25,027,201          7         20          3
Venture Capital................................................      20,664,301          6         23          3
Microenterprise................................................      18,748,642          5         67         10
Multi-Bank CDC.................................................      16,490,987          5         22          3
                                                                ------------------------------------------------
      Total....................................................     359,263,711        100        649        100
----------------------------------------------------------------------------------------------------------------

    Question. What percentage of the loans that originate from the CDFI 
Fund go into default?
    Answer. To date, no CDFIs have defaulted on loans from the Fund. A 
couple of CDFI borrowers have been late on interest payments but all 
have otherwise met the terms and conditions of their debt instruments 
with the Fund.
    Question. Do private banks get CRA credit for investments in low-
income communities that are also incentivized by Bank Enterprise 
Awards? Please document some cases in which this could happen.
    Answer. The BEA Program is intended to encourage FDIC-insured 
depository institutions to go beyond just serving the ``convenience and 
needs of the communities in which they operate'' (as called for by the 
CRA). The BEA Program provides an incentive to banks and thrifts to 
serve areas or people that the institution may not necessarily have to 
serve in order to receive a Satisfactory CRA rating. The BEA Program 
award should therefore be seen as a complement to the CRA activities of 
an institution.
    Generally, the types of activities that would qualify for a BEA 
Program award would also be viewed favorably by the regulatory agency 
in developing the CRA rating for the institution--provided the 
activities occurred within the bank's CRA Assessment Area.
    For example, take a bank whose CRA Assessment Area is the 
Washington DC metropolitan area. This bank could apply for a BEA 
Program award for increasing its lending within the Anacostia area 
(which qualifies as a BEA Distressed Community). In the current funding 
environment, the bank would have to increase its activities 
significantly to increase the probability of receiving an award. (When 
the Fund lacks sufficient resources to fund all qualified activities 
for which BEA applications are submitted, it must follow statutorily 
prescribed priorities, which include ranking applicants by the ratio of 
activity level to asset size. Thus, the greater the activity level, the 
greater the probability of an award.)
    These activities--because they are within a low-income community--
would likely also receive positive CRA consideration. The regulator, in 
developing a CRA rating for the bank, would view these activities in 
the context of the bank's overall operations. Because the regulator is 
looking for a reasonable level of activity within the low-income areas 
of the Assessment Area, there is no incentive to maximize or exceed a 
certain the level of investment activity. The BEA Program regulations, 
on the other hand, encourage the institution to provide more lending in 
the Distressed Community than required for ``Satisfactory'' ratings 
under CRA. Moreover, areas must pass a more stringent level of distress 
to qualify for the BEA Program (which considers poverty rate and 
unemployment rate of the area) than under the CRA regulations (which 
just consider income level of the census tract). Financial institutions 
participating in the BEA Program manage some of the Nation's best CRA 
programs, as nearly one-third of BEA Program participants have received 
``Outstanding'' ratings under CRA. According to bank regulators, only 
10 percent of regulated institutions receive ``Outstanding'' CRA 
ratings.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

                 rural communities and the bea program
    Question. The CDFI Fund has identified several options that may 
increase the flow of CDFI Program and BEA Program funding to rural 
areas. Your testimony notes that within the BEA program authorizing 
language would be needed to alter the definition of ``distressed 
areas'' which currently only applies to communities with a population 
of 4,000 or greater.
    Could you provide me with a breakdown of obstacles you've 
determined would need to be address in authorizing legislation? Second: 
Could you provide us with any examples of administrative and regulatory 
modifications you intend to implement to better serve rural 
communities?
    Answer. The statutorily prescribed definition of ``Distressed 
Community'' under the BEA Program is an obstacle and disadvantages 
rural communities. First, rural areas have difficulty meeting the 
program's 30 percent poverty requirement because populations in rural 
areas are often scattered, with Low-Income households mixed with 
households with higher incomes, and have fewer concentrations of 
poverty than is often found in urban areas. Second, over 40 percent of 
the Nation's rural population resides in communities with fewer than 
2,500 people. These communities are too small to meet the BEA Program's 
statutorily required population of 4,000 people in metropolitan areas. 
Further, in non-metropolitan counties there is a minimum population 
requirement of 1,000 people in a qualifying census tract. This figure 
also precludes otherwise qualifying economically distressed rural areas 
from BEA Program eligibility. To best address the issue, statutory 
modifications would be necessary.
Background
    According to the statute that created the BEA Program, a Distressed 
Community consists of contiguous Geographic Units (e.g., census tracts) 
located within the boundaries of one Unit of General Local Government 
(e.g., town, city, or country) that meet certain minimum population, 
poverty, and unemployment requirements, as follows:
    Minimum Population Requirements.--Metropolitan Statistical Areas: 
The population of a Distressed Community must be at least 4,000 people 
if any portion of the area is located within a Metropolitan Statistical 
Area. Non-Metropolitan Statistical Areas: The population of a 
Distressed Community must be at least 1,000 people if no portion of the 
area is located within a Metropolitan Statistical Area. Indian 
Reservations: If a Distressed Community is located entirely within an 
Indian Reservation, it is not required to meet the minimum population 
requirements.
    Minimum Poverty Requirements.--At least 30 percent of the Residents 
of the Distressed Community must have incomes that are less than the 
national poverty level, as determined by the latest decennial census.
    Minimum Unemployment Requirements.--A Distressed Community must 
have an unemployment rate that is at least 1.5 times greater than the 
national average, as determined by the Bureau of Labor Statistics' most 
recent statistics.
    In addition, the BEA Program regulations allow that a Distressed 
Community may consist of Geographic Units that (1) individually meet 
the minimum population, poverty, and unemployment requirements 
discussed below, or (2) in the aggregate meet the poverty and 
unemployment requirements, provided that no designated Geographic Unit 
within the Distressed Community has a poverty rate of less than 20 
percent.
           native american cdfi technical assistance program
    Question. Forty seven organizations have applied for awards in the 
first round of funding in that Native American CDFI Technical 
Assistance (NACTA) program, demonstrating very strong interest on the 
part of tribes and other organizations serving Native Americans in 
expanding the work of CDFIs in Indian country. Fiscal year 2002 will be 
the first year that monies will be awarded through the NACTA program.
    What kind of priority will the NACTA program have to the Fund, if 
resources are limited to the President's budget request of $68 million?
    Answer. It is the intent of the Fund to have a second round of the 
NACTA Component in fiscal year 2003.
       performance measures for rural and reservation communities
    Question. With regard to performance measures. I am concerned that 
seemingly straightforward standards may in fact work to the detriment 
of some communities. Particularly where they may aggravate the barriers 
rural and Native American areas already face in securing CDFI 
investments.
    For example, it is very straightforward to measure the success of 
an investment in terms of the number of jobs created and wages paid.
    However, it's equally important to consider the services provided 
and the impact that a business may have on the quality of life in the 
community. This is particularly important in rural and isolated areas.
    How do we measure the impact on a rural or reservation community by 
establishing a welding shop, a cafe, a grocery store, or a gas station? 
The business my only create 3 or 4 jobs, but area families no longer 
must drive 20, 30, 40 miles or more to utilize that service.
    In developing the ``performance measures'' required by Secretary 
O'Neill, how can we make sure rural and Native American CDFIs are not 
penalized for investing in small main-street business that may only 
create a handful of jobs, but significantly enhance the community?
    Answer. Performance measures will not disadvantage rural 
communities. The Fund's measure of impact will not focus on volume but 
will attempt to assess the local community improvement impact of each 
award made by the CDFI Fund. The Fund's Small and Emerging CDFI 
Assistance (SECA) Component, in particular, seeks to assist small 
lending operations that demonstrate that they are likely to achieve 
impact in the communities they serve.
                                 ______
                                 

           Questions Submitted by Senator Christopher S. Bond

                          performance measures
    Question. I am pleased that Secretary O'Neill has recognized the 
importance of performance outcomes because it is still unclear to me if 
CDFI's programs make a significant difference in helping distressed 
communities and if its programs are more cost-effective and efficient 
than other similar Federal efforts.
    For example, I would like to know to what extent the Bank 
Enterprise Award program motivate financial institutions provide 
capital in distressed communities, especially when they are required to 
perform these activities under the Community Reinvestment Act.
    Answer. Congress, in passing the BEA Program legislation, intended 
the BEA Program to encourage FDIC-insured depository institutions to go 
beyond just serving the ``convenience and needs of the communities in 
which they are chartered.'' Congress wanted to provide an incentive to 
banks and thrifts to do business in highly distressed communities that 
may not necessarily be part of their Community Reinvestment Act (CRA) 
assessment areas or to serve as partners with local CDFIs that serve 
populations that the institutions may not necessarily have to serve in 
order to receive Satisfactory CRA ratings. A BEA Program award should 
therefore be seen as a complement to the CRA activities of an 
institution.
    Question. In response to Secretary O'Neill's initiative, when do 
you expect to be able to provide this committee with data on program 
performance? Do you expect to collect and analyze data that will 
compare the performance of CDFI's programs to other Federal activities?
    Answer. The Fund is able to provide program performance data now. 
Our objective is to show how the investments we make in CDFIs, and the 
loans they make in turn, fill gaps in financial services for distressed 
areas and populations. Our program performance measures will show these 
investments improve our Nation's underserved communities and target 
populations through community development financing activities.
    The Fund is reviewing its current methodology for developing 
performance goals and measures to incorporate a more quantitative 
analysis of the awardee's community development impact, solvency, asset 
quality and management capacity (PLUM \1\). Analysis is being conducted 
to identify peer groups and benchmark data. Based on this information, 
acceptable levels of achievement will be determined and applied to 
awardees to achieve the following: identify CDFI Fund portfolio risk 
and to identify CDFIs that have had achieved higher success in 
fulfilling its community development mission. Based on this 
information, the Fund can conduct targeted analysis of its portfolio, 
highlight best practices that can be shared with the CDFI field, and 
better assess CDFIs' abilities to expand or stabilize underserved 
market areas.
---------------------------------------------------------------------------
    \1\ PLUM is defined to include P (performance effectiveness/
community impact), L (leverage, liquidity, solvency), U (underwriting), 
and M (management).
---------------------------------------------------------------------------
    The awards administered by the Fund serve a unique purpose. 
Investments by the Fund serve a special purpose in that they help to 
capitalize specialized loan funds that fill voids in the conventional 
capital markets. Such loan funds must serve economically distressed 
places or underserved populations. CDFIs serve a wide array of such 
communities through a wide array of loan products and financial 
services. The Fund differs from many other Federal activities in that 
the Fund invests in institutions not projects. CDFIs are local market-
based institutions that respond to market demand in their communities. 
Support from the Fund may allow a CDFI to absorb the cost of 
development services delivery and innovation that it could not fully 
recover through its lending operations.
                      overlapping federal programs
    Question. I am concerned about overlapping Federal programs. It is 
clear that CDFI works with the same communities and institutions that 
HUD and other Federal Agencies work with.
    Please tell me about any informal and formal efforts to coordinate 
Federal activities in assisting distressed communities. How do your 
organizations ensure that its activities are not duplicative of other 
Federal activities?
    Answer. The Fund has a structured means of coordination with other 
agencies through the Community Development Advisory Board, which 
includes representatives from six Federal Agencies (USDA, Commerce, 
HUD, Interior, Treasury, and the SBA). The statute that created the 
CDFI Fund requires the Advisory Board. In addition, the Fund, by law, 
coordinates with the banking and credit union regulatory agencies while 
in the process of considering Fund investments in regulated entities.
    Programmatically, the Fund regularly engages in discussion with 
other agencies. For example, there is current strategizing with HUD as 
to how to increase the level of resources available to the colonias in 
the U.S.-Mexico border region. The Fund has shared with HUD information 
about CDFIs serving these distressed areas in which the Fund has 
invested and described how CDFIs can help provide a permanent flow of 
capital in otherwise underserved areas. HUD in turn has shared its 
information regarding the concentrations of colonias. Both entities are 
interested in improving data-gathering to document the level of 
financial services activities in these areas. The Fund is also engaged 
in a dialog with Federal Reserve Board of Governors and the Federal 
Reserve Bank of Richmond as to the development of measurements that 
will serve to allow comparative classification of levels of financial 
services. Achieving this will help the Fund to improve its ability to 
target dollars to areas of market dysfunction.
           native american cdfi technical assistance program
    Question. The Treasury Department's November 2001 ``Native American 
Lending Study'' clearly indicates a need for capital access and 
financial lending on Indian lands. Further, the study recommends, 
``creating more financial institutions, including CDFIs, on Indian 
Lands'' and ``encouraging existing financial institutions that are not 
located on Indian Lands to open branches on Indian Lands.'' However, 
the Administration has not requested any new funds for fiscal year 2003 
for the Native American Technical Assistance program.
    Can you explain this disconnect? By not funding this initiative, 
does this mean that you disagree with the study's recommendations?
    Answer. The Fund supports the recommendations set forth in the 
Native American Lending Study report. The reason we have not included a 
request for Native American CDFI Technical Assistance (NACTA) funding 
in our fiscal year 2003 budget is because we believe that the carryover 
(unused funds) from fiscal year 2002 will be sufficient to meet the 
fiscal year 2003 need.
                          monitoring awardees
    Question. How does the CDFI monitor the management of grantees? Has 
the Fund ever revoked the certification of a CDFI?
    Answer. The Fund uses several methods to monitor its awardees. They 
include the following:
Annual Reporting
    The Fund requires awardees to submit performance and financial 
reports on a semi-annual and annual basis. Performance reports tell how 
well an awardee is achieving the goals and measures that it negotiated 
with the Fund, as incorporated in its assistance agreement. Financial 
reports demonstrate the fiscal health of the overall operation of the 
awardee organization and/or its affiliates. The Compliance Monitoring 
and Evaluation (CME) staff of the Fund reviews these reports.
    Reports are reviewed and awardees are rated as compliant, on 
``compliant watch'', non-compliant but not resulting in an event of 
default, or non-compliant. Awardees are automatically deemed 
noncompliant if they fail to submit required reports by the deadlines 
stated in their Assistance Agreements.
    If an awardee is noncompliant under the terms and conditions of its 
Assistance Agreement, CME staff will contact it to discuss the 
noncompliance and its plans for improvement; CME staff then prepares 
and presents its recommendations to the Fund's Portfolio Committee. 
Corrective actions approved by the Portfolio Committee can range from 
an amendment of the assistance agreement so as to adjust for unforeseen 
market conditions, to de-obligation of undisbursed funds, to (in the 
most serious cases) a demand that award funds be returned to the 
Federal Government.
On-site Reviews
    In the very near future, the CME unit will begin conducting on-site 
visits to examine certain organizations' operations more closely, and 
to ensure their compliance with the CDFI Fund's requirements. 
Organizations will be selected for on-site visits through a risk 
assessment process, with those deemed at higher risk being examined 
first. Some on-site visits are planned to organizations that are not 
considered at higher risk in order to balance the portfolio of on-site 
visits and to establish baseline procedures.
Program Suspensions
    In certain cases, the Fund has revoked the certification of CDFIs. 
A CDFI certification can be revoked when the Fund is notified of 
material changes in an organization, meaning that the entity no longer 
satisfies all six CDFI certification criteria. The manner in which the 
Fund learns of such changes occurs in several ways, including 
notification by a CDFI's regulator, notification by the CDFI itself, 
notification by an unrelated third party, or upon the Fund's review of 
reports submitted annually by the CDFI.
Performance Measures
    The Fund is reviewing its current methodology for developing 
performance goals and measures to incorporate a more quantitative 
analysis of the awardee's community development impact, solvency, asset 
quality and management capacity (PLUM). Analysis is being conducted to 
identify peer groups and benchmark data. Based on this information, 
acceptable levels of achievement will be determined and applied to 
awardees to achieve the following: identify CDFI Fund portfolio risk 
and to identify CDFIs that have had achieved higher success in 
fulfilling its community development mission. Based on this 
information, the Fund can conduct targeted analysis of its portfolio, 
highlight best practices that can be shared with the CDFI field, and 
better assess CDFIs' abilities to expand or stabilize underserved 
market areas.

                          SUBCOMMITTEE RECESS

    Senator Mikulski. This subcommittee stands in recess until 
next Wednesday, May 1, in which we will be taking testimony 
from NASA.
    So thank you very much.
    Ms. Lazar. Thank you both.
    Senator Mikulski. And we are in recess.
    [Whereupon, at 10:55 a.m., Wednesday, April 24, the 
subcommittee was recessed, to reconvene at 9:47 a.m., 
Wednesday, May 1.]

















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

                              ----------                              


                         WEDNESDAY, MAY 1, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:47 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Barbara A. Mikulski (chairman) 
presiding.
    Present: Senators Mikulski, Bond, Shelby, Craig, DeWine, 
and Stevens.

             NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

STATEMENT OF SEAN O'KEEFE, ADMINISTRATOR
ACCOMPANIED BY:
        DR. JOHN GRUNSFELD, ASTRONAUT
        STEVE ISAKOWITZ, COMPTROLLER
        DR. EDWARD J. WEILER, ASSOCIATE ADMINISTRATOR FOR SPACE SCIENCE
        DR. GHASSEM ASRAR, ASSOCIATE ADMINISTRATOR FOR EARTH SCIENCE
        ROBERT W. COBB, INSPECTOR GENERAL

            OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

    Senator Mikulski. I want to convene the Subcommittee 
hearing on VA-HUD appropriations to take the testimony of Mr. 
Sean O'Keefe, our NASA administrator, to review the NASA 
appropriations request.
    Mr. O'Keefe, this is the first time that we are welcoming 
you before this Appropriations Committee, and we look forward 
to listening to you and working with you.
    You come with a great deal of--you come with many 
credentials and we know that you come also with the confidence 
of the White House. I know that before this, before you took 
over NASA, you were deputy director of OMB. So you are used to 
being in orbit. That is a joke, but we will just let it go.
    Senator Mikulski. You come with a great deal of management 
experience and won all kinds of awards, and I believe your 
expertise in management is just what NASA needs right now. We 
are hoping that if anyone can get NASA back on track, it is 
really going to have to be you.
    We look forward to working with you and I am going to go 
through some of the challenges I believe that NASA is facing 
that we would like to hear your views on today and, of course, 
we hope to have other conversations with you as we prepare for 
markup.
    The President has proposed a flat budget for NASA this year 
at $15 billion. I must say I am disappointed that we continue 
to see the flat budgets for NASA, especially considering the 
enormous needs that NASA has.
    We have issues related to shuttle upgrades, additional 
scientific commissions, and an aging infrastructure that is 
troubling. These are just a few of the needs that need to be 
addressed. Along with that is the significant issue of the 
ongoing issue of the cost overruns of the space station.
    NASA has to have a balanced program in terms of human space 
flight, scientific research and aeronautics. In a speech you 
gave at Syracuse last month, you said that NASA's mission and 
vision was to improve life here on earth and find life beyond. 
I think that is an excellent vision. And to me, that is earth 
science, space science, and biological and physical science.
    But we are very troubled about the space station. The space 
station continues to be NASA's number one problem. With the $5 
billion in cost overruns, the station continues to be a dark 
cloud over NASA's horizon rather than a bright opportunity for 
research.
    NASA must implement the management reforms and creditable 
cost estimating this year. Otherwise, I am concerned that 
Congress will have no faith in NASA's cost estimates until the 
management reforms are firmly in place and NASA starts 
delivering results.
    Second, NASA must reaffirm that scientific research is the 
primary purpose of the space station. I am concerned that if we 
only have three astronauts in the station, all they are doing 
is housekeeping, rather than the scientific discovery, some of 
which I know we are going to see today.
    Third, NASA needs to present Congress with a scientific 
research plan that then lays out what it is going to do. The 
cuts to scientific research aboard the space station have 
really cost support for the program.
    Another important issue is the future of the space shuttle. 
The shuttle now costs $3 billion per year to operate, almost 20 
percent of the NASA budget. I know you are starting to look at 
privatizing of the shuttle program as a solution. I believe 
that NASA must proceed very, very, very carefully before making 
any decisions related to privatizing. And I know you will share 
with us what you think is the best way.
    I know that you are absolutely as committed as this 
committee is to the safety of our astronauts. And we need to 
look at what is the best way to get them into space safely and 
to return them to safety safely and to be able to sustain them 
when they are. So we look forward to the ideas and the money to 
do this.
    I know we cannot fly the shuttle forever, and that is why 
we look at other initiatives like the space launch.
    Moving on to science, aeronautics, and technology, I am 
glad to see that the administration has proposed a 10 percent 
increase in the funding. I know that you want to start an in-
space nuclear power program, and I think NASA is--I think we 
need to discuss this.
    I am concerned that you have zeroed out Pluto. We could be 
missing an opportunity if it does not launch. We only get every 
200 years to do this.
    Earth science, I am beginning to think we are beginning to 
see the benefits of that investment, record numbers of users on 
earth science, improving their understanding of how the earth 
works, and even other Federal agencies making use of this 
information.
    I know that we will always get double value from what we do 
at NASA, that science, technology, discovery always leads to 
the new ideas that either save lives, save communities, or 
generate jobs.
    We really look forward to hearing what you want to do with 
$15 billion, how we can keep NASA flying, and I turn now to my 
very able colleague, Senator Bond, for his comments.

                STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Thank you very much, Madam Chair. I join with 
you in welcoming the new NASA Administrator Sean O'Keefe, the 
first appearance before this subcommittee. It is usually not 
too painful and we hope we can be constructive on all sides, 
but we do have some very serious questions as we have discussed 
previously.
    Mr. O'Keefe has some big boots to fill in replacing Dan 
Goldin, who spent almost a decade at the helm of the agency. It 
is a big job to fill not only because of the imprint that Mr. 
Goldin left, but also because the agency continues to face a 
number of management and budget concerns, many associated, as 
the Chair has said, with the International Space Station and 
the space shuttle program, two of NASA's best known and visible 
programs.
    I have a great deal of confidence that Sean will be a great 
NASA administrator. And while he does not have an aerospace 
background, I think what is clearly needed at this agency are 
the critical management skills and budgetary expertise that I 
believe he brings to address the previous inability of NASA to 
provide an adequate budget for its programs and to solve the 
management problems.
    Mr. O'Keefe has been the staff director for the Senate DOD 
Appropriations Subcommittee, a comptroller of DOD, Secretary of 
the Navy, most recently deputy director at OMB, and frankly he 
has survived the blood and the water mentality at OMB, which 
should auger well for his ability to succeed in another agency 
with a little blood around it.
    I also believe every new agency head must be provided an 
opportunity to demonstrate leadership and management abilities. 
We will do all we can to support Mr. O'Keefe in meeting the 
many challenges facing him at NASA.
    In particular, the International Space Station, which is 
been touted as the new crown jewel of NASA, now appears to be a 
rather expensive bit of costume jewelry. And since 1993 when 
the ISS redesign work began, the program has gone through 
continuing fits and starts, delays, additional costs resulting 
from Russia's failure to meet certain commitments, as well as 
other costs and delays resulting from problems caused by NASA 
and its contractors.
    It would not surprise me if the Harvard Business School 
decided to use the ISS decision-making and funding process for 
a whole year's worth of courses on government and business 
mismanagement. It has been that bad. That could keep a whole 
raft of students busy and professors for many, many months.
    The problems all came to a head, at least most recently, in 
February 2001 when the key management personnel of the ISS 
identified just another little $5 billion in cost overruns for 
the space station to meet the assembly fact--those facts, and 
the crew has--this has been a major problem. They have let the 
assembly and completion requirements, set that time--the 
administration and NASA decided to reduce station funding 
requirements by cancelling or indefinitely deferring 
construction of ISS hardware, and by cutting funding for space 
station research.
    As currently formulated, NASA plans to reach what it calls 
``core complete'' by launching and completing assembly of the 
existing ISS elements and then adding lab modules being built 
by Europe and Japan.
    I think the decision is correct, because of other funding 
priorities, both within NASA and within the VA-HUD 
Subcommittee. I am disturbed that we will not realize fully the 
potential of ISS as a world-class research facility for science 
conducted in a micro-gravity environment.
    This failure is further highlighted by the fact that the 
crew size of the ISS is limited to a crew of three, while it 
requires two and a half crew to operate and maintain the 
station. Despite arguments to the contrary by some NASA staff, 
I do not believe that we are serving our scientific mission 
well when we have one half time of one crew member devoted to 
science.
    At a minimum, without additional investment for a crew 
return vehicle or the addition of more Soyuzes from Russia, 
most of the complex science research that was anticipated to be 
conducted on the station is not going to be accomplished.
    Equally troubling is NASA's attempt to control the costs 
and pay for cost overruns by slashing $1 billion from space 
station research budget projections from fiscal year 2002 
through 2006. In the current year, there are $140 million in 
terminations within the ISS research account. Now, that is very 
troubling to us for a program that costs as much as $100 
billion after completion and operation.
    On top of this and contrary to concerns raised last year in 
the NASA budget hearing, NASA has allowed policies to be put in 
place that will further reduce the stature of ISS from a 
research facility to a guest hotel for the super rich.
    Last year, Dan Goldin promised the international agreements 
on visitors and crew standards would ensure that all visitors 
to the space station would be trained comprehensively and 
qualified before permission would be granted to visit the 
station.
    Instead I believe that the proposed policies on station 
visitors are weak, insubstantial and could pose a deadly risk 
to every crew member on the station. To me that is 
unacceptable, especially during the assembly of the station, 
which is a period of heightened risk in an already extremely 
hazardous environment.
    Well, I have a number of other issues I want to raise today 
for the record. I am concerned about NASA meeting all the 
funding needs associated with the space station program. The 
Aerospace Safety Advisory Panel recently concluded its March 
2002 annual report by saying, ``current and proposed budgets 
are not sufficient to improve or even maintain the safety risks 
of operating the space station or the ISS.''
    I think that raises additional issues as to the future of 
the shuttle, how safety concerns are prioritized, what is the 
relationship between the space station program, the development 
of a crew return vehicle and the SLI, designed to develop 
second and possibly third generation reusable launch vehicles. 
Each of these programs has substantial costs. I am not 
convinced that the NASA budget can sustain even the shuttle 
program and the SLI without a clearer vision of the goals and 
relationships.
    Finally, on a positive note, I am gratified NASA is working 
with the University of Missouri's Center for General Physiology 
in the area of gender-related issues in space flights.
    As we look to explore the universe, commit men and women to 
long periods of time in space, we need to understand the risks 
and stresses on the human body of living in space. In 
particular, it is critical to know the sex-specific factors 
that influence our ability to adapt to the challenges posed by 
living in the harsh environments encountered in the exploration 
of space.
    Thank you, Madam Chair.
    Senator Mikulski. Thank you.
    [The statement follows:]

           Prepared Statement of Senator Christopher S. Bond

    Thank you, Madam Chair. I welcome the new NASA Administrator, Mr. 
Sean O'Keefe, to his first appearance before the Senate VA/HUD 
Appropriations Subcommittee. Mr. O'Keefe has some big boots to fill in 
replacing Dan Goldin who spent almost a decade at the helm of this 
agency. This is a big job to fill, not only because of the imprint that 
Dan left on the agency, but also because the agency continues to face a 
number of management and budget concerns, many of which are associated 
with the International Space Station and the Space Shuttle Program, two 
of NASA's best known and visible programs.
    However, I have a great deal of confidence that Mr. O'Keefe will be 
a great NASA Administrator. And while Mr. O'Keefe does not have an 
aerospace background, he does have the critical management skills that 
I believe are needed to address NASA's inability to budget adequately 
for its programs, and that once we solve these management problems NASA 
will be on a smooth flight plan. In particular, Mr. O'Keefe has been 
the staff director for the Senate DOD Appropriations Subcommittee, the 
Comptroller of DOD, Secretary of the Navy, and most recently the Deputy 
Director at OMB. Just to survive the ``blood in the water'' mentality 
at OMB augurs well for his success at NASA.
    I also believe every new agency head must be provided an 
opportunity to demonstrate their leadership and management abilities 
and I intend to provide whatever support I can to Mr. O'Keefe in 
meeting the many challenges facing him at NASA.
    In particular, the International Space Station which has often been 
touted as the new crown jewel of NASA now appears to be little more 
than very expensive costume jewelry. Since 1993, when the ISS redesign 
work was begun, the program has gone through many fits and starts, 
including delays and additional costs resulting from Russia's failure 
to meet certain commitments as well other costs and delays resulting 
from problems caused by NASA and its contractors. It would not surprise 
me if the Harvard Business School decided to use the ISS decisionmaking 
and funding process for a whole year's worth of courses on government 
and business mismanagement. It has been that bad.
    These problems all came to a head in February 2001 when the key 
management personnel of the ISS identified another $5 billion in cost 
overruns for the Space Station to meet assembly and completion 
requirements.
    Since that time, the Administration and NASA decided to reduce 
station funding requirements by canceling or indefinitely deferring 
construction of some ISS hardware and by cutting funding for space 
station research. As currently formulated, NASA plans to reach what it 
calls ``core complete'' by launching and completing assembly of the 
existing ISS elements and then adding laboratory modules that are being 
built by Europe and Japan.
    While I believe the decision is correct because of other funding 
priorities, both within NASA and within the VA/HUD Appropriations 
Subcommittee, I am disturbed that we will not realize fully the promise 
of the International Space Station as a world class research facility 
for science conducted in a microgravity environment. This failure is 
further highlighted by the fact that the crew size of the ISS is 
limited to a crew of three while it requires 2\1/2\ crew to operate and 
maintain the station. Despite arguments to the contrary by some NASA 
staff, I do not believe much compelling science can be accomplished by 
only one-half a crew member. At a minimum, without additional 
investment for a crew return vehicle or the addition of more Soyuzes 
from Russia, most of the complex science research that was anticipated 
to be conducted on the Station will never be accomplished. Equally 
troubling is NASA's attempts to control costs and pay for cost overruns 
by slashing some $1 billion from space station research budget 
projections from fiscal year 2002 through fiscal year 2006. In fiscal 
year 2002 alone, there are $140 million in terminations within the ISS 
research account.
    This is not acceptable for a program that could cost as much as 
$100 billion after completion and operation. On top of this and 
contrary to concerns raised last year in the NASA budget hearing, NASA 
has allowed policies to be put in place that will further reduce the 
stature of the ISS from a research facility to a guest hotel for the 
super rich. Last year, Dan Goldin promised that international 
agreements on visitors and crew standards would ensure that all 
visitors to the Space Station, would be trained comprehensively and 
qualified before permission would be granted to visit the Station. 
Instead, I believe that the proposed policies on Station visitors are 
weak, unsubstantial and could pose a deadly risk to every crew member 
on the Station. Again, this is unacceptable, especially during the 
assembly of the Station which is a period of heightened risk in an 
already extremely hazardous environment.
    I have a number of other issues and concerns that I intend to raise 
today or as questions for the record. In particular, I am concerned 
about whether NASA is meeting all the funding needs associated with the 
Space Shuttle program. The Aerospace Safety Advisory Panel recently 
concluded in its March 2002 annual report that ``current and proposed 
budgets are not sufficient to improve or even maintain the safety risks 
of operating the Space Shuttle or the ISS.'' This raises additional 
issues as to what is the future of the Shuttle, how safety concerns are 
prioritized and what is the relationship between the Space Shuttle 
program, the development of a crew return vehicle and the Space Launch 
Initiative (SLI) which is designed to develop second and possibly third 
generation reusable launch vehicles. Each of these programs have 
substantial costs and I am not convinced the NASA budget can sustain 
even the Shuttle program and the SLI without a clearer vision of the 
goals and relationship of these programs.
    Finally, I am very gratified that NASA is working with the 
University of Missouri's Center for Gender Physiology in the area of 
gender-related issues in space flight crews. As we look to explore the 
universe and commit men and women to long periods of time in space, we 
need to understand the risks and stresses on the human body of living 
in space. In particular, it is critical to know the sex-specific 
factors that influence our ability to adapt to the challenges posed by 
living in the harsh environments encountered in the exploration of 
space.
    Thank you, Madam Chair.

    Senator Mikulski. I note that Senator Ted Stevens is here, 
the ranking member.
    Sir, I know that you have many demands on you. Would you 
like to make a statement?

                    STATEMENT OF SENATOR TED STEVENS

    Senator Stevens. Madam Chair, you are very kind. Senator 
Inouye is opening our defense hearing, well, in just 2 minutes. 
I came to pay my respects to Administrator O'Keefe and to just 
put one little item in the budget, which--in the record, which 
I will bring to Mr. O'Keefe.
    I am a little worried about the fact that Gilmore Creek, I 
hear, is maybe subject to being closed. That is the last 
tracking station on American soil. I would urge that you put 
down that rumor if it is not true and review it if it is.
    Thank you very much.
    Senator Mikulski. Thank you, Mr. Chairman.
    In order of arrival, it was Senator Craig, Senator Shelby, 
and Senator DeWine. I wonder if you want to make any statements 
now or if you would prefer to do that as you move into your 
questions or concerns you might have--Senator Craig or----
    Senator Shelby. Madam Chairman, I just want to associate my 
remarks with those of Senator Bond. I think he laid out some 
very serious and important questions that I hope Mr. O'Keefe 
will address.
    Senator Mikulski. Thank you, sir.
    Senator Craig.

                  STATEMENT OF SENATOR LARRY E. CRAIG

    Senator Craig. Madam Chairman, thank you.
    Director O'Keefe, we welcome you to the committee. I also 
am frustrated by the very concerns that Senator Bond has spoken 
to. We Americans have a love affair with space, and it is still 
there. There is no question about it. And so we here who 
appropriate for your activities have a similar excitement about 
it.
    But you are there and I think you have been put there to 
bring some sense of balance and fiscal responsibility to this 
agency and also to chart new directions for it. And that is 
extremely important for all of us, because in reference to 
science and what can be gained, this morning once again we are 
seeing those phenomenal new images coming out of Hubble and 
going, ``Whoa, that is exciting.'' And if it were not for the 
space program, we would not have been able to make that step.
    I have been associating myself with it for some time as 
Senator Bond mentioned, university programs that are extremely 
valuable. Many of the researchers and educators from Idaho who 
take part in those programs see phenomenal benefit from them.
    We, in Idaho, have grown increasingly excited about the 
Educator in Space Program. As many know, mission specialist 
Barbara Morgan is from McCall, Idaho, and she is slated to go 
up sometime in 2004 in a mission.
    That excites us all. But it is an opportunity to extend 
once again to our young people a tremendous challenge towards 
space, space exploration and as my colleague from Missouri 
mentioned, as the chairman mentioned, science. We have invested 
a great deal in the biological sciences for the last decade and 
this Congress has been committed to them as the physical 
sciences in part have languished.
    And I would hope that we can reinstate our purpose there, 
and NASA plays an extremely important role in that. Your new 
nuclear system initiative is exciting for me to see where you 
want to go. And I say that, and your jointly working with the 
Department of Energy is an opportunity.
    It is not only an opportunity for us to be able to build 
long-term energy supplies or energy capability, but also to 
extend greater research into the area of nuclear reactors and 
energy from that type of thing.
    We in Idaho are very proud of the fact that in our 
laboratory over 52 nuclear reactors have been built over the 
last five decades of all shapes and sizes. Working with Argonne 
and other laboratories around the Nation, we can lead the 
world, and this is an initiative that I am pleased that you are 
looking at. I think it is important for all of us in the long-
term efforts in space and the long-term efforts of producing 
viable energy for our country.
    Madam Chairman, let me put the balance of my comments in 
the record.
    We are pleased to have you before us, sir, Mr. 
Administrator. And I trust that next year you will be able to 
tell us about all of the corrective measures made and the great 
new direction and course that NASA is taking.
    Thank you.
    Mr. O'Keefe. Thank you, sir.
    Senator Mikulski. Without objection, sir, your statements 
are in the record.
    [The statement follows:]

              Prepared Statement of Senator Larry E. Craig

    Today we are hearing from the Administrator of NASA about the 
important programs conducted by this leading science agency. Over the 
last several months, I have met with many researchers and educators 
from Idaho who take part in and benefit from NASA's programs. 
Administrator O'Keefe, I commend you and the people of NASA for the 
excellent work you do in getting young people excited about science.
    I know your testimony makes reference to the sobering statistics 
regarding the workforce challenges faced by--not only NASA but all of 
the Federal Government--in terms of the aging of our Federal scientists 
and engineers. We must do all we can to reinvigorate our science and 
engineering base in this country--to arrest this decline, and starting 
turning those statistics around.
    One of the ways that students really become engaged is through the 
``Educator in Space'' program. I am obviously very excited that you 
recently announced--and personally conducted a joint press conference 
with--NASA's first ever ``Educator in Space''--Mission Specialist 
Barbara Morgan from McCall, Idaho. You can bet that school children all 
over Idaho and all over the world will be following Barbara's story as 
she prepares to take part in her space mission in 2004.
    In your testimony we will also hear about a new NASA initiative 
that has really peaked my interest. This new initiative is the Nuclear 
Systems Initiative. This new program would cost about $800 million over 
5 years. What excites me about this new program is that it acknowledges 
something I have long believed. If this country intends to explore the 
far reaches of the universe, it will not be possible to power these 
craft without nuclear power.
    Working jointly with the Department of Energy, NASA has used 
nuclear power systems in space for over 35 years. These nuclear 
generators use the heat of the decay of nuclear materials to generate 
electricity. These systems are safe, proven, reliable, maintenance 
free, and capable of producing heat or electricity for decades under 
remote, harsh environments such as deep space.
    NASA's new Nuclear Systems Initiative will improve upon these 
existing nuclear generators. Additionally, this new program will seek 
to develop a uranium-fueled nuclear reactor that will power an advanced 
electric propulsion system. I think this development is critical to the 
future of deep space exploration.
    The Department of Energy's Office of Nuclear Energy has been a 
partner with NASA in all of its nuclear space initiatives. The same 
will be true of this new initiative. When it comes to the development 
of new, nuclear reactor technology, the Idaho National Engineering and 
Environmental Laboratory along with Argonne West--in Idaho--are DOE's 
lead laboratories.
    Over the course of the last five decades, 52 nuclear reactors have 
been built at the INEEL. I encourage you to visit these facilities in 
Idaho and see for yourself what we can do. Working jointly with NASA 
and DOE, I look forward to the contributions that Idaho can make to 
this new Nuclear Systems Initiative

    Senator Mikulski. Senator DeWine.

                    STATEMENT OF SENATOR MIKE DEWINE

    Senator DeWine. Madam Chair, thank you very much.
    Administrator O'Keefe, good to see you again.
    Let me express my support for your efforts in getting the 
Nuclear Systems Initiative started. I have confidence that this 
will provide the agency and the country with the technologies 
that we need to support future space missions, and I applaud 
you for that.
    Let me also say that the NASA Glenn Center in Ohio is a 
NASA Center that is really, I think, able to contribute to this 
initiative through its electric propulsion technology 
capabilities and flight developmental heritage. And you and I 
have talked about that extensively in the past.
    So, again, we welcome you here and look forward to your 
testimony.
    And, Madam Chair, I would just ask unanimous consent that 
the balance of my statement be made a part of the record.
    Senator Mikulski. Thank you, Senator DeWine.
    [The statement follows:]

               Prepared Statement of Senator Mike DeWine

    I would like to recognize the NASA Glenn Center in Ohio as an 
outstanding NASA Center that is able to contribute to this initiative 
through its electric propulsion technology capabilities and flight 
development heritage. NASA Glenn provides a significant contribution to 
the economy of Ohio. The Glenn Research Center has a total employment 
impact of more than 12,000 Ohio jobs and an economic output of 
approximately $1.1 billion for the entire State. Glenn is particularly 
well suited to have a major leadership role as part of this initiative. 
I will also point out that NASA Glenn is uniquely qualified to lead 
systems analysis and engineering efforts in the development of many 
non-nuclear technologies including: (a) high performance ion thrusters, 
(b) high voltage power management and distribution systems, and (c) 
power systems including high temperature lightweight radiators.

                         HUBBLE SPACE TELESCOPE

    Senator Mikulski. Mr. O'Keefe, we now turn to you for your 
testimony on the appropriations request and the management 
guidance that you want to provide the agency. But we also know 
that Hubble--as the new retrofitted Hubble with its new eye in 
the sky has sent back some really wonderful pictures and 
pictures that tell us even more about the universe.
    You know, we are very proud of Hubble, because of Hubble 
itself out there looking to the edges of the universe, but the 
fact that Goddard is the catcher's mitt of the information 
coming in and then it tosses it to the Johns Hopkins Space 
Telescope Institute for its marvelous analysis and so on.
    So we in Maryland view the Hubble kind of--right now, it 
has been up there so long, it is kind of like the Cal Ripken of 
space telescopes.
    And so we are--but unlike Cal, we had a very expensive 
contact lens that we had to retrofit, which also says something 
about the fact that even with the station, we know it has got 
problems, but when we get it on track, like we got Hubble on 
track, the results can be stunning.
    So why do you not go ahead and tell us about your request 
and, of course, bring to the table whoever you wish?

                       STATEMENT OF SEAN O'KEEFE

    Mr. O'Keefe. Thank you, Madam Chair, Senator Bond, members 
of the committee. Thank you all very much for your hospitality 
and willingness to consider our requests on a variety of fronts 
and, your very important, I think, opening statements have 
touched on the very challenges that I have seen in the course 
of my vast tenure of 4 months now at NASA. These are exactly 
the kinds of issues that I am wrestling with every day, and I 
think you put your finger to them.
    First and foremost, I want to tell you how pleased I am to 
be here at this committee, being an alumni of the Senate 
Appropriations Committee staff longer ago than I care to admit, 
but nonetheless a very proud member of that alumni team and 
very grateful for the opportunity to be here.
    I would like to submit a statement for the record, if you 
would permit, and quickly summarize a couple of points, and 
then touch on the Hubble images, Madam Chair, that you referred 
to up front.
    Senator Mikulski. Without objection, it will be.
    Mr. O'Keefe. First and foremost, the issues I think that 
best characterize the approach that we are taking for the 
fiscal year 2003 budget before you and the request that the 
President has advanced, is characterized first by an approach 
to try to emphasize enabling technologies to overcome technical 
limitations that have been structural for some time.
    That is a mission objective of trying to deal with some of 
the enduring kinds of challenges that sort of limit our ability 
to explore and discover anywhere. Most characteristic of that 
and touched on in the statements of several members here this 
morning, is our objective of trying to look at propulsion 
systems and power generation capacities that get us past what 
our current limits that, quite frankly, in the speed that we 
travel once we do the amazing effort of getting into low-earth 
orbit in 8 and half minutes, we are basically traveling----
    Senator Mikulski. Mr. O'Keefe, I appreciate you giving oral 
testimony----
    Mr. O'Keefe. Yes, ma'am.
    Senator Mikulski [continuing]. But could you follow your 
written one in some order as you summarize it? It is hard for 
us to follow you in a very complex technical testimony.
    Mr. O'Keefe. Oh, I apologize.
    Senator Mikulski. Okay.
    Mr. O'Keefe. I am sorry. I have got to get the statement 
then.
    Senator Mikulski. Yes, because we have got a statement. We 
cannot read the statement and listen to you.
    Mr. O'Keefe. I understand.
    Senator Mikulski. But if you could just follow some order 
with your priorities.
    Mr. O'Keefe. I apologize.
    Senator Mikulski. Please--and I am prepared to listen to 
the oral, but I have got to have a framework.
    Mr. O'Keefe. My apologies. All right.
    I am sorry. I attempted to just cut through two issues as a 
means to just summarize this statement and then move to the 
Hubble issues to quickly work through that.
    First and foremost, our mission objectives and the 
statement that we have prepared here for the vision and mission 
of where we would like to take the agency is best summarized by 
a concern that we focus on and establish a priority for 
enabling technologies. And that is essentially what the first 
initial couple of pages here has attempted to touch on.
    And so our attempt is to emphasize what have been 
structural deficiencies and difficulties that we have 
encountered as part of our challenge to explore and discover. 
And so in that nature, the objective here is to look at very 
specific technologies that would overcome propulsion system and 
power generation capacity limits that would otherwise exist.
    And in that regard, our primary effort for the most mature 
technology we seek to emphasize is for nuclear systems 
initiative, which is a maturing technology that gives us an 
opportunity to travel at speeds that exceed what we are 
currently restricted to, which right now are precisely or 
within the same realm or framework of what we did on Friendship 
Seven 40 years ago when Senator Glenn took his first trip.
    So as a consequence, we are in that same set of limitations 
there. And part of what we attempt to describe here in the 
opening statement as that objective is to look at the enabling 
technologies to achieve that vision and mission statement 
objective.
    A second area I want to touch on very briefly that is 
summarized towards the end of the statement as well, and then 
we will move from there again, with your indulgence, Madam 
Chair, to a discussion of the Hubble imaging that has just come 
back as of yesterday, is to touch quickly on the International 
Space Station and the approach that we are taking in this 
regard. And this is summarized later on page six and 
thereafter, in which our attempt is to look at five very 
specific dimensions of International Space Station to infuse a 
sense of management discipline to this particular process that 
we believe will correct some of the deficiencies and I think 
that Senator Bond touched on very, very clearly in his opening 
commentary as what we see as the nature of our problem.
    First and foremost is to emphasize the science priorities. 
This must be driven by science requirements. The purpose of 
having an International Space Station is multi-fold, but its 
first primary objective should be to achieve the science and 
research objectives that have been outlined.
    And in that regard there is a wide array of scientific 
community assessment and judgment that has been rendered over 
the course of the years, which unfortunately does not have any 
specific priority order attached to it.
    In that regard, what we have done is asked a team of 
external scientists who represent all of the disciplines within 
the scientific community to look at this range of approaches 
that have been advocated for what the scientific and research 
objectives will be on station and rank order prioritize what 
should be accomplished using this astonishing capability and 
infrastructure that we have managed to deploy at this juncture.
    That is the first objective, to reach a prioritization 
effort, which gives us a very clear understanding of what we 
can use to maximize the research potential for those research 
objectives that uniquely require the kind of capability and 
micro-gravity condition that exists on the International Space 
Station; and then as a follow-on matter, also to emphasize 
those research opportunities which would give us a breakthrough 
potential in those particular fields or disciplines.
    A second area of concern that is, again among the five 
focus areas that we are looking at for station, I think address 
the issues that were summarized well in the opening statement, 
is to focus very specifically on the engineering challenge of 
what we are dealing with here.
    Over the course of the next 2 years to achieve the core 
configuration--this is not so much limited by resources as it 
is by just the dynamics of large scale systems integration 
challenge.
    And, again, summarized as item two is the engineering 
objectives on page seven, which very specifically we looked to 
the course of the next 2 years through early fiscal year--I am 
sorry--through early calendar year 2004.
    There are ten successive shuttle flights with payloads that 
will build out the International Space Station in the graphic--
both here on the chart as well as before you--that need to be 
achieved in succession. And every one of those missions must be 
successful. Everyone has to be building on the success of the 
previous mission.
    That is not so much limited by resources as it is by just 
the engineering challenge of that many flights, that much of a 
payload and the succession of that kind of a payload 
integration challenge.
    So as a consequence, our approach is to focus very directly 
on the program management challenges of what it will take to 
achieve that particular objective, that milestone, which then 
could permit and facilitate the opportunity to consider the 
larger international partner assembly complete configuration 
that was envisioned so many years ago.
    But as an engineering matter between now and, you know, 2 
years from this stage in early 2004, if we do not achieve that 
milestone, we cannot look at expanding the scope of the 
International Space Station beyond what it is today. So it must 
be achieved and it must be done successfully in each of those 
successive ten missions to build out the entire station to 
facilitate that opportunity.
    The third quick item, again, touched on in your opening 
statements that is a matter of extreme interest and concern to 
me is the cost estimation and analysis problem. There is no 
question that exactly the history that Senator Bond recounted 
is the manner in which it was revealed.
    In early 2001, the determination was that we were $5 
billion at present over the estimate. And at this juncture, we 
have asked for and commissioned, as the statement describes, is 
an internal cost estimating procedure to validate what it will 
take to achieve core configuration and then to look at what the 
additional excursions would be for the international partner 
complete configuration that would follow thereafter.
    Secondary, we have also asked for an independent cost 
assessment, part of the recommendations of the Young Commission 
that reviewed this matter last fall and made recommendations to 
NASA on that point. We have commissioned that particular 
independent cost assessment, all of which we expect to converge 
this summer.
    So I can give you an estimate of what we believe to be the 
cost engaged in this particular activity. At this juncture, it 
is our best estimate, but it is one that I think needs to be 
validated further with a more disciplined cost estimating 
approach.
    The fourth area is the international partnership dimension 
that you referred to as well. The international agreements call 
for a build out of International Space Station beyond what is 
referred to as node two, which is that particular milestone 
that occurs in the early part of 2004. And to reach those 
agreements and to make sure that we have accomplished that task 
is what we attempt to touch on in that last point.
    And, finally, on the fifth objective of where we are on the 
International Space Station is to look at what the flight rate 
requirements are for shuttle and payload missions for Soyuzes, 
for progress flights from our Russian partners engaged in the 
activity, to assure that we have supported this particular 2-
year endeavor at this juncture to assure we reach that core 
configuration and then can discuss beyond that.
    As it stands now, the flight rate that is built into the 
budget is the maximum achievable flight rate to support this 
particular engineering dynamic. So as a consequence, there is 
no more aggressive deployment of that particular build-out 
procedure according to the project management and engineering 
team that manages the International Space Station and what we 
have built into the program. And it is designed purposely in 
order to achieve that systems integration success.
    With that, Madam Chair, if you would permit me, those two 
issues are the primary topics I wanted to at least touch on 
briefly, and then to defer quickly to a discussion of the 
Hubble imaging effort that just occurred. And, again, I think 
your characterization of it is precisely right.
    And I would simply add one footnote to the history of it. 
Ten years ago, this was an asset that was roundly criticized as 
an absolute failure, and as you correctly described, a 
corrective lens was installed by a remarkable astronaut by the 
name of Story Musgrave, who performed a series of space walks 
that were just positively over the top in terms of what anybody 
thought was achievable to bring this into a serviceable 
condition.
    But what we are getting back today as a consequence of the 
Hubble servicing missions that have occurred since that time, 
since his success in 1993, have really been beyond what we ever 
could have expected. And a gent that I have asked to join us 
here today is a veteran astronaut of four different missions, 
two of which were Hubble servicing missions to include the most 
recent one, STS 109, which was launched on March the 1st and 
returned in mid-March after the very successful upgrade of the 
power units aboard as well as the infrared imaging systems, all 
of which exceeded our expectations.
    Our fondest hope was that we would get a ten-fold increase 
of what we would see coming back as imaging from Hubble, which 
has already, even before the servicing mission, rewritten the 
astronomy books.
    But as a consequence of this latest mission, I think we 
have not seen anything yet in terms of the caliber of materials 
that has come back.
    John Grunsfeld is, again, a veteran astronaut, a fellow who 
was aboard the last mission, and in the history and in the 
legend of a guy like Story Musgrave, he too is becoming 
legendary, given the fact that he has done two of these 
servicing missions. And among all of his extraordinary 
characteristics as an astrophysicist and just a remarkably 
talented fellow, it turned out that his greatest attribute on 
this mission, on the several EVA space walks that he did to 
service the Hubble mission over the course of several hours, to 
include almost 7 and a half to 8 hours each mission--his 
greatest attribute is because all the control panels on Hubble 
are on the left-hand side, he is a left-hander, and so it made 
it an awful lot easier to service. So around NASA he is 
referred to as the ``southpaw savant.''
    So I would like to introduce Dr. John Grunsfeld, who will 
walk us through a few of the images that have just returned 
from Hubble and released just yesterday.
    Senator Mikulski. Thank you.
    [The statement follows:]

                   Prepared Statement of Sean O'Keefe

    I appreciate the opportunity to appear before the Subcommittee 
today in my new capacity as NASA Administrator. My objective throughout 
my stewardship of this storied Agency is to ensure that the Congress 
and the public are fully aware of our accomplishments, our current 
efforts and our plans for the future. My job as Administrator is to 
remind everyone of what NASA does and what we are capable of doing. 
It's a responsibility I take very seriously. I believe we are at a 
crossroads in NASA's history. We have an opportunity here and now to 
reinvigorate the Agency's agenda and renew the entrepreneurial spirit 
present at NASA's beginning--a continued characteristic of American 
culture.
    The President's fiscal year 2003 budget proposal for NASA of $15.1 
billion reflects the Administration's commitment to NASA's core 
research efforts and its fundamental mandate to advance aeronautics and 
aerospace science and technology. This budget initiates exciting new 
efforts in the realms of space transportation and propulsion. It builds 
upon our abilities to measure and understand our home planet and the 
natural--and unnatural--forces that shape our environment. I believe it 
is a well-balanced and progressive budget that allows us to set the 
stage for the future. Enclosure 1 displays NASA's fiscal year 2003 
budget request.
    In the 4 months since my confirmation, I have traveled across the 
country to visit each of our 10 Centers to meet NASA's dynamic 
workforce and have seen firsthand the remarkable science and technology 
efforts that are the underpinning of our endeavors. In this relatively 
short period of time, the Agency has taken a fresh look at the long-
term management, resource, and technical challenges while continuing to 
expertly carry out highly complex day-to-day operations. Together we 
have charted a vision and mission that I look forward to sharing with 
you this morning.
    My testimony today will focus on the talent and technology that is 
embedded in the NASA organization, the challenges we face, and, more 
importantly, the steps we will take as an Agency to chart a clear 
course for the future. We are intent on continuing the gains made over 
44 years while pushing the edge of the envelope of what appears today 
to be impossible. NASA today is working together, as one Agency, 
committed to a clear vision and refined mission that will serve as the 
blueprint for service to America.
    What NASA needs now is a roadmap to continue our work in a more 
efficient, collaborative manner. I first outlined this roadmap for NASA 
on April 12 at the Maxwell School of Citizenship and Public Affairs, 
Syracuse University. NASA's imperative is not only for the sake of 
knowledge--it is for our future and our security. I have introduced a 
new strategic framework and vision for NASA. It is a blueprint for the 
future of exploration. It is a roadmap for achievement that we hope 
will improve the lives of everyone in this country and everyone on this 
planet.
    That is a bold statement, I know. But, I am confident in saying 
this because the unique work that NASA does truly touches all of our 
lives.
    This is NASA's vision for the future. Our mandate is:
  --To improve life here;
  --To extend life to there; and,
  --To find life beyond.
    This vision is much more than carefully arranged words; it frames 
all that we do and how we do it.
    So, how do we get to that impressive picture of the future? The 
answer is by executing NASA's mission:
  --To understand and protect our home planet;
  --To explore the Universe and search for life; and,
  --To inspire the next generation of explorers as only NASA can.
    To understand and protect our home planet, NASA develops and 
employs the technology to make our nation and society a better place. 
We forecast the impact of storms on one continent upon crop production 
on another continent, track and predict the patterns of mosquito-borne 
diseases, and study climate, geography and the environment.
    NASA's contribution to security comes from increased cooperation 
and the sharing of imagery and unique technology with the Federal 
agencies charged with the defense of our homeland. Aerospace 
innovations developed at our centers prevent civilian aircraft from 
being used as weapons. Improved air traffic control safety systems and 
engineering that will make future airplanes more efficient and 
environmentally sound are clear examples of our role in the changing 
nature of transportation and our Nation's security. Hypersonics and 
quiet aircraft are efforts to speed transport and, in doing so, bolster 
the economy.
    Our mission's second theme is to explore the Universe and search 
for life. NASA will exploit advanced technology, robotics, and will 
eventually use humans to explore and seek the answers and the science 
behind our most fundamental inquiries: How did we get here? Where are 
we going? Are we alone? If we are to achieve our ambitious objective of 
exploring the universe and the searching for life beyond our Earth, be 
it through flights to Mars or observing faraway planets, we must 
continue to learn about and overcome the technical hurdles that remain 
in our quest to answer our most probing questions.
    NASA's recent achievements are only the beginning of the Agency's 
role in rewriting tomorrow's textbooks for America's children, as well 
as for today's astronomers and astrophysicists alike. Just yesterday, 
NASA released the first images received from the newest science 
instrument on the Hubble Space Telescope, the Advanced Camera for 
Surveys (ACS). The new ACS was part of the recent and highly successful 
STS-109 servicing mission, during which astronauts helped take Hubble 
to the next level of excellence. This new and improved camera now 
offers us 10 times the discovery power than the camera it replaced. 
With the ACS, our view into the depths of our Universe has been taken 
to a new level. I would like to share with you today a set of the 
stunning new images from the Hubble Space Telescope, including an image 
of a spiral galaxy dubbed ``Tadpole,'' residing in a constellation 
about 420 million light years away; an image of the center of the Omega 
Nebula, a hotbed of newly born stars, 5,500 light years away; and, an 
image of a pair of colliding galaxies nicknamed ``The Mice,'' more than 
300 million light years away.
    Later this month, we will launch the GALEX, Galaxy Evolution 
Explorer, which will use ultraviolet light to conduct an all-sky 
ultraviolet survey and detect millions of galaxies located billions of 
light years from our earth. Next year, we will travel further into our 
own solar system with the launch of the Mars Exploration Rovers and 
Mars Express missions. The Mars Rovers will take us beyond the success 
of the Mars Pathfinder mission in 1997 and allow us to analyze rock and 
soil samples on the Martian surface at a microscopic level. Mars 
Express, a mission planned by the European and Italian space agencies, 
will be the result of international collaborative efforts with NASA. 
This mission will take us another step closer to our search for 
evidence of past or present life on Mars. In January 2003, we will 
launch the last of NASA's great observatories, the Space InfraRed 
Telescope Facility, destined to be a cornerstone in our Astronomical 
Search for Origins Program and allowing us to peer into regions of 
space currently hidden from our view.
    If we are to achieve the mission of exploring the universe and 
searching for life, there is much we must still learn and many 
technical challenges that must be conquered. Today's chemical energy 
rockets that have been the engine of exploration since the inception of 
space travel are today at the limit of what they can deliver. Using 
current technology, if we were to embark to explore Pluto in 2006, the 
earliest we could arrive there is 2014-2016; and then, upon our 
arrival, we would only be able to obtain meaningful research for 4-6 
weeks. That is an 8-10 year travel period for 4-6 weeks of science. 
NASA's fiscal year 2003 budget includes nearly $1 billion for a nuclear 
systems initiative as a first step in addressing this challenge. 
Nuclear propulsion is a mature technology that has been used safely by 
the U.S. Navy since 1955. Since that time, the Navy has sailed over 120 
million miles encompassing 5,000 reactor years without incident. This 
technology may hold the key to overcoming the time/distance challenge, 
and its application to space travel has great potential.
    Propulsion is only one of the challenges facing further human 
exploration of space. Still unknown are the long-term effects of 
radiation and exposure to a microgravity environment on humans. The 
fiscal year 2003 budget includes funding for a new initiative for space 
radiation research.
    Our third mission objective is to inspire the next generation of 
explorers. America looks to NASA to build an unequalled scientific base 
of knowledge and motivate our youth to embrace math, science and 
engineering. While opportunities in the technology sector are expected 
to quadruple this decade, the pool of college students enrolled in 
science and engineering courses continues to decline. NASA has an 
obligation to the nation and its own workforce to reverse this trend.
    NASA faces similar challenges with its scientific and engineering 
workforce. During one of my recent Center visits, I found that only 62 
engineers out of a 3,000-person workforce were less than 30 years old. 
In fact, as an Agency, our over-60 population is three times larger 
than the under-30 workforce. Inspiring the next generation of explorers 
to enter fields of science and engineering is integral to NASA's 
success in reconstituting our workforce for the 21st Century 
challenges.
    Students are only part of the education equation at NASA. Our 
Nation's educators are also a critical component of NASA's revitalized 
education focus. Teachers at all levels already possess the skills to 
inspire and plant the seeds necessary for this Nation to grow the next 
generation of science and technology leaders. NASA can best introduce 
itself and the science that it represents into the classroom by teaming 
up with educators, especially at the younger grade levels.
    Inspiring future generations works in synergy with NASA's mission 
to protect our home planet. The U.S. Commission on National Security 
for the 21st Century (the Hart-Rudman Commission) concluded that 
advances in technology and changing economies mandate an increase in 
the level of technology literacy across society. It is clear that 
technological human capital is an essential component of our national 
security equation.
    Our mission concludes with the statement, ``as only NASA can.'' Our 
Agency is one of the Nation's leading research and technology Federal 
agencies with unique tools, capabilities and expertise that represent a 
National asset. The Agency contributes to America in a broad spectrum 
of areas. Medical technologies, aerospace innovations, spin-offs, nano-
technologies, and countless commercial applications are rooted in NASA 
discovery. Our commitment to the American taxpayer is to continue 
providing a direct and very tangible means of improving life on our 
planet. Extending life beyond the reaches of our earth is not a process 
driven by any particular destination, but by science that will 
contribute to the social, economic, and intellectual growth of our 
society.
    NASA provides a constant return on taxpayer dollars with each new 
discovery, telescope picture, launch, patent, and newly inspired child 
or adult. That being said, none of the ambitious plans that I have 
detailed for the Agency will take root if we fail to improve the 
management of our resources, commit to fiscal responsibility, and 
establish a clear set of priorities. A clear vision and integrated 
mission are important foundations for NASA's future success, but 
success requires that we embrace a wide variety of tools to move us 
forward.
    At NASA, and at other departments and agencies across the Federal 
Government, we are vigorously implementing the President's Management 
Agenda as a powerful management initiative. Each of the five items 
included in the Agenda applies directly to NASA.
    First on the Agenda is the strategic management of human capital. 
As I mentioned previously, we face challenging times as we reconstitute 
and reshape our workforce for the 21st century. Today we have an 
extremely experienced workforce in terms of overall capability. The 
downside, however, is that almost one-third of the workforce will be 
eligible to retire within the next 3-5 years. We must aggressively deal 
with this leadership and workforce challenge. I have recently forwarded 
a series of legislative provisions to the Office of Management and 
Budget, which address this challenge head-on. These provisions will 
complement the Administration's Managerial Flexibility Act, and I look 
forward to working with the Congress to ensure that these essential 
tools are enacted into law.
    The second element of the Agenda is competitive sourcing. We are 
thoroughly examining the best ways to motivate a competitive sense in 
all we do. By focusing on results and outcomes, we will find the most 
efficient means to accomplish our goals.
    The third element of the Agenda is expanded electronic government. 
We must pay specific attention to information technology and ensure 
that the information technology process is integrated into Agency 
decision-making.
    The fourth element of the Agenda is improved financial management. 
I am pleased to report that we are aggressively implementing our 
integrated financial improvement program, which is now in the third 
year of its implementation schedule. I have tasked the staff to explore 
all options to determine whether we can accelerate implementation 
throughout the Agency.
    The fifth element of the Agenda involves budget and performance 
integration. We must become results-oriented and link our budgets to 
performance. We will breathe new life into the Government Performance 
and Results Act. We in NASA are spending a great deal of effort into 
developing metrics to measure performance.
    I would now like to provide a status of two of our major programs.
International Space Station
    The International Space Station (ISS) is without precedent in the 
history of the U.S. space program. The ISS Program has had a year of 
spectacular technical achievements, which include ground preparation 
and checkout, launch integration, and on-orbit assembly and operations. 
To date, the ISS program has achieved remarkable technical successes; 
however, it has not been equally successful in controlling cost growth. 
Last year, NASA projected an overrun in the amount it needed to 
complete the space station, as then planned, of up to $4.8 billion. 
While some of that growth may be attributable to such factors as 
inadequate initial requirements definition, added content, late 
delivery, and development problems leading to cost variance, there are 
clearly areas of fiscal management and program control that need 
improvement.
    The President's Budget Blueprint for fiscal year 2002 laid the 
groundwork for attaining cost control and regaining credibility for the 
program to reach its full potential. As a result, a course of action 
was prescribed to get cost growth under control and restore confidence 
in NASA's cost management, and to achieve the science priorities for 
which the Nation has made a large investment. We are continuing with 
the reassessment and review activities that we began last year that 
followed the Blueprint, but did not eliminate the cost challenge. The 
President's fiscal year 2003 budget projections include about $600 
million of savings that NASA will realize through the implementation of 
identified program initiatives, and a process that continues to seek 
additional savings while containing the threats to further ISS cost 
growth. While steps taken last year were designed to contain cost 
growth and to gain better understanding of its source and nature, this 
year will be one of corrective action--putting in place the right 
processes, tools, management controls, and measures to improve and 
evaluate the ISS program.
    Thanks to the efforts of the ISS Management and Cost Evaluation 
(IMCE) Task Force, led by Mr. Thomas Young, we are well along in 
effecting proper controls and regaining credibility. I have reviewed 
the Young team's recommendations and have endorsed them as a roadmap to 
improve the ISS Program management. As a result, the ISS management has 
already taken actions to develop implementation strategies.
    The following five points are guiding our efforts at reform and 
revitalization of the ISS program:
    Research Priorities.--Establishing an integrated portfolio of 
science and technology priorities that maximize the benefits of space-
based research within available resources. In addition to addressing 
the cost challenges of the ISS, we must make a renewed determination of 
the research goals and on-orbit capabilities that we want the ISS to 
achieve. Our priority should not be to simply build an ISS to a 
specific hardware complement and then seek research and experiments to 
make use of the hardware. The ISS Program should be driven by high-
priority research objectives. NASA has recently established a Research 
Maximization and Prioritization (ReMaP) Task Force to assess how high-
priority research objectives can be best met by ISS within available 
resources, and how the resulting research strategy might evolve, given 
the possibility of research-driven enhancement to the ISS beyond U.S. 
Core Complete.
    Engineering Development/Deployment.--Development of a program road 
map that focuses on successfully achieving a ``core complete'' 
configuration within budget. This will not be easy, but we are 
dedicated to making it happen. Therefore, it is imperative that 
Congress provide us with the requested funds so that we can meet our 
commitment to achieving a core Station. Should NASA demonstrate that 
reforms are implemented and cost credibility is regained, this will 
enable future decisions towards a requirements-driven ``end state'' 
that will, defined in terms of science priorities, allow an expanded 
research potential for us and our international partners.
    Cost Estimation and Analysis.--The ISS is the largest and most 
complex engineering development program ever pursued by the United 
States. Implementation of improved methodologies, tools and controls 
are underway and will allow us to regain credibility and improve our 
ability in financial forecasting and strategic planning capabilities. 
An independent cost review is underway to better understand our costs. 
These projects will also be beneficial to the Agency at large.
    International Partnerships.--An important challenge is maintaining 
the ISS international partnerships. Our partners have expressed their 
concerns stemming from NASA working to get the fundamentals right to 
achieve U.S. core complete; and then to identify options beyond U.S. 
core complete to realize the full potential of the ISS. Although the 
configuration of the ISS has been modified to meet the cost challenges 
we face, the fundamental purposes remain--research and international 
cooperation. To reaffirm NASA's strong commitment to its international 
partnerships, I have formed a team to meet with representatives of all 
our partners to understand their concerns and to work with them in the 
spirit of cooperation.
    Mission and Science Operations.--Advanced planning for Space 
Shuttle and ISS operations to maximize the productivity of on-orbit 
research and ensure the safety of real time operations.
Space Shuttle
    NASA is proud of its historic record of 106 Shuttle missions and, 
in particular, the accomplishments of the last year in support of the 
ISS. Last year, seven Shuttle missions were flown with five of those 
missions launched during a 6-month period.
    This budget continues to invest in safety and supportability 
improvements for the Space Shuttle and increases the investment in 
repairing aging Shuttle infrastructure. These investments, totaling 
$1.35 billion over the next five years, will ensure that the Space 
Shuttle can meet NASA's space transportation needs for at least the 
next decade. NASA seeks to implement these upgrades as quickly as 
possible, and is working to accelerate the availability of planned 
upgrades. These investments are an integral part of NASA's Integrated 
Space Transportation Plan (ISTP), which also includes investments in 
the Space Launch Initiative (SLI) for NASA's next-generation reusable 
space transportation system.
    As recommended by the IMCE Task Force, reducing the Space Shuttle 
flights to four per year appears to be sufficient to meet ISS needs. 
However, we are reviewing this decision to determine whether any 
additional flights are necessary.
    The President's budget also provides for the continued pursuit of 
Shuttle competitive sourcing. The anticipated benefits of competitive 
sourcing include: (1) greater flexibility to recruit and retain the 
skilled personnel necessary to safely operate the Shuttle; (2) avoiding 
potential continued cost growth for Shuttle operations by moving to a 
private organization that has greater flexibility to make business 
decisions that increase efficiency; and, (3) significant culture change 
in Human Space Flight at NASA by making it a purchaser of services 
rather than an operator of infrastructure.
    Mr. Chairman, I believe the vision, mission, programs, initiatives 
and budget I have described represent a strong commitment to a healthy 
and forward-moving NASA. I believe it is deserving of the 
Subcommittee's strong support and I look forward to working with the 
Subcommittee to achieve an appropriation that supports the President's 
budget request.
    I have mentioned the opportunity I have had to meet the men and 
women of NASA, working in our installations across this land. We have a 
diverse and resilient workforce, and they are proud and excited about 
the work they are doing. They are our greatest assets and I believe our 
greatest hope for the future of this Agency. They have shown me their 
desire to be a part of the work contributing to even greater meaning in 
the larger dreams represented by this Agency. Their eagerness and 
dedication and the strength of their resolve tell me that, together 
with the support of Congress and this Subcommittee, we can achieve what 
we have set out in this budget to accomplish--and more.
    Thank you.

                    NATIONAL AERONAUTICS AND SPACE ADMINISTRATION FISCAL YEAR 2003 ESTIMATES
                                       [In Millions of Real Year Dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                    Fiscal year
                                                                 -----------------------------------------------
                                                                   2001 Op plan    2002 Initial      2003 Pres
                                                                    revised \1\       Op plan         budget
----------------------------------------------------------------------------------------------------------------
Human Space Flight..............................................         7,153.5         6,830.1         6,130.9
International Space Station.....................................         2,127.8         1,721.7         1,492.1
Space Shuttle...................................................         3,118.8         3,272.8         3,208.0
Payload & Elv Support...........................................            90.0            91.3            87.5
Heds Investments and Support....................................         1,247.8         1,214.5         1,178.2
Space Communications & Data Systems.............................           521.7           482.2           117.5
Safety, Mission Assurance & Engineering.........................            47.4            47.6            47.6
Science, Aeronautics & Technology...............................         7,076.5         8,047.8         8,844.5
Space Science...................................................         2,606.6         2,867.1         3,414.3
Biological & Physical Research..................................           362.2           820.0           842.3
Earth Science...................................................         1,762.2         1,625.7         1,628.4
Aerospace Technology............................................         2,212.8         2,507.7         2,815.8
Academic Programs...............................................           132.7           227.3           143.7
Inspector General...............................................            22.9            23.7            24.6
                                                                 -----------------------------------------------
      Total Agency..............................................        14,253.2        14,901.7        15,000.0
----------------------------------------------------------------------------------------------------------------
\1\ Fiscal year 2001 restructured to reflect two-appropriation structure

                     HUBBLE SPACE TELESCOPE IMAGES

    Senator Mikulski. Good morning, Doctor. Come on up.
    We are looking forward to hearing you. You know, they often 
say about this agency and these appropriations for it really is 
rocket science. But we are glad to really meet a rocket 
scientist, so----
    Dr. Grunsfeld. Do you have a baseball analogy for a lefty?
    Senator Mikulski. No. I am going to just----
    Dr. Grunsfeld. All right.
    Senator Mikulski. I am going to just sit in the dugout here 
and look at the pictures.
    Dr. Grunsfeld. Well, it is truly a pleasure to be here. And 
I thank you very much for allowing my participation.
    First, let me say that I was on the Hubble Space Telescope 
a month and a half ago, and the Hubble Space Telescope is a 
national treasure. I would just like to report to you that the 
telescope is in fantastic shape.
    We spent about 35 hours space walking on the Hubble Space 
Telescope. While the outside may look a little tattered, inside 
it is a brand new telescope. And even more so now that we have 
made the upgrades, as Mr. O'Keefe told you, the telescope is 
now ten times better and has a new power system, so I think 
effectively we can consider it a brand-new telescope.
    It is very exciting for me to be involved in the Hubble 
project as an astronomer simply because it is kind of a Mecca 
for astronomers in that it is the most productive scientific 
instrument ever created by people. I think that is just 
incredible, we are all alive at this time in history to be 
participants. So I would like to bring all of you as 
participants into that a little closer by showing a short video 
with some of the early results. And I really want to just 
remind you that the best is yet to come. This is just a sneak 
preview.
    So we are going to start with the first images. These were 
released yesterday. They are from work that occurred in April 
from the advanced camera for surveys, a digital camera. It 
actually has three cameras inside of it, but it is the digital 
camera.
    We are going to show you four pictures today. The first 
picture is called the cone nebula. And this is a very large 
turbulent pillar of gas very much like the Eagle nebula 
pictures from the wide field camera. But this is unprecedented 
detail of this nebula. And this nebula is a star forming 
region.
    We are seeing where baby stars are born and start to grow. 
There is another star off field that is illuminating this and 
giving us just beautiful views of this.
    The next picture is zooming in from an earth-based optical 
picture, which is now low resolution compared to the new Hubble 
images. You can see it getting blurry until you get to the 
Hubble image. And as we zoom in, you can see the very, very 
small detail. This picture is only about 3,500 times as big as 
our solar system.
    The next is the Mice. And this is a zoomed-in view of the 
tail, and the detail is unbelievable. This is a 16 million 
pixel camera, and we are seeing a galaxy that has collided with 
a much smaller galaxy and thrown out a pillar of gas. The two 
galaxies are interacting and the tails--but in the background, 
you see all these other objects. And it comes out more in this 
picture, which has been named the Tadpole. And, again, it is 
interacting galaxies that have thrown out a tail. Star 
formation is occurring in that tail, spawning off new galaxies.
    The incredible thing about this picture is in the 
background--the main thing to take was the picture of the 
Tadpole galaxy, but in the background, it is virtually another 
Hubble deep field. This picture was taken over the course of 
about 1 day of observation compared to the 12 days of the deep 
field.
    When we take pictures like this, I think we are going to 
get a deep field in every picture, and it is just incredible. 
There is a total of about 6,000 galaxies in the background of 
this picture, twice----
    Senator Mikulski. 6,000 galaxies?
    Dr. Grunsfeld [continuing]. The number that we saw in the 
two deep fields that were dedicated precious Hubble time.
    We saw pictures of bright young stars in those pictures. I 
had the opportunity last week to talk to third-graders in my 
hometown, which is the south side of Chicago. That is the age 
at which I kind of became inspired to do science. It was when I 
had to do a biography of Enrico Fermi, a famous American 
physicist.
    I had the opportunity to talk to a third-grade class about 
the Hubble mission. There was one little girl in that class who 
raised her hand and asked me a question, and it was more of a 
statement than a question. She said, ``Did you know that 3 
billion years or 4 billion years from now, our sun is going to 
explode and create a planetary nebula like the ones you showed 
in the pictures?''
    Senator Mikulski. She said that to you from the third 
grade?
    Dr. Grunsfeld. She said that to me. I thought this is 
incredible that a third-grader knows enough about stellar 
evolution and the course of stars like our own, that there is 
hope for all of us yet. And I think those are the bright young 
stars that these Hubble images really talk to is our young 
people, getting them interested in that age in technology and 
science. I thank you very much.

                             HUBBLE MISSION

    Senator Mikulski. Well, thank you very much, Doctor.
    First of all, I think in behalf of the Committee and the 
Congress and the country, we really want to thank you and we 
want to thank the astronauts who went on this mission. It was 
not an easy mission. It was a white-knuckled mission in terms 
of the complexity of the retrofitting.
    All the hard work and the training that you all did in 
order to be efficient and safe in space, first of all, we want 
to thank you for the successful completion of the retrofitting 
that adds not only new life to the Hubble, but a whole new 
incredible capacity, bringing it far beyond what we wish we had 
even thought of for Hubble.
    And so we would like to thank you and, of course, everyone 
connected with Hubble in terms of what they are doing. And some 
day that little third grader is going to be--I have a feeling, 
is going to be up in space.
    And so, again, do you not think we ought to just give them 
a round of applause here?

                   MANAGEMENT REFORMS OF THE STATION

    And after that, it seems kind of nickel and dime to be 
talking about the budget, but we must. So thanks again and we 
look forward to this.
    Thank you. I am going to move now to my questions and let 
us go to the issues related to--I know that Senator--let us go 
to the questions related to the space station.
    In your written testimony on pages six and seven, you 
really go into what you want to be the management reforms of 
the station. $4 billion in overruns; $4 billion in overruns. 
You give these excellent five points and you had them in your 
testimony, the research priorities, engineering developments, 
cost estimates, holding steady our international partners, 
which is getting tattered and worn, and then, of course, 
mission.
    What can we expect over the next year in terms of the 
bringing this into some form of discipline and some form of 
really true cost estimates in terms of what the station will be 
able to do?
    Mr. O'Keefe. Well, first of all, if you would permit me, 
Madam Chair, I want to thank you again for the recognition of 
John Grunsfeld, Scott Altman and his extraordinary crew that 
performed this mission. It was really remarkable, and I thank 
you for the opportunity to present that today.
    As it pertains to the International Space Station, I think 
you put your finger right to it. What we are focused on and 
clearly dedicated to is to focus on program management and 
fiscal discipline principles to achieve the core configuration 
so we can then have a meaningful discussion and debate of how 
to best utilize the scientific requirements or to employ the 
scientific requirements that will emerge from that.
    My strongest hope and frankly confidence is that this 
summer as we complete the internal, as well as, independent 
cost estimates, that we are going to find ourselves within the 
range of what we presented as the budget for this particular 
endeavor and assure that we stick to that as a means to 
accomplish this particular task.
    Again, the pacing milestone that is most critical, for 
which everything needs to be discussed from that point is the 
accomplishment of node two, which is part of the international 
partner deployment of that module, which then facilitates a 
larger configuration potential. But between now and then, what 
you see in the budget for 2003 as well as the projections for 
2004 is the amount required to achieve the core configuration, 
and based on the map out here of each of the fiscal years laid 
out, or each of the calendar years; and to achieve that task 
then makes open the possibility for a larger discussion of what 
assembly complete would look like with all the international 
partner components that would go to that.
    If we do not meet that milestone, that objective, there is 
not a discussion beyond that. As an engineering matter, the end 
state, not because it is resource constrained, not because 
anyone wants it to be that way, but because that becomes the 
reality of what we are faced with if we cannot achieve the core 
configuration by that stage.
    So our focus is very much on the knitting of getting from 
here to that big milestone, and then assuring that each of the 
international agreements that we have entered into can then 
follow on from there to achieve what could be the assembly 
complete configuration.
    But until that point, our focus has to be primarily on the 
core configuration between the elements, and the budget 
includes----

                      SPACE STATION COST OVERRUNS

    Senator Mikulski. We appreciate the focus on the core 
configuration. And here is my question: based on what you're 
bringing to bear on the space station through your executive 
ability and management methodologies, can we have your 
assurance that the cost overruns are over?
    Mr. O'Keefe. This summer, when the internal, as well as 
independent cost estimate is complete, I will be able to give 
you a definitive answer on that.
    Senator Mikulski. Oh, we take you for your word. We believe 
you are a man of integrity and that is why we need candor here.
    Mr. O'Keefe. Sure. I appreciate that. Yes. At this 
juncture, I cannot give you an assurance that this is the end 
of it. I do not know, until that independent cost estimate and 
the internal estimate is complete.
    I think we are heading in that direction. There is nothing 
so far, that I have seen in the last 4 months that has been a 
surprise or anything even approaching what we saw emerge as a 
consequence of the early January 2001 revelations of what the 
cost configurations were here.
    So there is nothing along that run, or line. But I think by 
this summer, I will be able to give you a definitive answer to 
that. Until then I am withholding judgment myself. We are 
trying to exert as much of a discipline in that process to make 
what we have sent and the President has proposed for 2003 as 
well as projections for 2004 for the International Space 
Station, the resources we think at this juncture are necessary 
to achieve that task.

                       CORE COMPLETION--CREW SIZE

    Senator Mikulski. Well, first of all, I want to salute you, 
because I think that you are ending this culture associated 
with the station that it did not matter if there were cost 
overruns, that we would make it up in other programs. And all 
of us feel that other programs have suffered because of it.
    But one last question and then we will be turning to 
Senator Bond. I understand that the core completion means that 
the station would be able to house three crew astronauts, am I 
correct in that?
    Mr. O'Keefe. Yes.
    Senator Mikulski. And that anything to go to the seven, 
which we had already envisioned, would be beyond core. So this 
is really the basics, not even the basics. This is the bare 
minimum to even justify the station. Am I correct?
    Mr. O'Keefe. Well, the----
    Senator Mikulski. And then the question is: Can you really 
do research with three astronauts?
    Mr. O'Keefe. Yes. This is definitely a chicken and egg 
problem. I think you put your finger right to it, Madam Chair. 
But let us recall, again, as a systems integration, an 
engineering reality, we are through 2004--under any 
configuration whether we agreed to a ten-astronaut 
configuration, or twenty, or whatever other number you would 
like. The reality is in the next 2 years, the engineering 
principles driving the direction, and the systems integration 
challenges driving the direction of an International Space 
Station, between now and 2004, that will accommodate three.
    There is no way to accommodate larger than that between now 
and then, and never was part of the plan. Even before the cost 
estimates were revealed to have increased, there was not a 
point where we would have achieved more than three crew 
members, up until 2004.
    It was beyond that that was the original agreement and 
understanding, because, again, the buildout time it takes to do 
this is such that we are about halfway there right now, maybe a 
little more than that. And so as a consequence, the reality is 
we are going to be at a three-crew-member configuration. We 
were going to be at that a year ago. We were going to be at it 
yesterday. We will be at it tomorrow.
    The plan, the objective, the clear intention is to get to 
the point by early 2004 where we can look at the deployment of 
modules and components that would make this a larger 
configuration for a crew size driven by the science 
requirements, not by some number we all make up. Instead, it 
ought to be driven by what those requirements are and how many 
crew it takes in order to conduct that set of priorities that 
are there.
    So part of the discussion we need to engage in here over 
the course of the next year, as we reach that configuration 
that facilitates this meaningful discussion, is to talk about 
what those priorities are and how far we want to go, how deep 
down that priority list we want to achieve this and, therefore, 
how many crew members it will take to accomplish that task.
    That is a more, I think, appropriate way to look at the 
nature of the objective, the mission of what is required and 
the requirements for this extraordinary capability, rather than 
backing into it by some crew configuration number that is 
different.
    Again, the total crew size that exists today was the crew 
size that was envisioned at the time of the international 
agreements at this time. And all the way through 2004, that was 
going to be the crew size configuration. My fondest hope is 
that we not stop there. Nonetheless, we need to exert the 
discipline to assure that we can at least get there before we 
can even entertain a discussion beyond that.
    Senator Mikulski. Senator Bond, I know you have questions 
on this.

                     PRIORITIZING SCIENCE RESEARCH

    Senator Bond. This is an area we have discussed before and 
one of great concern to me. The core complete, obviously you 
have got to take the first step before you can start to jog or 
run, and one of my questions was going to be how you prioritize 
the science research.
    And you have indicated briefly that you are going to move 
to the science side first and use the science requirements to 
drive the configuration needs for manning the space station. Is 
that a fair assessment?
    Mr. O'Keefe. Yes, sir. I think the science and research 
objectives are the primary, not the only, but the primary 
reason why we have engaged in this remarkable challenge of 
building something this big, 250 miles straight up that is 
moving at 18,000 miles an hour while we are trying to build it. 
It is a challenge, yes.
    Senator Bond. And in prioritizing the science--we talked 
about it yesterday--tell us about how you are prioritizing the 
science for the station. What kind of tests are you doing? Are 
they laying out in each project the time, the crew man hours or 
time hours, the costs? How are you prioritizing the science?
    Mr. O'Keefe. Thank you, Senator. The approach is to pull 
together, and what we have assembled now is a group of 
scientists who represent all of the respective disciplines, to 
include a plant scientist, to include Dr. Vitchi, as well, who 
is one of the members of that particular group, that is 
prioritizing the full range of all the scientific objectives 
that has been expressed by each of those communities, chemists, 
biologists, plant scientists, across the board, everyone who 
has articulated what they think are the purposes or the 
utilization of capability that is continuous microgravity 
condition----
    Senator Bond. Yes.
    Mr. O'Keefe [continuing]. And for which there would be 
extraordinary breakthrough research opportunities, if conducted 
in that atmosphere. So in other words, what we have asked them 
to do in representing all of those disciplines is, give us your 
highest priorities that meet those two criteria, then use this 
capability uniquely.
    Senator Bond. When is that due? When are you going to get--
--
    Mr. O'Keefe. That would be finished by early June. Within 
the next 6 weeks, we will have that in hand. Yes, they have 
committed to that. They are on track for that too.
    Senator Bond. Yes. Do you get it prioritized? Do they say, 
This is going to take--this project, we estimate will take so 
many crew hours, so many crew days, so many crew years``? How 
do you--if you are going to meld that in, you need to know the 
cost of it.
    Mr. O'Keefe. Sure, yes, sir.
    Senator Bond. You need to know the extent of the equipment. 
And I gather from what you are saying, although you have not 
said it explicitly, the crew size you are going to shoot for 
ultimately is going to depend upon the human needs associated 
with each experiment.
    Are they going to give you an estimate of the crew time? Is 
that going to drive the habitation needs?
    Mr. O'Keefe. Yes, sir. Well said. That is exactly the 
objective, to look at that as the driving requirement. While 
this particular group is not making an assessment of how many 
people to take or how much does it cost, we already have that 
in the can by virtue of the fact that most of the efforts that 
are underway in each of these research communities are 
identified. What they are doing is prioritizing them, so 
therefore you can draw from each----
    Senator Bond. So you have the crew--each project has a crew 
time, cost and all that.
    Mr. O'Keefe. Can be derived.
    Senator Bond. They are just prioritizing their--okay.
    Mr. O'Keefe. It can be derived, yes.

                   BEYOND CORE COMPLETE CONFIGURATION

    Senator Bond. And at what point, assuming they come up with 
some things that require, say, for example, that you go up to 
the seven-man crew. Under what proposal, when would you be able 
to provide for and fund a habitation module and the crew return 
vehicle necessary? What are you doing in that area to--I know 
you have some options. Tell us about those if you would, 
please.
    Mr. O'Keefe. Yes, sir. Thank you. As it stands, several of 
the decisions that are necessary to look at beyond core 
complete configuration can be made in 2003 and the early part 
of 2004. There are a few that really need to be considered and 
thought about as early as this fall, or certainly by the time 
the 2004 budget is presented to the Congress for your 
consideration.
    So there are a few issues that are pacing items that need 
to be considered on that point. The most critical of them is 
the successful development and production of the node two 
module, which the Italians are very ably conducting right now. 
We have been working with them extensively to assure delivery 
of that module that then opens up the opportunity for the 
habitation module you described.
    Senator Bond. Yes.
    Mr. O'Keefe. So the decisions are about a year off, and we 
need to assess that to see where we are on the deployment of 
that particular configuration by that time.
    On the crew return vehicle that you have discussed, we are 
looking at several alternatives that will be platforms to 
accomplish multiple objectives, not single purpose objectives.
    And as it stands now, the X38 crew return vehicle, which is 
a single purpose mission craft which was designed and 
developed, there has been a test article of it. We know how far 
that is going to go and we got a pretty good idea of how to 
make it, and instead of going ahead and producing or investing 
the $1 billion plus that it takes for a single purpose craft, 
we are setting that aside and looking at other alternatives 
that would give us multiple mission objectives for 
transportation, for resupply, for logistics, for payload 
requirements, and crew return capacity.
    So there are a number of options we are looking at right 
now that are developed, that are flight tested as well, that if 
we can deploy in the same time frame coincident with any change 
that would necessitate a crew size larger than three, then we 
have got an opportunity, I think, to look at those options 
right now, this year and develop them during the course of the 
next two, in order to achieve that set of objectives.
    So we are on track to do that. I think we have got the 
options ready to go to consider it and if need be, if we have 
to go to a single purpose craft like an X38, we have got that 
ready to re-energize, if necessary, or reactivate in order to 
achieve that task.
    But at this juncture, investing in a single-purpose craft 
that meets a crew-size objective greater than what we currently 
have and investing what we know is going to be a substantial 
amount for a single-purpose objective, we are looking to buy 
that extra time in order to achieve the multiple mission 
objectives and to leverage that investment for those multiple 
purposes.
    Senator Bond. It sounds like it makes a lot of sense to me. 
I hope it works. And we will be watching that.
    Thank you, Madam Chairwoman.
    Mr. O'Keefe. Thank you, sir. I appreciate your support.
    Senator Mikulski. Those were excellent questions, Senator 
Bond. They parallel my thinking.
    Again, I think you can see you have got really bipartisan 
support and you have bipartisan questions.
    Senator Shelby.

                   PRIORITIZING RESEARCH FOR THE ISS

    Senator Shelby. Thank you. Thank you, Madam Chairman.
    I just want to briefly associate myself with Senator Bond's 
questions regarding the prioritizing of the research for the 
International Space Station.
    Mr. O'Keefe. Sure.
    Senator Shelby. I think we have to, Mr. O'Keefe, recognize 
the importance of material science research, as a key enabler 
to our future success in space. And I hope that NASA will 
remain committed to working with industry to develop materials, 
devices and processes that we are going to need tomorrow.
    Mr. O'Keefe. Yes, sir.
    Senator Shelby [continuing]. I think that there is so much 
out there, if we will not ignore it. And I hope you remain 
committed to this.
    Mr. O'Keefe. Yes, sir. No, very much so. I think that you 
put your finger to a very important element of the research 
agenda that must be emphasized that gives us the unique 
capability to utilize the space station for what it was 
envisioned to be used for, and can give us some breakthrough 
opportunities. I think you are exactly right.

                       NUCLEAR SYSTEMS INITIATIVE

    Senator Shelby. There is no telling where it will carry us 
in the future with our industrial products and everything that 
goes with it.
    Mr. O'Keefe, the nuclear systems initiative, my colleague 
from Ohio touched on earlier. I know you mentioned it in your 
written testimony.
    Compared to current technology, what specific capabilities 
is the nuclear initiative designed to produce for our 
spacecraft? And how will this initiative's success impact 
future missions, particularly NASA's ability to conduct space 
science? I think it has a lot of promise, as Senator DeWine 
said, but I thought you might want to touch on it here in the 
open hearing.
    Mr. O'Keefe. No, I appreciate it. Thank you, Senator. First 
and foremost, this is the best example of what I think we can 
find and what we see in the manifest and the budget for 
enabling technologies to get past what had been structural 
limitations for exploration and discovery for 40 years.
    And the fact of the matter is, again boldly stated, that we 
travel beyond lower earth orbit at speeds that roughly 
approximate that which John Glenn flew at in Friendship Seven 
40 years ago. We are stuck in that laws of physics paradigm. 
And we have not found a successful method of----
    Senator Shelby. We have got to break out of it.
    Mr. O'Keefe. I am sorry, sir?
    Senator Shelby. We have to break out of that.
    Mr. O'Keefe. I mean, we have got to find a leap ahead 
technology. We have got to find an enabling capability to get 
past that structural limitation of speed or on orbit time, one 
of two.
    And what we see generated, I think, by a power generation 
or propulsion system, and the specific objectives we have in 
mind is to decrease the time to traverse distances or increase 
on-orbit time, one or the other or both in that task.
    Senator Shelby. Yes.
    Mr. O'Keefe. And we are setting as a near term, I think, 
conservative objective improving that speed to achieve distance 
by a factor of three or improving on-orbit time by much more 
than that, than what we achieve today. And the most mature 
technology that is out there right now that has a means to be 
developed is nuclear fission, and a means to either upscale 
what has been a very strong experience that NASA has had with 
power generation units, RTGs that we used on Cassini and a 
number of other missions over the course of the past 20 years, 
but that only is a power generation capacity.
    What we are looking for is a propulsion capability that can 
then beat those longer distances because right now we are 
limited by solar electric capacity, which the further away from 
the sun we get, the more dependent we are on gravitational pull 
as a means to deep space exploration.
    As a consequence, the further away you get, even a non-
engineer, non-physicist, non-scientist like me understands, the 
lights go out. As a result, you cannot depend on solar electric 
for long. It is very----
    Senator Shelby. This could keep the lights on, could it 
not?
    Mr. O'Keefe. Yes, sir. Keep the lights on and move faster.
    Senator Shelby. Sure.
    Mr. O'Keefe. And stay on orbit for a greater period of 
time.
    Senator Shelby. It has got a lot of promise.
    Mr. O'Keefe. That is the objective behind the nuclear----
    Senator Shelby. A lot of promise. And we are closer to it 
than many think, are we not?
    Mr. O'Keefe. I think so. I think we can get there.

                     SPACE LAUNCH INITIATIVE (SLI)

    Senator Shelby. Briefly, I want us to touch on the Space 
Launch initiative. In this budget, NASA has requested $759 
million to execute the SLI program. This technology program is 
of critical importance, I believe, to the future of NASA.
    And I assume, Mr. Administrator, that you would oppose any 
effort to reduce funding by SLI in 2003.
    Mr. O'Keefe. Yes, sir. I think it is a critical initiative, 
one that is the future of reusable launch vehicles, space 
flight----
    Senator Shelby. Yes.
    Mr. O'Keefe [continuing]. And the objectives for launch to 
achieve ultimately shuttle replacement. All those ride in the 
balance. It is a very important issue. Yes, sir.
    Senator Shelby. Okay.
    Thank you, Madam Chair.
    Senator Mikulski. Thank you, Mr. Shelby.
    Mr. DeWine.

         NUCLEAR SYSTEMS INITIATIVES PROGRAM/ENERGY DEPARTMENT

    Senator DeWine. Thank you very much.
    Mr. O'Keefe, we talk about the nuclear power. This nuclear 
power program, what will be the role of the Department of 
Energy in this?
    Mr. O'Keefe. The----
    Senator DeWine. What is the big picture?
    Mr. O'Keefe. Yes, sir. We are beginning to sort that out. I 
have had several discussions with the Naval Reactor side of the 
Department of Energy through Admiral Skip Bowman to discuss how 
we could take the mature technology they have developed to 
generate power for substantially larger platforms than what we 
need frankly. But they have had a long experience of producing 
advanced reactor capabilities that now power every nuclear 
powered vessel in the United States Navy safely without 
incident for 45 years, have had a stellar record of doing just 
that. In the process, they have managed to design and produce 
nuclear reactors that are substantially smaller, as in more 
compartmented, that they take up a lot less space. On a 
submarine that is a big deal, kind of like it is on space 
shuttle or any kind of space launch vehicle. And they have 
increased the capacity.
    When H. G. Rickover first designed the reactors that went 
aboard Enterprise and earlier than that for Sea Wolf, they 
celebrated the fact they lasted 18 months before refueling. 
Today, every reactor lasts the full life of a 40-year-old ship.
    So as a consequence, the operational experience that they 
have achieved is something we seek to tap in dealing with this 
as well as the design experience they have achieved, which is 
to reduce the size, mass, and compartmentalization of that 
reactor capability, which, again, far exceeds what we need and 
then to upscale what it is we have been doing on RTG's for the 
last 25 years.
    Senator DeWine. So when you talk about ``X'' number of 
dollars, a long-term vision, obviously the Department of Energy 
is involved in that significantly?
    Mr. O'Keefe. I think there is certainly a very close 
collaboration we are seeking to develop. We are kind of in the 
initial phases right now. We are setting up the project team. 
Again, this is a fiscal year 2003 initiative that we are going 
to have to step up in a big way here in the month's ahead. So 
putting together a project management team, as well as how to 
develop that close professional inter-rogatory-agency 
cooperation with all the elements of the Department of Energy, 
which includes the Naval Reactor side, will be critical, as 
well as the nuclear energy piece.
    There is a civilian commercial component within DOE. 
Certainly many of the DOE labs have been involved in this 
activity. We have got to parse through how we maximize and 
leverage that technology experience best.

                       RE-EXAMINING HEAD CENTERS

    Senator DeWine. Mr. Director, you have stated that you 
intend to recentralize programmatic authority at NASA 
headquarters, rather than the centers. How is that process 
coming?
    Mr. O'Keefe. Well, I think that may be----
    Senator DeWine. Is that too strong a statement?
    Mr. O'Keefe [continuing]. Too definitive a statement.
    Senator DeWine. Where are we? What are you going to do 
then?
    Mr. O'Keefe. I basically looked at a request through the 
agency to reexamine the proposition of lead centers. The notion 
that everything is delegatable for program management, 
oversight, and all other purposes to individual elements of 
what is conducted throughout the agency.
    Indeed, I think what we have an opportunity to do, like on 
the nuclear initiative, is to collaborate very extensively on 
extant capabilities within NASA that is not individually 
center-centric, if you will.
    On the nuclear initiative, clearly the prowess demonstrated 
by NASA Glenn, by the Marshall Space Flight Center, by the Jet 
Propulsion Lab in Pasadena, California, all of them are going 
to be contributors in how we develop this initiative.
    So rather than designating any individual center as the 
dominant or only, instead we are looking at it more as a case 
of ``How do you maximize core competencies that exist at each 
of those centers and then collaborate for the purpose of trying 
to develop end products, end purposes that are greater for the 
advantage, I think, of the agency overall?''
    Senator DeWine. All right.
    Mr. O'Keefe. So that is a bit of a difference there, and 
that does not necessarily mean we are going to drag everything 
into headquarters. Indeed, not an awful lot really, you know, 
visionary comes from headquarters any time of any agency.
    So as a consequence, we are seeking to keep the delegated 
program management authority within the centers, but to 
establish a firm policy and oversight function within 
headquarters.
    Senator DeWine. Good. Thank you very much.
    Mr. O'Keefe. Thank you, Senator. I appreciate your 
question.

                 ENVIRONMENTAL COMMUNITY--NUCLEAR POWER

    Senator Mikulski. Let me go to the questions related to the 
space shuttle.
    I think we have covered a lot of the information related to 
the station as well as these new innovations on nuclear 
propulsion. And we can understand the merits of that.
    I believe that there will be a lot of concern from the 
environmental community about nuclear power in space. And I 
would just hope that we would acknowledge that, number one, 
there will be concerns, and that we address them----
    Mr. O'Keefe. Absolutely.
    Senator Mikulski [continuing]. Rather than the--often the 
usual way is--and I am not saying this about you, Mr. O'Keefe, 
but usually when the environmental community raises an issue, 
everybody says it is not an issue. They are ignored. And it 
becomes a very prickly issue within this institution. So let us 
just deal with it.
    Mr. O'Keefe. Absolutely.
    Senator Mikulski. And let us just deal with the groups who 
want to raise those flags, because often they have very good 
insights that help us provide the opportunity to do bold things 
but ensure the safety for those who are traveling on the 
mission as well as for the planet. So now speaking----
    Mr. O'Keefe. Madam Chair, would you permit me to just 
comment real quick?
    Senator Mikulski. Yes. Please go right ahead.
    Mr. O'Keefe. I think you have hit the nail exactly on the 
head. This is something not to be avoided. We really need to 
engage on this question.
    And there is a couple of facts that I think really are 
persuasive in my mind. Pioneer 10 was launched in 1972. We are 
still getting information back from it. It still has a nuclear 
capability that is generating power to keep that communication 
coming back to us that is 7.5 billion miles away. I mean, this 
has been done safely in the past and it has a success rate on 
this and a track record that is clear.
    The second one is, again, the nuclear reactor performance 
record of the United States Navy over the course of the last 50 
years is very, very reassuring. It says we know how to design 
capabilities and we know how to operate them.
    So you are exactly right. We need to engage this debate 
with the environmental interests to be sure that we are doing 
this right and doing it in a way that assures public safety. 
And I appreciate your point and associate myself completely 
with the sentiments you have expressed.

                       RELIABILITY OF THE SHUTTLE

    Senator Mikulski. Well, then this takes me, since we are 
talking about safety, this then takes us to the issue of the 
space shuttle. We are very concerned about the shuttle. The 
shuttle is wearing out. The shuttle has a limited shelf life.
    And my question is: What can we do now in terms of the 
resources to ensure the reliability of the shuttle in terms of 
its transportation mission, but also the reliability of the 
shuttle in terms of the safety of the astronauts?
    I know they are entwined, but we need to be sure, one, that 
it is the mule train that was supposed to go into space, So its 
reliability to take off and get the missions up, but once we 
are going, to make sure that our astronauts can go and come 
back.
    Mr. O'Keefe. Yes. Indeed, I think the----
    Senator Mikulski. Do you think you have the right 
resources? Do you think you have the right management?
    Mr. O'Keefe. There is, I mean, more important than any 
other factor, the right culture exists at NASA to focus on 
safety. I think it is up there with a theological calling. I 
mean it is unbelievable to see the, I think, the real 
commitment to safety objectives.
    On the Hubble mission that we talked about a little bit 
earlier, for the STS 109 flight, I attended a flight readiness 
review at Kennedy Space Center 2 weeks before the mission took 
off. They worked through second, third and fourth-level 
indenture issues over the course of a day and a half that I 
found to be absolutely unbelievable. They leave absolutely 
nothing unturned.
    And as a consequence, all the way up until the final moment 
of launch, there is an obsession that if there is anything, 
even the slightest deviation from what should be acceptable, 
the launch is postponed. As a consequence of that, that is 
reassuring. I have seen that now every step of the way through 
this process and am impressed with the manner in which they do 
that. And, again, it is easily a rival of what I saw in the 
nuclear Navy. It is an absolute obsession of how that is 
conducted.
    So what we have included as part of the fiscal year 2003 
budget, I think, is a responsible allowance for continuing 
safety upgrades and operational upgrades. The issue that I find 
disconcerting, though, is our safety panel of outside experts 
who have come in, who report annually to us--I just got the 
outbrief of that about a month and a half ago--have determined 
that the safety upgrade requirements as well as potential 
modifications and service life extension requirements, if we 
extend the orbiters past 2012, are insufficient the way we are 
looking at it right now.
    So what I have asked them to do as their next order of 
priority here over the course of the next 6 months leading up 
to the 2004 considerations, is to give us a very specific 
understanding of what they advise--and again this is an outside 
group of experts who represent every discipline on the 
engineering and safety regime that I have--the quality 
assurance business that I have ever seen, to give us a very 
clear understanding of what upgrades they think would be most 
significant, which ones we missed, what we should be doing 
differently.
    We are concurrently doing an internal review of that as 
well as the Office of Space Flight has conducted, to see what 
it would take, if we extend it past 2012, what would that take. 
So there is a whole revision, I think, of the safety upgrades, 
as well as major modifications and capabilities enhancements 
that we need to look at and consider what those options will 
call for.
    In 2003, I think we put in a safety upgrade modifications 
portfolio that is appropriate to get us from here to that 
consideration.

                         SHUTTLE PRIVATIZATION

    Senator Mikulski. Well, where does privatization come in, 
and what are your thoughts on privatization?
    You know, the word ``privatizing'' sounds like----
    Mr. O'Keefe. Yes. Yes.
    Senator Mikulski [continuing]. You know, is there a space 
Greyhound that is going to take over and----
    Mr. O'Keefe. Right, exactly. I have, you know----
    Senator Mikulski. And that, you know----
    Mr. O'Keefe. The reason I was pausing here is I get the 
same reaction. Another step beyond that is that when you say 
privatization that means you made up your mind what the outcome 
is going to be.
    In my judgment, and more importantly in the President's 
management agenda, the focus on competitive sourcing is the 
approach we are after at this stage, so rather than 
preordaining what the result will be, what we are after right 
now is developing a business case of what it would take, what 
would be involved to take all the range of shuttle operations 
and consider an alternative means of delivery than what we are 
doing today. That may mean more public servants, less public 
servants, more private company, more non-governmental 
organizations, whatever it calls for. We are just starting with 
an approach that says do not preordain what you think the right 
answer is. Let us ask the question of what needs to be 
accomplished and then what is the alternative means to go about 
accomplishing those tasks?
    Senator Mikulski. I did not understand that. What would be 
like examples? Are you saying who does the mechanics? Who does 
what? I don't understand what you are----
    Mr. O'Keefe. You are exactly right, the functions that 
would be involved are ``What does it take for maintenance 
modifications, for, safety and mission assurance?''
    Senator Mikulski. And I appreciate that then, but is your 
objective to save money or to save the shuttle when you do 
this?
    Mr. O'Keefe. Yes, the primary objective is to enhance 
safety. Whatever that takes in order to achieve that task, we 
need to figure out what the best way is to deliver that 
activity. The fondest hope would be we find an efficient way to 
do that. And certainly in the risk management arena and 
community, there is a very strong school of thought that says 
it does not necessarily cost more. It means you do it 
differently, in order to assure a higher grade of quality 
assurance.
    So looking at those kinds of challenges in that way may 
result in a different cost model, maybe more, maybe less. I do 
not know. But the primary objective in looking at the business 
case is: Let us first look at the functions. How do we do this 
safer than what we are doing today? How do we do it more 
efficiently than what we are doing today? And achieve the 
operational readiness rates that we want.
    Senator Mikulski. Well, I think there needs to be far more 
extensive conversation about this. First of all, I want to just 
say we are so glad that you are as safety-obsessed as the 
members of the committee.
    Mr. O'Keefe. Indeed.
    Senator Mikulski. So that is number one. Number two, I 
mean, we are going to turn to Senator Bond--we do need to look 
at ``What does integrated transportation mean? What would be 
some other vehicles to get other things, say, up to the 
station?'' and the space launch initiative--I know that it has 
been raised by colleagues.
    Of course, you know, I am interested in the whole 
possibility that perhaps out of something like a Wallops, that 
an unmanned vehicle could go up and act like a cargo shuttle, 
and use the astronauts for only what the astronauts need to do.
    But they do not need to be delivering cargo. Okay? They 
need to be delivering other astronauts. And so there is a lot 
for us to talk about.
    But let me turn to Senator Bond.

           SPACE LAUNCH INITIATIVE/NUCLEAR PROPULSION PROGRAM

    Senator Bond. Well, the Chair has raised a whole 
interesting area. You certainly have a broad field to resolve 
some very sticky questions. We are most interested in them.
    I just want to pick out a couple while we still have time 
and I am going to submit a lot more for the record and look 
forward to continuing the discussion, but there are significant 
costs associated with both the Space Launch Initiative, the 
Nuclear Propulsion Program.
    What do you see the out year costs, and how do we balance 
these programs to ensure that they complement each other, they 
do not--we are always worried about robbing from one program to 
deal with another. What are your projections on those?
    Mr. O'Keefe. Well, certainly over the course of the next 5 
years, we are looking at about a $4.5 to $5 billion initiative 
for Space Launch Initiative alone. That is the current 
projection where we are to down select from about a half-a-
dozen-plus options of where we are today, to think about what 
the most likely vehicle prospects would be to achieve not only 
shuttle replacement, but a range of others, mission objectives 
as Senator Mikulski identified very clearly.
    Coincident with that, though, I think is an opportunity 
that we are at right now in this unique period of history in 
which there is a convergence between requirements NASA has in 
terms of longer term exploration platform discovery objectives, 
as well as that which we see on the Air Force side of the 
equation for reusable launch vehicles.
    They are probably a little bit further behind in terms of 
their requirements definition than we are at this juncture for 
our requirements, but not so substantially that it would not be 
possible to consider those requirements on both sides of the 
equation and think about how we leverage the technology best in 
order to meet multiple objectives.
    So while we may not end up with the same vehicle or same 
end item, it has the opportunity to draw on comparable 
technologies for propulsion, aerodynamics, a range of different 
disciplines and technology breakthrough opportunities that we 
really need to converge this a little more closely.
    As a result, we are spending a lot more time now getting 
closer to understanding each other's requirements as they are 
emerging to see as we move through this as a program management 
and contractual matter how we can best utilize those 
technologies for multiple means.

                INTEGRATED FINANCIAL MANAGEMENT PROGRAM

    Senator Bond. Well, let me move from the exciting 
projections to some really mundane management questions. Over 
the last 5 years, NASA has been judged by its auditor, Arthur 
Andersen, to meet all of the Federal financial reporting 
requirements. This was at a time GAO was saying NASA 
procurement was high risk, and the new auditor, 
PriceWaterhouseCoopers disclaimed an opinion on NASA's fiscal 
year 2001 financial statements because of internal control 
weaknesses.
    What are you doing--they said that the financial management 
systems do not substantially comply with the requirements of 
FFMIA. What are you doing to address these concerns, and what 
are you doing to address the GAO identified contracting 
management risks specifically?
    Mr. O'Keefe. Senator, thank you for the question. I regret 
to advise that management mundanery for financial management 
systems apparently is proclaimed as a forte of mine by many 
of----
    Senator Bond. I am afraid we may lose half of the crowd 
here, but these are unfortunately very important issues.
    Mr. O'Keefe. No, they are ones I think are critically 
important. I have just taken a fair amount of commentary of why 
that is a forte as opposed to some other areas that some would 
prefer. But I frankly agree with you. I think this is the 
number one structural management issue across the agency that 
we have got to arrest and bring to absolute discipline control.
    We are implementing an integrated financial management 
program now that is intended to look at accounting, finance, 
human resource management, contract management, logistics, 
inventory control, all that in a method that is full management 
information system exposed.
    And we have brought in the best experts I know how to 
recruit in the information technology (IT) arena, and in the 
financial management arena, from in the private communities for 
financial management and IT to come to NASA to deal with this 
particular set of problems as a Kaizon team to arrest it and to 
make it work.
    So it is the number one priority that every center 
director, every enterprise manager knows is the first order of 
priority we have got to do. It is the idea of coming up with a 
disclaimed opinion from the independent auditors, because they 
could not get the data is unacceptable.
    So in my judgment this will not be a topic of discussion 
next year in this vein. It will be more that, yes, we have 
beaten that problem to death and we have implemented a 
integrated financial management system that satisfies not only 
your, but all of our questions on what it costs to do anything. 
That is first.
    Senator Bond. That is an easy promise to remember. We will 
keep that one in mind.
    Mr. O'Keefe. Yes, sir. I intend to keep----
    Senator Bond. Okay. We will look for it.
    Mr. O'Keefe [continuing]. That, if it is the last thing I 
do.

                             HUMAN CAPITAL

    Senator Bond. Let me just ask you one very quick question.
    Senator Mikulski. I am not even going to go there. You go.
    Senator Bond. One very quick question, that something that 
concerns us on this committee a great deal. Your specific 
problem, the Aerospace Advisory Panel said that their hiring 
freeze on planned departures has produced critical skill 
deficits, and we know that NASA is beginning to--in the serious 
shortfall of younger scientists and engineers, you are 
beginning to address it.
    Is this one of your top priority attention areas? Do we 
need a national policy to ensure that we have an adequate 
number of scientists, engineers and researchers? First, is this 
a high priority concern, and is this one of your major 
concerns?
    We would like to work with you, because we see this in NSF 
and so many other areas. And we will look forward to seeing 
your action steps in this area.
    Mr. O'Keefe. Yes, sir. Well, thank you for the question, 
Senator. I guess beyond my priorities, this is the number one 
priority the President has articulated for the strategic 
management of human capital as part of the President's 
management agenda.
    There is no question, the most polite way to say this is we 
have a very mature workforce. No doubt about it. The experience 
rate and the level of talent we have in the agency has never 
been higher. The catch is we have got roughly a third of that 
workforce that is eligible to retire in the next 5 years.
    Senator Bond. Yes.
    Mr. O'Keefe. So we are looking at some real serious 
challenges on this front in the technology and engineering 
fields, particularly math, science, technology and engineering, 
those are the kinds of disciplines that we are seeing a real 
departure of not only talent and experience, but not a lot 
behind it in terms of cohort capability, numbers of people to 
fill those capacities. That is true not just at NASA, I think 
across the entire frame. And you are exactly right.
    The President submitted back in October the Manager 
Flexibilities Act that has now manifested itself in the form 
of, I want to say it is a Senate bill that was introduced by 
Senator Voinovich that has been modified since that time that 
we are very, very enthusiastic about in the administration, and 
we will love to see enacted because it provides the tools on 
the personnel, human resource front to start to arrest this 
problem and to deal with the issue of recruitment, retention 
and how to really deal with the technology, engineering, math, 
science kinds of disciplines that are necessary to continue to 
recruit for.
    Senator Bond. Thank you. That is very, very interesting to 
us.
    Senator Mikulski. Very, very good.
    Senator Bond. Thank you, Madam Chair.
    Mr. O'Keefe. Well, thank you, Senator. I appreciate the 
question.

                          CIVIL SERVICE REFORM

    Senator Mikulski. You were talking about the Voinovich 
civil service reform.
    Mr. O'Keefe. Indeed, exactly.
    Senator Mikulski. Yes. We are interested in that too.
    Mr. O'Keefe. He has done a superb job of really pulling 
together some great tools to help manage the human resource 
challenge we are all facing at every agency.
    Senator Mikulski. Senator Shelby.
    Mr. O'Keefe. Thank you.

                   AIR FORCE/SPACE LAUNCH INITIATIVE

    Senator Shelby. Could you elaborate a little bit about the 
involvement of the U.S. Air Force in the SLI program and what 
does the Air Force bring to the table and how cooperative is 
the effort thus far?
    Mr. O'Keefe. Very cooperatively, if I can take the last 
part of this first, because we are really very much in the 
formative discussion phase. I think the idea of how much and 
what type and so forth is yet to be determined.
    Senator Shelby. Yes.
    Mr. O'Keefe. Again, the sum and substance of where I think 
we are right now is just this interesting historic convergence 
in which the Air Force has a set of demands for reusable launch 
vehicles and a concern about long-term reliability of 
expendable launch vehicles.
    Senator Shelby. Yes.
    Mr. O'Keefe. We, in turn, have, a set of structural 
challenges, that many members here this morning have identified 
when the retirement rates of assets will occur, shuttle 
orbiters to be specific about it. As a consequence, that 
convergence gives us a unique opportunity to look at how we can 
leverage technologies to meet different purposes, but to derive 
from similar technological basis.
    So it is very much in the formative phase. It is very much 
cooperative. Just 2 weeks ago, I met at an extended series of 
meetings over a course of a couple of days with the Commander 
in Chief of the U.S. Space Command, with the Under Secretary of 
the Air Force, Under Secretary Teets, and General Eberhart, and 
respective staffs from the Office of Secretary of Defense, and 
their research and engineering teams, as well as within the 
aerospace community, to think about what is laying on the 
table, what are all those requirements and how can we choose 
the technologies that best leverage and maximize the efficiency 
of what we select to meet multiple objectives. We conducted a 
study that lasted about 4 months with the Air Force in an 
attempt to converge these. We still have to go back and look at 
it again, because I think we are a little bit behind step. But 
in terms of collaboration and cooperation, it is real close. We 
are at least identifying what we see are mutual problems or 
mutual challenges, mutual opportunities, and we are now just 
about the business of trying to identify them.
    Senator Shelby. Thank you very much.
    Mr. O'Keefe. Thank you, Senator. I appreciate the question.
    Senator Shelby. Thank you.
    Senator Mikulski. Yield?
    Senator Shelby. Yes.
    Senator Mikulski. Senator DeWine?
    Senator DeWine. Nothing further, Madam Chair.

                        NATIONAL SECURITY ISSUES

    Senator Mikulski. Well, I want to raise some questions 
about the Russians and knowing both of your interests in 
national security, it might be of interest to you.
    My colleagues--by way of background, when the Cold War 
ended or was about to end, we looked forward to how to 
cooperate with the Russians in a very different way. And one of 
the things that we were concerned about is the issue of 
proliferation, and I know my two colleagues here have been very 
keenly interested in that.
    And we engaged the Russian scientists in being involved 
with us on the International Space Station, so that the Russian 
scientists rather than selling rocket launch capability to 
people that we did not want to have rocket launch capability 
would be involved with us in the new world order and democratic 
Nations who have been involved as our international partners on 
the space station.
    We have been very unhappy about this. And I would like to 
know, Mr. O'Keefe, exactly where are we in terms of, one, 
insisting with the Russians that they are not engaging in 
proliferation and, number two, we have been very much involved 
in the Iran non-proliferation act. That requires the President 
to certify that Russia is not assisting Iran with ballistic 
missile technology or other assistance in the development of 
mass destruction, meaning launch capacity or whatever. Without 
the Presidential certification, you are to be prohibited from 
sending funding to Russia under certain circumstances.
    Now, let us step back here. First of all, we know we are 
engaged with the Russians in our fight against terrorism, that 
Mr. Putin has been very cooperative, but yet at the same time 
we see Iran poses great threats to allies and to the strategic 
interest of the Mid-East. Could you tell us, one, where are we 
with the Russians, where are we in what you believe their 
cooperation is in the Iran non-proliferation or selling their 
technology, and do you believe that they are really stepping up 
and that their scientists have been truly engaged with us?
    I pass no judgment on the technical competency of the 
scientists, but I really wonder if our money to the Russians is 
going to the Russian scientists or is going to the Russian, you 
know--so we are interested in this, we are very much interested 
in how, through the use of engaging the Russians in civilian 
space like the space station, we help them make sure that their 
scientists or other mechanisms out of Russia are fostering the 
proliferation of weapons of mass destruction.
    Mr. O'Keefe. Thank you for a very timely question. I just 
last week spent 2 days with Deputy Secretary Armitage in 
Moscow. He, in discussing, the bilateral discussions leading up 
to the President's summit meeting later this month, early June, 
and I spent most of my time with RosaviaKosmos, and the general 
director of that space agency as well.
    And we reconverged towards the end of our meetings with 
Foreign Minister Primakov as well as Foreign Minister Ivanov, 
who then discussed this with Koptev who is the general director 
of RosaviaKosmos on very, very similar lines as your discussion 
has just gone down.
    It is a challenge in the sense that we have a very strong 
close working relationship with RosaviaKosmos, and the 
operations and the activities of the International Space 
Station are heavily dependent on our meeting the build out 
requirements. For example, as I discussed at length, and their 
objectives as well as commitments to help the support and 
logistics requirements for progress and Soyuzes flights. As a 
consequence, their continuing efforts on that front are 
critical to achieving the milestones I have talked about. I 
think we are there. It is a very close collaborative 
relationship. The issue that clearly is always going to be on 
the table in the foreign policy discussion that Secretary 
Armitage had, as well as the closer intergovernmental 
discussion I had with Director General Koptev is over the 
matter of the Iran non-proliferation treaty or agreements act.
    And it means that we really need to be conscious of how 
that is implemented and we are continuing to work at every 
opportunity to try to reach agreement on how that can be, not 
only adhered to, but verified. There is a very strong interest, 
I sensed in the couple of days I spent there in wrestling with 
that question successfully. There is a very strong view in that 
direction.
    Senator Mikulski. Well, Mr. O'Keefe, this is a subject of 
great interest I know to the members of this subcommittee, and 
I would like to suggest that I coordinate a meeting with you 
and welcome any members of this subcommittee who wish to have a 
more in-depth conversation with you about that.
    Mr. O'Keefe. Terrific.
    Senator Mikulski. I do know that members of the 
subcommittee are actively engaged. And Senator Lugar, really 
our outstanding Senator----
    Mr. O'Keefe. You bet.

                           NON-PROLIFERATION

    Senator Mikulski [continuing]. On non-proliferation has 
invited us to join with him in a group to Russia on the issues 
of non-proliferation. So I think it is timely that we perhaps 
talk with you on how we can make wise use of our time there, 
enhance this and also get a more in-depth view that I know you 
and your team could share with us.
    So would you just presume that we are going to coordinate a 
meeting and we will make the arrangements and we will invite 
the appropriate people and look forward to working with Senator 
Lugar who has been a real champion on this, and then how we can 
really keep the Russians engaged in civilian science.
    Mr. O'Keefe. Absolutely. No, I would be delighted, Madam 
Chair. That would be terrific.
    Senator Mikulski. And so let us talk some more about that.
    Mr. O'Keefe. If you would permit me, my intent would be to 
be in touch with Secretary Armitage, as well, and see if we can 
coordinate an effort that meets your schedule and timing as 
well. I think that would be terrific.
    Senator Mikulski. I think that would be great. We have 
worked with Secretary Armitage on a number of issues and I have 
great admiration for him.
    Mr. O'Keefe. Great. I appreciate it.
    Senator Mikulski. Senator Shelby, did you wish to comment 
on this?
    Senator Shelby. Yes, I do.
    Senator Mikulski. I know you have been----
    Senator Shelby. I want to follow up and I appreciate you 
bringing it up.
    Senator Mikulski [continuing]. An expert on this, as 
Senator DeWine.
    Senator Shelby. I do not know about that. But all three of 
us, plus Senator Lugar that you mentioned, Mr. O'Keefe, serve 
on the Intelligence Committee, and we are very interested in 
this subject matter, not just for this committee but for what 
we do in our government and the security of our Nation.
    So I appreciate, Madam Chairman, you bringing this up. And 
I think a meeting with Mr. O'Keefe at the right time would be 
well attended and be very important.
    Senator Mikulski. Very good.
    Mr. O'Keefe. Thank you, Senator. I appreciate that.
    Senator Mikulski. Senator DeWine, did you want to comment 
or----
    Senator DeWine. I am fine.

                             PLUTO MISSION

    Senator Mikulski. Okay. There are many other areas that we 
could pursue. We thank our colleague, Senator Bond, for raising 
the work force issue.
    Let me go to some issues with space science and then I 
think we will be ready to conclude our hearing.
    I was concerned that OMB cancelled Pluto in space science 
or I guess that the administration's fiscal 2003 cancels the 
Pluto mission.
    The opportunity to go to Pluto will not come again for 
another 200 years and we understand from the applied physics 
lab that would do the Pluto mission that they have estimated 
their costs at $450 million, much less than what NASA 
originally thought.
    Could you tell us where we are on the Pluto mission? What 
is the rationale for cancelling it? Was it financially driven? 
Was it science-driven? And is there any way that we can get 
this back on track----
    Mr. O'Keefe. Thank you for the question, Senator.
    Senator Mikulski [continuing]. Working with the 
subcommittee?
    Mr. O'Keefe. Well, first and foremost, the requirement, or 
at least the mission objectives, the research that could be 
gained by a mission to the outer edge of this solar system is 
something that clearly has captured the attention of the 
scientific community and they view it as an important 
objective, to the point where the National Academy of Sciences 
this summer, we are hopeful they are going to conclude by this 
summer, is rank ordering the priorities of where they see 
exploration objectives. This clearly is among the missions they 
are considering very seriously in terms of what its standing 
and prioritization should to be. So we will be driven and 
guided by that determination as well from the National Academy. 
But nonetheless it is one that, I think as you are well aware, 
Madam Chair, they view as an important set of objectives, so I 
think that is not in dispute, the criticality of it.
    The second issue that we have really run across is the how 
to get there, how to accomplish it. The stark reality is much 
in the vein of the earlier discussions we have had or at least 
touched on, this is a quintessential example. But then, again, 
any destination in the solar system and indeed in this universe 
would be an example too, of how long it takes to get anywhere.
    A very responsive proposal that was advanced, as I 
understand it, would call for a launch as soon as 2006, or a 
vehicle probe by that time, and achievement of the objectives 
by about the 2015, 2016 time frame. So in that rough parameter, 
maybe as early as 2014, maybe as late as 2017, we are still 
talking about a period of time that is approaching 15 years 
from now, roughly within that parameter, which therefore 
suggests, two problems.
    The second issue that really is dominant there as well is 
given the existing capability we have for propulsion and power 
generation, once we pass or get to Jupiter, we basically run 
out of the option, not completely, but for all practical 
purposes of solar electric capability.
    We, therefore have to depend on the gravitational slingshot 
effect, if you will, off Jupiter to meet the timelines you are 
talking about. That is the most aggressive approach we could 
possibly employ in order to be on station about 15 years from 
now to achieve that task, and through the Kuiper Belt beyond. 
What would amount to a few months worth of imagery that would 
be of higher caliber than what we can do today.
    So not a challenge at all, not a problem at all about what 
the mission objective, the requirement, the scientific research 
opportunity would be. We will be, again, guided by the National 
Academy of Sciences in terms of where they think that 
prioritization fits.
    Our greatest obsession at this juncture is how to get there 
and stay on station for a long enough period of time in order 
to truly inform the research and scientific objectives.
    There are options that we are clearly looking at if the 
National Academy comes up with findings that say this is a very 
high priority, that may be we will be able to do that.
    Senator Mikulski. Mr. O'Keefe, when is the National Academy 
going to complete its work?
    Mr. O'Keefe. We are told this summer, but----
    Senator Mikulski. But what does ``this summer'' mean? The 
committee is going to be marking up in June.
    Mr. O'Keefe. I know. This has been a question on my mind as 
well. I would really appreciate your assistance in this regard 
too.
    Senator Mikulski. What can we do to help you out here, 
because first of all, we welcome the National Academy's advice. 
They have been such an excellent resource to we policymakers.
    Mr. O'Keefe. They are indeed.
    Senator Mikulski. But their timeline and ours do not--and 
we do not mean--we really want to welcome their priority 
commentary. But would you let my staff know how we can help you 
be a booster rocket here?
    Mr. O'Keefe. I appreciate that. I would welcome that 
opportunity.
    Senator Mikulski. Because we would really like their 
advice, if we could, really sometime in June.
    Mr. O'Keefe. Yes, ma'am.
    Senator Mikulski. At least certainly perhaps into the top 
tier of what they are recommending.
    We would also like their specific commentary on Pluto. It 
is something that I have very keen interest in and also the 
fact that it will only come in 200 years. So we are either 
going to do it, we should do it right. We should do it 
prudently. So let us work together on this.
    Mr. O'Keefe. I would enjoy that very much. Thank you.

                  NEXT GENERATION OF SPACE TELESCOPES

    Senator Mikulski. We cannot conclude this hearing without 
asking about Hubble.
    NASA's current plans for Hubble is to receive one more 
servicing mission and then have it operating until 2010. Then 
the next generation space telescope will be launched to replace 
the Hubble. Well, I understand that schedule has slipped.
    As we look at the next generation of space telescope, which 
I am a supporter of, should we develop a contingency plan that 
will enable Hubble to operate beyond 2010? And we are seeing 
now, here it is, 2002, and I was really taken aback by these 
photographs. I mean, even--this is better than Spielberg and he 
makes it up, you know----
    Mr. O'Keefe. It is the real thing.
    Senator Mikulski [continuing]. And in some ways has a 
bigger budget than the Hubble has.
    Maybe you ought to trade places here.
    But truly even to the untrained scientific eye that you 
could look at it and not only were they dazzling, but you know 
that a gifted and talented scientific analytical group of 
people are going to glean so much about the universe and so 
tell me what you think. First of all, I know that eventually we 
will need a next generation. We want to prepare for it and it 
has got to be reliable and sustainable, all the management 
words you would use.
    But tell us what you think about Hubble and should we have 
a contingency plan?
    Mr. O'Keefe. Sure. Thank you, Madam Chair.
    Senator Mikulski. Should we have two space telescopes?
    Mr. O'Keefe. Thank you, Madam Chair. I think the logic that 
you are employing here has a lot of merit. It is something that 
I have begun to inquire about as well internally.
    Given the stunning results we have seen thus far exceeded 
our expectations. And this is not just because the great 
unwashed type like me is looking at this, because what I know 
about this you can summarize in a matter of moments, but more 
importantly the astronomers who are looking at this, the 
astrophysicists who are examining this, the scientific 
community is stunned by the value of what they are getting out 
of this.
    It is not just the new imagery. It is the archival imagery. 
It is the things that we have downloaded as imagery from prior 
transmissions that was archived and viewed as available and 
indeed some of the most stunning discoveries were made 2 and 3 
years after the images were transmitted, because someone, a 
scientist, a researcher, a principal investigator, thought to 
go look at some particular aspect, dig it out of the archives, 
see what it may reveal, and then drew a series of conclusions 
from that.
    So the data that is being gathered is not just a one-trick 
pony opportunity. It is something that is a longstanding set of 
requirements or information bits that in turn then are 
revealing things over a period of time that we did not expect, 
even though they were gathered 2, 3, 4, 5 years ago.
    So that alone tells that the logic that you have employed 
is precisely the way we have got to look at this. We ought to 
be thinking about, given the results we are achieving here, 
what is it going to take in order to operate that?
    Certainly the next mission in 2004 is planned. We are going 
to press on ahead with that. But we then have to trade that off 
relative to what we would gain thereafter. And that is 
precisely the kind of analysis we have got to conduct, more 
rigid analysis, I think, than we have employed so far to see 
exactly what that would take. And now, again, seeing the 
advantages that come from this that exceeded our expectations, 
it clearly is something that merits that kind of attention.

                         EARTH SCIENCE MISSIONS

    Senator Mikulski. Well, know that I do believe we do need a 
next generation of space telescope and I think we can really 
plan and get the highest use of it by making use of both 
telescopes that we have, those space telescopes.
    Earth science, we understand that the NASA budget indicates 
that the future for earth science mission is kind of in limbo, 
until the administration completes an interagency review on 
global warming. I am concerned about that because as you know, 
you are an old hand at these things, interagency reviews can 
take forever. And we have an excellent earth science program 
and I believe you know how there are multiple agencies that are 
making use of this.
    Could you tell us: When do you expect the administration to 
release the details of this review, and what does it mean for 
the EOS follow-on projects that will be re-proved or where are 
we on earth science?
    Mr. O'Keefe. And I think your characterization of the 
interagency process is polite, diplomatic.
    Senator Mikulski. That is me.
    Mr. O'Keefe. Well, in that case, uncharacteristically 
understated in terms of the challenges of the interagency 
process. You are exactly right.
    Nonetheless, what I have been really struck with, as 
Secretary Evans has taken this challenge, he and Secretary 
Abraham, but Secretary Evans is leading it at this juncture, to 
pull together all the agencies necessary. We meet pretty 
regularly. I have been surprised at the intensity, frequency 
and deliberation that has gone into this particular task, so 
the President's challenges we have accepted as an 
administration and we are moving ahead smartly on it.
    Exactly when the deliverable will be, let me give you a 
more comprehensive answer after a little more research, because 
I am wrestling to remember the dates of when various elements 
are to be delivered back to the White House. But it is not 
necessarily holding up or driving what we are doing at NASA as 
well though. It is a very important consideration, but it is 
not one that I would say is limiting.
    The Aqua launch occurs 7 o'clock today?
    Staff. On the 4th.
    Mr. O'Keefe. Oh, on the 4th. Excuse me. I am sorry. On the 
4th of May. So we are proceeding apace with a series of earth 
science activities and as a result, we are continuing to use 
EO1, which has, proven to be an extraordinary source of imagery 
and information on weather and geological phenomenon.
    TDRSS continues to be deployed. We have got another launch 
of that due in October, I guess. So we are pursuing a series of 
earth science objectives that I think are as aggressive as we 
think are necessary for this coming year. I do not see it 
constrained by that particular review at all. If anything, I 
see a very aggressive effort underway to try to beat that 
interagency challenge that I think you very accurately 
described.
    Senator Mikulski. Well, we want to, of course, talk more 
about that.
    Mr. O'Keefe. Sure.

                   SENATOR MIKULSKI'S CLOSING REMARKS

    Senator Mikulski. We are not sure when we are going to get 
our allocation, but we believe that there is a variety of views 
looking at how we are going to be proceeding on the budget 
resolution, et cetera. But it is our estimate that we will be 
marking up sometime in June, of course, working with the House, 
but at least a preliminary framework.
    So we look forward to further conversations with you as we 
prepare for markup, Mr. O'Keefe, because you have got studies 
and all online that are going to be relevant to our decision 
making process. So we really need to continue our very close 
collaboration. We want to thank you and your entire team for 
what they do every day for the NASA mission, but also their 
very collegial and cooperative spirit in working with the 
committee.

                     ADDITIONAL COMMITTEE QUESTIONS

    So we want to say thank you and God bless you and God bless 
everyone who is trying to do so much in our space program.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

          Questions Submitted by Senator Barbara A. Milkulski

                        space launch initiatives
    Question. What is your approach with regard to SLI flight tests to 
evaluate key technologies?
    Answer. SLI continues to emphasize the importance of testing 
advanced enabling technologies in their relevant environment. In some 
cases, flight-testing can provide validation of key technologies that 
cannot be adequately tested on the ground. SLI evaluates each 
individual technology test and evaluation effort based upon the benefit 
for the program relative to its cost. Some of the technologies being 
evaluated for testing in a flight environment include airframe and 
mechanical systems, thermal protection system, operations, avionics, 
power, crew escape systems, and integrated vehicle health management 
systems. SLI's flight test programs complement its integrated ground 
testing and simulation tasks. There are currently three companies under 
contract to provide flight demonstrations for the SLI-Kistler 
Aerospace, Orbital Sciences Corporation, and the Boeing Company. In 
addition, one of the primary objectives of the ongoing NRA 8-30 Cycle 
II procurement is to identify cost-effective candidates for flight-
testing.
    Question. What is your strategic plan for Wallops Flight Facility 
and does it include SLI flight-testing?
    Answer. Currently, there are no current plans to perform SLI 
flight-testing at WFF. The SLI program is evaluating industry proposals 
for flight demonstration of key technologies for a 2nd Generation 
Reusable Launch Vehicle. These proposals include the identification of 
flight test launch site operations of which WFF is eligible for 
consideration. In addition, the SLI Program is actively engaged in 
discussions with WFF to determine other areas where WFF flight-testing 
and operations expertise can be utilized. Decisions to use WFF or other 
flight test facilities will be made competitively based on these 
proposals and discussions.
                         aeronautics blueprint
    Question. Mr. O'Keefe, during your testimony before the House VA/
HUD Subcommittee 2 weeks ago, you answered ``I think so'' in response 
to a question asking if the current aeronautics budget is sufficient to 
realize the vision in the Aeronautics Blueprint.
    Could you please expand on that answer and explain how a major new 
undertaking in aeronautics is to be funded in a budget that is cut 
under your request? When can we expect a budget estimate of what will 
be required to implement the Blueprint?
    Answer. The Aeronautics Blueprint addresses how new technology can 
be brought to bear on the issues facing aviation in the United States. 
These technologies, still in their infancy, have the potential to 
create a new level of performance and revolutionize aviation by 
addressing key public good issues (aviation safety, air system 
congestion, and aircraft noise and emissions) that could constrain 
future air system growth. NASA aeronautics programs have been realigned 
and investments have been reprioritized toward the vision articulated 
in the Blueprint. The NASA funding request for aeronautics research and 
technology is sufficient to formulate the development of the necessary 
fundamental understanding of these technologies. As progress is made on 
this long-term technology development, planning will be updated and 
technology investments revised.
    Question. Given the opportunity presented by the slow-down in air 
traffic after 9/11, what is NASA doing to move ahead as soon as 
possible with improvements to the national air system?
    Answer. In cooperation with the Federal Aviation Administration, 
NASA is developing technology for air traffic decision support tools in 
support of the FAA's Operational Evolution Plan. Additionally, NASA is 
investigating potential future air traffic management concepts of 
operation and the technologies that support them.
    Question. Can NASA truly take advantage of the current slow down 
and aggressively work to meet the 4 Airspace System goals of the 
Blueprint (reduced throughput in bad weather, en route congestion/poor 
traffic flow, better manage aircraft movements at HUB airports, develop 
precision navigation systems) when you propose cutting the Airspace 
Systems Program?
    Answer. As the events of September 11 slowed air traffic in the 
skies and transformed the current-world aviation situation to increase 
emphasis on the aviation security, there has been no change in the 
(already increased) momentum in which NASA strives to resolve the 
current Airspace Systems goals. The $8.8 million reduction in Airspace 
Systems was a planned reduction. The NASA request for the projects in 
this program supporting the airspace systems goals (Advanced Air 
Transportation System and Virtual Airspace Modeling and Simulation) is 
at the same level as the fiscal year 2002 appropriation.
    Question. Are you concerned with the position taken by the 
Europeans in their ``Vision 2020'' plan to be the world's undisputed 
leader in aviation 2 decades from now?
    Answer. NASA has been focused for several years now on the key 
public good issues (aviation safety, air system congestion, and 
aircraft noise and emissions) that Europe is beginning to address in an 
integrated fashion through the ``Vision 2020'' document. These public 
good issues pose the largest constraints on continued air system and 
aviation market growth.
    Question. Is your ``Aeronautics Blueprint'' in response to the 
Europeans ``Vision 2020''? If so, why is there no discussion of the 
funding that should be committed to this effort?
    Answer. The Aeronautics Blueprint is not in response to the 
Europeans' ``Vision 2020.'' The Blueprint was prepared to provide more 
details to NASA strategic plan for aeronautics developed in 1997, well 
in advance of the European vision. It is interesting to note that the 
targets established in the Europeans' vision are consistent with NASA's 
goals of 1997. Furthermore, NASA believes it has sufficient funding to 
pursue the vision articulated in the Blueprint.
    Question. Does NASA anticipate that we will need a comparable level 
of funding to what the ``Vision 2020'' calls for--roughly a billion per 
year for the next 20 years to help our aviation industry remain 
competitive in the face of their increased investment?
    Answer. NASA believes that the five-year funding plan for 
aeronautics accompanying its fiscal year 2003 budget request will 
enable the agency to pursue revolutionary technologies over the next 
five years that will provide this country's aviation system with 
unparalleled capability.
    Question. Do you believe that the cuts to NASA's aeronautics 
research and development enterprise over the last 5 years have played a 
major role in the government's backpedaling on what were once 
priorities for improved air service in this country?
    Answer. NASA's aeronautics research and technology funding peaked 
at an all time high of $920 million in fiscal year 1998. This peak 
funding was largely due to the budget ramp-up associated with the High 
Speed Research program, a program to develop an environmentally 
compatible, commercially viable supersonic passenger jet in partnership 
with industry. This program was cancelled when technology and market 
projections led industry to defer funding commitments to the 
development of a supersonic passenger jet into the future. Prior to 
this peak, NASA aeronautics research and technology has been funded at 
about $500-$600 million per year, adjusted for inflation, as far back 
as the early 1970s. NASA's fiscal year 2003 budget request and five-
year budget projection for aeronautics research and technology is 
consistent with these levels and provides adequate funding to pursue 
key technology goals over the next five years that could improve 
aviation safety and capacity and reduce aircraft noise and emissions.
    Question. Why was it so important for NASA in the past to enumerate 
such goals when the Aeronautics Blueprint fails to mention any time 
frame for accomplishing similar goals regarding safety, emissions, 
noise and cost of air travel?
    Answer. The Aeronautics Blueprint is consistent with NASA's 
strategic plan for aeronautics, which lays out technology goals that 
could enable the nation to realize improvements in aviation safety, 
capacity and mobility and mitigate the impact due to noise and 
emissions by 2022.
    Question. Do you anticipate incorporating time frames for the goals 
enumerated in the Aeronautics Blueprint? If not, why?
    Answer. The Blueprint states general objectives. NASA's strategic 
plan for aeronautics, which has specific time frames, has targeted 2022 
for the development of technology to enable revolutionary improvements 
in aviation safety, capacity and mobility and mitigate the impact due 
to noise and emissions.
    Question. Is the problem of drawing students to aeronautical 
engineering degrees at U.S. universities so great, and the problem of 
bringing on new talent to replenish the depth of expertise that has 
been lost at the NASA Aeronautics Centers so critical, that NASA 
undergraduate and graduate research opportunities need to be larger by 
an order of magnitude?
    Answer. We believe that we can refocus our programs in such a way 
to expand the university community's participation in the full range of 
aerospace technology research and education programs. Examples of such 
activity are reflected in our recent selection for further negotiations 
of seven leading American academic institutions for research and 
education program development in emerging technology areas. We believe 
that by providing the opportunity for high quality collaboration by the 
academic community we can stimulate and attract the best and brightest 
of the university populations to our programs.
                      international space station
    Question. A principal justification for undertaking the 
International Space Station program was to conduct world class, 
groundbreaking research across multiple scientific disciplines over a 
10 to 15 year period. Achieving that goal will be difficult. In the 
past, GAO has pointed out that funding the research program has been a 
challenge for NASA, given the need to fund other important development 
activities. Today, NASA's ``core complete'' concept limits permanent 
presence on the station to 3 people, one of whom must be a Russian 
pilot to operate the Soyuz crew return vehicle. This scenario obviously 
places additional limits on the amount of research that can be 
performed.
    What is your vision as to the purpose of the research component of 
station operations and what is the scope of the research that can be 
completed under the ``core complete'' concept?
    Answer. NASA's Biological and Physical Research (BPR) Enterprise 
seeks to use the unique space environment to conduct research and to 
develop commercial opportunities that could not otherwise be pursued on 
Earth, while building the vital knowledge base needed to enable 
efficient and effective systems for protecting and sustaining humans 
during extended space flights. BPR addresses the two fundamental 
challenges associated with human space flight: (1) understanding 
nature's forces in space; and (2) understanding the human experience in 
space.
    Established in fiscal year 2001, BPR closed its first year with a 
significant record of accomplishment. ISS outfitting for research began 
with the delivery of the Human Research Facility in March 2001. After 
more than a year of continuous human occupation, the ISS now has 5 
research racks. There are 26 investigations currently underway aboard 
ISS, representing research from government, industry and academia; 54 
investigations have been carried out since ISS construction in orbit 
began. The Agency is on-track to deliver an additional five research 
equipment racks by the end of 2002. Expeditions 5 and 6 will also fly 
during fiscal year 2002, and 41 experiments will be conducted in the 
areas of biomedical research, biotechnology, microgravity fluid physics 
research, materials science, agriculture, and Earth observations.
    In spite of a significant unscheduled ISS upkeep and 
troubleshooting activities during Expeditions 1 and 2, the ISS team was 
able to meet the minimum research objectives of the first four research 
increments. NASA continues to prepare for ISS on-orbit research through 
the preparation and testing of five additional research racks and 
ongoing payload crew training. In addition, NASA looks forward to 
launching STS-107 in the late summer, a Space Shuttle mission dedicated 
to biomedical and biological research. .
    Throughout the ISS construction phase, NASA is continuing to 
achieve a balanced program of scientific exploration that will 
contribute, along with ground-based research, to the fields of biology, 
physics, chemistry, and the long-term effects of space flight on 
humans.
    In response to the second part of your question concerning the 
scope of the research that can be completed under ``core complete,'' 
the U.S. core complete will be achieved in February/March 2004, at the 
conclusion of Increment 9, which is planned as Mission 10-A, by which 
there will be an average of 15 continuing experiments and 7 new 
experiments (delivered by Shuttle resupply missions) onboard. U.S. core 
complete will include 5 EXPRESS racks, featuring Physical Sciences 
research and Space Product Development; 2 Human Research Facility 
racks, hosting Bioastronautics experiments; one Microgravity Sciences 
Glovebox, hosting Physical Sciences and Commercial experiments, and the 
Window Observational Research Facility (WORF), collecting observational 
data for Earth Sciences and the Office of Space Flight. Enclosure 1, 
which includes graphs (a), (b), and (c), shows ISS experiments by 
discipline or category and by increment, comparing the growth in number 
of experiments for each discipline as the increments continue.
    Although NASA did not plan to expand the crew size beyond three 
members until 2006, a permanent crew of three could preclude certain 
experiments that are very crew time-intensive or complex and which do 
not lend themselves to automation. Examples include experiments that 
involve crew manipulation such as time-course sampling of plants.
    In addition, BPR is stressing the maximization of research return 
from the ISS by actively seeking options for broadening its access to 
flight platforms in pursuit of the answers to its driving scientific 
questions. NASA is working with the White House Office of Science and 
Technology Policy (OSTP) and the Office of Management and Budget (OMB) 
to engage the scientific community and reestablish clear high-priority, 
affordable science objectives with near-term focus on improving 
scientific productivity. The results of this review, which was 
conducted by the Research Maximization and Prioritization (ReMaP) Task 
Force, became available in early July. The ReMaP results will help set 
the BPR science agenda that will, in turn, drive how the ISS is used. 
We expect the ReMaP recommendations to increase the efficiency and 
output of ISS research and realign NASA's ISS research portfolio to 
reflect current scientific priorities.
    Question. What opportunities do you see for increasing the amount 
of research time on the station?
    Answer. NASA is currently evaluating several options for increasing 
research time on the ISS, including the recommendations of the ReMaP, 
which will play a role in determining the cost/benefit of adopting one 
or more of these approaches to enhancing crew time for research. NASA 
plans to discuss a set of option paths in the fall of 2002 and 
determine the optimal ISS configuration to maximize research in 2003.
    Prior to the program restructuring, the crew size was not planned 
for expansion beyond three until 2006. Research plans through that time 
remain largely unchanged. Experiments until 2006 are specially designed 
and chosen through peer review to not require significant crew 
involvement. The ReMaP results will provide guidance on research 
priorities that will allow informed decisions to be made on the areas 
of research on which to focus.
    During Fall 2001, the International Space Station (ISS) Management 
and Cost Evaluation (IMCE) Task Force recommended that extended Soyuz 
sortie missions coupled with Space Shuttle Extended Duration Orbiter 
(EDO) missions be considered to provide additional crew time for 
scientific research to supplement a crew size of 3.
    The IMCE also recommended a Space Shuttle flight rate of no more 
than 4 per year. This results in significant constraints to research 
due to limited ability to launch and resupply research equipment. The 
addition of Shuttle missions in the 2006+ timeframe will supplement 
research crew time by freeing the ISS crew from some of their EVA 
requirements and thereby increasing the crew time available for 
research; and by allowing the visiting shuttle crew to perform short 
duration experiments during the docked mission, or initiate long 
duration experiments which would then be completed by the ISS crew
    Use of overlapping Soyuz for gaining additional crew time is of 
limited attractiveness. Overlapping Soyuz opportunities could 
potentially provide 300-400 hours of additional research, presuming the 
docking time is extended. However, it would add significant logistical 
burdens to the existing Shuttle flights; since it would be necessary to 
accommodate for the additional life support and crew provisions. 
Further, there is a significant learning curve for visiting Soyuz crews 
that would limit the productivity during the first several weeks of the 
mission. Additional study is required to assess cost verses benefit of 
this particular option. The use of an Extended Duration Orbiter for 
existing or new missions appears promising and is under consideration.
    Question. What are the obligations of both the U.S. and Russia 
regarding the long-term operations of the space station?
    Answer. The specific responsibilities of NASA and the Russian 
Aviation and Space Agency (Rosaviakosmos) are listed in Article 6 
(enclosed) of the Memorandum of Understanding (MOU) on the 
International Space Station (ISS) signed in January 1998. This detailed 
list of responsibilities includes separate sections for the design and 
development phase and for the assembly, operation and utilization 
(long-term) phase. These responsibilities cover a wide range of issues 
from management mechanisms, to logistics arrangements, to training 
facilities and simulators. NASA provides the basic infrastructure of 
ISS, including four solar arrays that generate the majority of power to 
ISS and two significant research modules. In addition, other NASA key 
obligations regarding operations include: (1) logistics support for 
delivery of supplies to ISS on the Shuttle; (2) Mission Control from 
Houston; (3) crew rotation on the Shuttle; (4) crew return after 
assembly complete; and (5) life support systems. Many of Rosaviakosmos' 
key obligations regarding operations are similar to those of NASA, 
including: (1) logistics support for delivery of supplies and 
propellant; (2) Mission Control from Moscow; (3) crew rotation; (4) 
crew return during assembly; and (5) life support systems for the 
Russian segment.
    Question. How can NASA effectively manage its work on the station 
given its dependence on its international partners?
    Answer. The deployment, operation and utilization of the 
significant capabilities already attained with the ISS demonstrate what 
international partnering can achieve. While the failure of some 
partners to deliver certain elements according to schedule has been a 
past issue, the issues addressed in the recent ISS Independent 
Management and Cost Evaluation (IMCE) task force did not raise concern 
in this regard.
    Partnerships, by definition, ascribe certain rights and 
responsibilities to each of the parties, and the ISS international 
partnership is no exception. As such, NASA, like each of the ISS 
partners, expects the others to fulfill their obligations and fully 
intends to continue meeting its own. Meanwhile, NASA is effectively 
managing its own domestic team of civil servants and contractors, 
continuing to integrate U.S. elements of the ISS, and, in concert with 
the international partners, accomplishing program objectives including 
the integrated operation of the overall ISS vehicle and the execution 
of an internationally-coordinated research agenda.
    Question. Under the terms of the NASA/OMB agreement, will the final 
space station configuration conform to the expectations set out when 
the program began, that is, 7-person capability? If not, what are the 
differences?
    Answer. The final configuration of the ISS has not been determined. 
The NASA/OMB agreement takes the ISS through the core complete 
configuration that accommodates deployment of the International 
Partners elements. The launch and assembly of this configuration is our 
first and foremost priority. We are currently defining research 
requirements, after which we will perform an analysis of resource 
capacity to meet those requirements. We recently completed two separate 
independent life cycle ISS cost estimates. When all of this requisite 
knowledge is in hand, we can begin considering potential option paths 
to address delta requirements.
    Question. How can NASA meet its commitments to the international 
partners if the station does not progress beyond a 3-person crew 
capability?
    Answer. NASA is committed to meeting its obligations to the 
International Partners under the ISS international agreements and has 
made no decision to reduce the crew size from that specified in the ISS 
international agreements. NASA has initiated a five-point assessment to 
reform and revitalize the ISS Program and ensure the construction of a 
viable ISS that fulfills its potential as a world-class research 
facility. The five areas of this assessment are: science priorities, 
engineering development and deployment, cost estimating and analysis, 
mission and science operations, and international partner coordination. 
The resources required to meet the science priorities of ISS will 
determine the ultimate crew size. NASA is working closely with the 
International Partners throughout this process to ensure that the 
United States meets its commitments in a manner consistent with the ISS 
Agreements. The International Partners have demonstrated a willingness 
to work with NASA as we assess the ISS Program and develop an end state 
acceptable to the partnership. If, as a result of this process, it is 
determined that specific provisions under the ISS international 
agreements require renegotiation, NASA will work with relevant 
International Partners to seek consensus on the changes.
    Question. How will the loss of the habitation module and the crew 
return vehicle and the U.S. resulting dependence on the Russians impact 
U.S. leadership on the station/in space?
    Answer. NASA's leadership role in the International Space Station 
(ISS) is a fundamental principle in the Intergovernmental Agreement 
among the ISS Partners and in the Memoranda of Understanding between 
NASA and each of the cooperating space agencies. NASA's contribution to 
the ISS Partnership outweighs that of any other partner many fold, but 
the Partnership is still dependent on each of its members to provide 
certain goods and services. Over the course of the design and 
development of the ISS there have been a number of changes in the 
planned contributions of the various Partners. NASA, executing its 
responsibility for overall management and coordination, has led the 
Partnership through the requisite changes and adjustments. As the ISS 
has evolved, changes have occurred on a number of smaller scale items 
and, most notably, on a larger scale when the Russian Federation joined 
the Partnership in 1993. The ISS is a partnership, with all Partners 
dependent on the performance of the others. NASA has embarked on a 
five-point effort to reform and revitalize the NASA ISS Program. This 
plan is premised on research requirements driving the ISS vehicle 
configuration. We have, with the Heads of the ISS Cooperating Agencies, 
agreed to a Program Action Plan for the remainder of calendar year 2002 
that will allow for multilateral endorsement of an option path to meet 
utilization and research requirements. This option path will address 
NASA's demonstration that it has regained programmatic cost control, 
the timing of research requirements on orbit, as well as budgetary 
requirements and constraints, while recognizing NASA's prerequisite 
coordination with the Administration and Congress.
                             space shuttle
    Question. What are NASA's current plans for and cost of upgrading 
the shuttle?
    Answer. Current plans include the following for upgrading the space 
shuttle:
Safety upgrades
    The Cockpit Avionics Upgrade Increment 1 (CAU) will enhance crew 
situational awareness and reduce crew workload by providing automated 
control of complex procedures. The fiscal year 2003 President's budget 
estimate of total funding is $442 million. The Preliminary Design 
Review for CAU Increment 1 was held the week of April 22, 2002.
    The Advanced Health Management System Phase I (AHMS) upgrade to the 
Space Shuttle Main Engines (SSME) will provide improved real-time 
vibration monitoring of the SSME and will provide improved engine 
anomaly response capabilities. The fiscal year 2003 President's Budget 
estimate of total funding is $55 million. The first flight of AHMS 
Phase I is scheduled for 2004
    Friction Stir Welding (FSW) increases External Tank (ET) 
reliability by improving weld joint strength, weld margins, and 
fracture toughness, FSW also enhances process control. In addition, 
this project decreases ET production time and cost and is an 
operational demonstration of large-scale use of FSW technology. The 
total funding is $21 million. The first production use on an ET will be 
in April 2003.
    Main Landing Gear (MLG) Upgrade improves tire designs that could 
allow for higher landing speeds and increases in cross winds and 
landing load limits. It will also mitigate obsolescence issues and 
improve margins for pressure leakage and colder temperature 
environments. The tire improvement project received the authority to 
proceed in May 2002. The fiscal year 2003 President's Budget estimate 
of total funding is $11 million.
    Industrial Engineering For Safety (IES) Upgrades identify and 
reduce risks to ground operations personnel and flight hardware by 
optimizing human-system interfaces. The IES project will also enhance 
maintainability and improve overall processing operations of flight 
hardware and vehicle systems. Total funding is estimated at $90 million
Supportability Upgrades
    Long Life Alkaline Fuel Cell (LLAFC) upgrade modifies cells of the 
Shuttle's existing stack to lengthen corrosion path, reduce reactant 
temperatures, upgrade external seals and insulator plate, and modify 
regulator housing to eliminate aluminum corrosion. The total cost for 
this upgrade is $28 million. The new hardware will be available for 
installation into the fleet on an attrition basis starting in 2005.
    Solid Rocket Booster (SRB) Range Safety Command Receiver--Decoder 
(CRD) upgrade eliminates a criticality 1 failure mode, decreases 
destruct reaction time, mitigates obsolescence of key components, and 
enhances maintainability. The total cost for this upgrade is $5 
million. New hardware will be available for installation into the 
booster fleet in early 2003, with first flight expected in 2004.
    SRB Altitude Switch Assembly (ASA) upgrade is a pressure-sensing 
device to initiate SRB recovery sequence (one unit per SRB). The ASA 
upgrade eliminates an escalating failure rate and a poor repair record 
and improves fault tolerance and reliability. The total cost for this 
upgrade is $4 million. New hardware will be available for installation 
into the booster fleet in early 2003, with first flight expected in 
2004.
    Reusable Solid Rocket Motor Nozzle/Case Joint J-Leg upgrade 
eliminates potential for hot gas intrusion into the joint and 
eliminates significant time and effort expended evaluating hot gas 
pass-throughs. The total cost for this upgrade is $9 million. First 
flight for the improved joint insulation design is targeted for 2004.
    NASA is currently assessing the Space Shuttle supportability and 
upgrade candidates, ground support equipment supportability and upgrade 
candidates, and infrastructure supportability and upgrade candidates. 
The primary objective of this activity is to understand options to 
maintain safe space shuttle operations through 2020, should NASA need 
to fly the Shuttle until that time. No decisions have been made to fly 
the Shuttle beyond 2012.
    Question. What is the impact on these plans since the shuttle will 
only be flown four times a year in support of the International Space 
Station?
    Answer. The limit of four Shuttle flights a year applies only to 
ISS missions. NASA retains the flexibility to fly additional missions 
if the benefiting party (NASA enterprises/DOD/Commercial) provides 
funding. Currently, there are no impacts to the existing Shuttle 
upgrades.
    Question. What is the status of NASA's efforts to solve the 
agency's space shuttle-related human capital challenges?
    Answer. NASA is making key investments in recruiting, training, and 
retaining a dedicated and skilled workforce. At the end of fiscal year 
1999, OSF undertook an assessment of its staffing requirements at the 
field centers. Our internal assessment of core civil service workforce 
requirements at the four Space Flight Centers revealed that full-time 
equivalent (FTE) targets would have to be adjusted upwards. In late 
December 1999, each Center was directed to address critical Space 
Shuttle Program (SSP) workforce shortfalls. The objective was to hire 
employees to support flight safety and the Space Shuttle Upgrades 
program, including addressing critical skill shortages. Since January 
2000, we have seen our Space Shuttle Full Time Equivalents (FTE) levels 
grow from a fiscal year 1999 base of 1819 to a planned fiscal year 2002 
level of 1986. The SSP has made significant progress in addressing the 
skills imbalance identified in 1999; however, like other programs it 
has been impacted by normal attrition. Having completed two consecutive 
years of hiring, our fiscal year 2003 hiring efforts will target 
critical skills.
    Question. NASA has convened an independent business review team to 
evaluate market potential, financing and indemnification issues 
associated with transitioning the Shuttle to private industry. With the 
uncertainty associated with how long the Shuttle will operate under a 
competitive sourcing scenario, how can this team develop a reasonable 
financial assessment?
    Answer. NASA commissioned RAND to assemble a business review team 
consisting of representatives from across the private sector (business 
management, marketing, finance, insurance, safety, and academia) to 
evaluate the various business models that could be considered to 
competitively source Space Shuttle operations. For each proposed 
business model, RAND defined the conditions and requirements necessary 
for the business model to be financially viable. This will enable NASA 
and the Administration to fully understand the level of commitment 
(including required policy and regulatory changes) necessary if they 
choose one of these business models or a variant option. To ensure the 
financial viability for each business model, the President's fiscal 
year 2003 Budget lays out key criteria for Space Shuttle competitive 
sourcing proposals, including financial viability within the Shuttle's 
planned retirement in 2012.
    Question. Is the review team considering the possibility of private 
industry accepting the Shuttle fleet only if maintainability upgrades 
have been made at NASA's expense?
    Answer. The issue of who pays for maintainability upgrades is tied 
to the years of contractor commitment needed and will be considered in 
NASA's competitive sourcing analysis.
    Question. At one time, NASA was considering privatizing one of the 
Orbiters. What was the reason why this was not pursued?
    Answer. In 1996, United Space Alliance (USA) was given the 
opportunity to ``sell'' one Shuttle flight to commercial customers. USA 
pursued this offer, but, was unable to find sufficient commercial 
market demand to underwrite the flight. If a market does not exist for 
one flight, then the concept of privatizing an entire Orbiter for 
commercial purposes is unrealistic. It is important to note that 
privatization is a mechanism distinct from competitive sourcing, which 
could or could not include privatization of some portion of the Space 
Shuttle fleet or infrastructure.
    Question. NASA recently announced a decision to move space shuttle 
maintenance from California and consolidate space shuttle operations at 
Kennedy Space Center facilities. Reportedly, the decision was made 
after ``years of study'', and will save ``millions of dollars''. What 
is the estimated cost saving? What is the analytical basis for the 
estimated cost savings? Will the facilities used to house the 
maintenance activities be renovated existing facilities or new 
construction? To what extent has the cost of providing the facilities 
been included in any analysis justifying the move? To what extent have 
all the costs to terminate maintenance activities in California been 
included in any analysis justifying the move?
    Answer. The estimated cost savings is $30 million. The JSC Systems 
Management Office independent cost/risk assessment is attached as 
Enclosure 2. Additional independent cost assessments were performed 
(see Enclosure 3). All three assessments indicated that cost savings 
would be realized in moving OMM from Palmdale to KSC.
    The Orbiter modifications in Florida will use existing facilities 
and there are no plans for renovation or construction of new 
facilities. OMM at Palmdale is conducted in a government owned facility 
and the government will retain it. USA and Boeing are conducting 
studies to determine the best location to complete the Space Shuttle 
work that currently remains at Palmdale, CA.
                        space launch initiative
    Question. NASA and the Space Launch Initiative Program Office did 
not conduct a cost estimate prior to initial contract awards in May 
2001. At this time an independent cost estimate for total program costs 
has not yet been conducted. What is the timeframe for completing an 
independent cost estimate for the Space Launch Initiative program?
    Answer. An independent group, the Space Launch Initiative Cost 
Credibility Team, formed in February 2002, has been chartered to review 
the current state of cost effectiveness for development, production, 
and operations in the aerospace industry and to formulate 
recommendations for applying the findings to the life cycle cost 
estimates for the next generation of RLVs. The team includes members of 
the MSFC SLI program office, MSFC Systems Management Office (SMO), NASA 
IPAO, Department of Defense, Aerospace Corporation, Rand Corporation, 
Institute for Defense Analysis, and the COTRs for each Integrated 
Architecture team
    The team is collecting the data from each industry-led architecture 
development team to serve as the basis for the initial estimates. The 
preliminary estimates will be available to support a Non-Advocate 
Review (NAR). The estimates for full-scale development cost will be 
directly dependent upon the results of the systems requirements review 
process and the awards from the RFP currently scheduled for late next 
calendar year.
    Concurrent with the SLI Independent Cost Team, the Systems 
Engineering and Integration Office is developing a ``bottoms-up'' cost 
and schedule estimate on the basis of the system design fidelity. The 
systems engineering review process factors in comprehensive budget 
estimates, detailed project schedules, and business and performance 
plans, against the goals of safety, reliability, and cost, in addition 
to overall technical feasibility. This approach forms the basis for the 
investment decisions in the 2nd Generation RLV program's risk reduction 
activities.
    Question. How are you measuring progress toward achieving full-
scale development decision in fiscal year 2006?
    Answer. We added the word ``decision'' in the text of the question 
because SLI has never planned to have Full-Scale Development (FSD) of 
the 2nd Generation RLV by fiscal year 2006, but rather an FSD decision 
by fiscal year 2006--the critical milestone facing the Agency. SLI is 
on track to provide the necessary scientific and technological data 
required to design, evaluate, and formulate realistic plans leading to 
a FSD decision in 2006. NASA is pursuing priority investments for 
designing the 2nd generation system, maturing critical subsystems to 
technology readiness levels, and developing credible cost and 
performance estimates.
    Question. In light of NASA's problems in controlling costs on 
previous programs, what will you do to ensure that the agency 
adequately defines requirements and adequately manages the program 
within established cost guidelines?
    Answer. As outlined in the strategic plans for SLI, the program 
continues to refine the Level I requirements and design reference 
missions in order to maintain focus on the Full Scale Decision by 
fiscal year 2006. Comprehensive top-to-bottom systems engineering and 
the cost-control process ensure that the Government gets what it pays 
for by measuring technical progress against the schedule at regular 
intervals. The cost-to-benefit ratio must prove a wise investment; 
gated procurements provide built in ``off ramps'' to discontinue 
efforts after a period of performance, as well as ``starting gates'' to 
add new tasks to fill technology gaps and spur competition. The 
research funded must be directly relevant to SLI goals to reduce the 
technical and business risk of developing a new RLV system. In addition 
to the multiple internal reviews and analysis teams, the requirements 
are also reviewed by an external group. The External Requirements 
Assessment Team (ERAT) was chartered to provide senior-level advice and 
recommendations to MSFC on this program. Specifically the ERAT will 
provide an independent assessment of NASA's requirements development 
processes and resulting documented requirements. The ERAT is further 
chartered to recommend specific refinement (if necessary) of the 
program's goals and objectives.
    The 2nd Generation RLV External Requirements Assessment team 
reports to the Manager of the 2nd Generation RLV program office at the 
NASA, Marshall Space Flight Center. The team is supporting all relevant 
reviews and requirements development activities required to provide a 
detailed assessment of the processes and resulting documented 
requirements.
    The process of narrowing architectures completed a major 
milestone--the Interim Architecture and Technology Review--in the 
second quarter of fiscal year 2002. The next phase will continue to 
focus space transportation system designs from many concepts to several 
of the most promising candidates to go forward into more detailed 
development. As technology trade studies are focused and validated 
through a rigorous systems engineering process, the two merge again in 
the Systems Requirements Review milestone, anticipated in the first 
quarter of fiscal year 2003. This further narrows the field to a select 
few designs and defines which technologies require further investment 
to enable the eventual winner to be built and become operational. In 
this way, the Space Launch Initiative is reducing the risks inherent in 
an advanced research and development program of this magnitude, while 
fostering a fair business environment for industry and ensuring the 
wise use of valuable resources.
    In conjunction with the numerous technical requirements reviews, 
SLI has implemented a disciplined Earned Value Management (EVM) process 
across all projects. EVM is implemented on the SLI contracts consistent 
with NPD (NASA Program Directive) 9501.3, ``Earned Value Performance 
Management''. The EVM reports are specified within each contract and 
are reported to the Program Manager on a monthly basis.
    Question. The X-37 is to serve as a platform for integrated flight 
demonstration of reusable space system technologies thus advancing 
technologies to reduce risk to the overall Space Launch Initiative 
program. Is NASA providing adequate funding to support the X-37 program 
through the aerodynamic drop tests in fiscal years 2004 and 2005?
    Answer. The X-37 continues to serve as a one of multiple platforms 
for integrated flight demonstrations of reusable space system 
technologies thus advancing technologies to reduce risk to the overall 
Space Launch Initiative program. The X-37 program is currently planned 
through an atmospheric drop test, scheduled to begin in 2004, to 
demonstrate approximately 18 imbedded technologies. Funding for the X-
37 in fiscal year 2004 timeframe will be contingent upon the final 
evaluations of the current NRA 8-30 Cycle II.
                    space launch initiative reserves
    Question. In fiscal year 2002, each Space Launch Initiative project 
included five percent in reserves. By 2nd quarter fiscal year 2002, the 
reserves have been significantly depleted.
    What was the basis for determining the adequacy of a 5 percent 
allowance for SLI reserves? What are the plans for replenishing the 
reserves and what impact will this have on program risks?
    Answer. The program allocated an initial 5 percent reserve to each 
project based upon the contracts awarded from NRA 8-30 Cycle I. In 
addition to the project reserve allocation, the program carries 
approximately 15 percent reserve each fiscal year. Each project can 
request funds from the program reserves through the Risk Management 
Board, chaired by the Program Manager, as required. The program level 
reserves are allocated by the Program Manager consistent with program 
priorities and assessment of each task's associated risk to achieving 
the overall program goals and objectives.
      contract management/integrated financial management program
    Question. GAO has reported that NASA's contract management is a 
continuing area of high risk, because the agency lacks effective 
systems and processes for overseeing contractor activities. For 
example, in a recently issued report on International Space Station 
cost limits, GAO found that NASA was unable to provide auditors with 
detailed, transaction-based data to support the dollars obligated for 
the space station, and did not have support for the actual cost of 
completed space station components--either in total or by subsystem or 
elements. As a result NASA is not able to re-examine its cost estimates 
for validity once costs have been realized. A key effort to address 
these weaknesses is the implementation of a new integrated financial 
management system. Implementation of the system and its integration 
with full cost accounting have been delayed for several years, however, 
because of significant development and implementation problems. NASA 
has started its third attempt at developing such a system, after having 
spent $180 million over 12 years on two failed efforts. Until the new 
system is operational, performance assessments relying on cost data may 
be incomplete.
    After two failed attempts, what is your expectation for fully 
implementing the Integrated Financial Management System (IFMS)?
    Answer. We are currently on schedule for implementing all eight (8) 
modules comprising the IFMS. To date, the Travel Manager, Resume 
Manager and Position Description modules are in various stages of 
Agency-wide deployment and the rollout of our Core Financials module 
pilot (at Marshall Space Flight Center) is on schedule with a ``go 
live'' date of October 2002. The remaining four (4) modules, Budget 
Formulation, HR, Integrated Asset Management (IAM), and Contract 
Administration (CA) are also on schedule for rollout over the next 
thirty six (36) months.
    Question. What lessons learned from the previous attempts do you 
plan to apply to increase the probability of success on the current 
effort?
    Answer.
  --Use COTS software
  --Use a phased approach for module rollout
  --Involve the end-users early into the deployment process
  --Drive the change management process as an integral part of the 
        transformation
    Question. What type of management attention are you providing to 
this effort?
    Answer. After Safety, the Administrator has made the successful and 
accurate implementation of the Integrated Financial Management System 
the primary goal. In addition, he has hired a Special Assistant who is 
the Program Executive Officer of IFM and reports directly to him. He 
has also directed a re-focus of the field centers to include financial 
analysis to be complete with the implementation of the IFM program.
    Question. What is the estimated completion date for fully 
implementing the IFMS?
    Answer. December 2005 for all eight modules. Resume Management was 
implemented in January 2002, Position Description in August 2002, Core 
Financials will be fully implemented in June 2003, Budget Formulation 
in February 2004, Human Resources, Integrated Asset Management and 
Contract Administration are currently scheduled for December 2005.
    Question. What are the total estimated costs to develop and 
implement the IFMS?
    Answer. The PCC number is $644.8 million (fiscal year 2001 through 
fiscal year 10). Details are:

                          [Dollars in millions]

                                                                  Amount
Fiscal year:
    2001.......................................................... $76.7
    2002..........................................................  73.3
    2003..........................................................  85.1
    2004..........................................................  91.2
    2005..........................................................  90.8
    2006..........................................................  48.2
    2007..........................................................  67.0
    2008..........................................................  37.5
    2009..........................................................  37.5
    2010..........................................................  37.5

    Question. What are the advantages and risks for NASA to accelerate 
progress on developing the IFMS?
    Answer. The IFM will give the tools to NASA necessary to manage in 
a timely and efficient its finances. So far, the IFM implementation is 
on schedule and any additional acceleration analysis will include a 
detailed risk identification and mitigation strategy comparable to the 
one adopted for the Core Financials module.
    Question. Do the centers have the resources and knowledge to 
implement the IFMS?
    Answer. Yes. They are working in very close coordination and 
concert with the IFM program office.
    Question. How will NASA's new financial management system change 
the way NASA tracks and uses cost information for activities such as 
estimating and controlling costs, performance measurement and making 
economic trade-off decisions?
    Answer. IFM will provide NASA with timely, accurate and highly 
detailed and correlated financial information capable of supporting 
both full-cost accounting requirements and program and project level 
performance analysis. It will help shift the financial management focus 
of the Agency from ``spending to budget'' to ``managing to cost'' by 
providing the necessary information for effective decision support in a 
timely, user-friendly and reliable environment.
    Question. Given the fundamental changes in NASA's financial 
management, how will NASA manage the cultural and workforce changes 
needed for the project to succeed?
    Answer. NASA is keenly aware that one of the major success factors 
related to implementing a new Agency-wide system like IFM resides in 
transferring as quickly as possible the ``ownership'' of the new system 
and its related processes from the Project Office to its ultimate 
constituencies. In parallel to the software technical implementation, 
the Agency is scheduling the related change management activities 
following a timetable closely coupled with individual user/constituency 
feedback.
    Question. What other steps will you take to enhance oversight of 
contract management activities?
    Answer. The appointment of a Program PEO and the competitive 
sourcing of future module, such as Payroll, focusing on ``best of 
Breed'' and e-government guidelines will enhance contract management 
oversight.
                            workforce issues
    Question. Between fiscal year 1993 and fiscal year 2000, NASA 
experienced a 26 percent civil servant reduction. The downsizing skewed 
the age distribution of NASA's workforce and contributed to critical 
skill shortages. More people in the workforce are over 60 than are 
under 30, and there is concern about the prospect of large numbers of 
future retirements. Since the completion of downsizing in fiscal year 
2000, NASA has shifted its focus to workforce revitalization and 
restructuring.
    What progress has NASA made toward mitigating critical skill 
imbalances and reversing adverse workforce demographic trends?
    Answer. NASA has taken, and continues to pursue, efforts to address 
Agency workforce issues, including skill imbalances and adverse 
workforce demographic trends.
    To help us better manage the existing workforce and enable better 
strategic decisions about future workforce needs, the Agency has 
undertaken an initiative to develop and implement an Agency-wide 
integrated workforce planning and analysis capability that will permit 
us to track the distribution of NASA's workforce across programs, 
capture critical competencies and skills, and allow an analysis of gaps 
between current and desired states.
    The Agency is very focused on addressing the adverse workforce 
demographic trends it faces, including the shrinking S&E pipeline, lack 
of diversity within that pipeline, and NASA's aging workforce. In order 
to reshape and reconstitute the workforce for the future, NASA Centers 
are re-establishing recruitment networks and rebuilding the once 
extensive Co-operative Education Program. The Agency will continue to 
use these programs, as well as the Presidential Management Intern 
Program, the Federal Career Intern Program, and other student 
employment programs as tools for entry-level hires.
    NASA uses available financial incentives to attract and retain a 
workforce that has the right skills for the future and is 
representative of the Nation's diversity. For example, NASA Centers 
will offer starting salaries above the minimum rate of a grade and when 
appropriate offer recruitment bonuses to attract, and retention 
allowances to retain, needed talent. Use of these incentives has 
increased in the recent past--a trend the Agency expects to continue 
because of an increasingly competitive job market and high cost of 
living surrounding some NASA Centers. The Centers are now also able to 
repay student loans as a way to attract or retain employees.
    The National Recruitment Initiative study, completed in January 
2002, was created to develop Agency-wide hiring strategies and tools 
for NASA's current and future science and engineering recruitment 
needs. Information gathered was used to develop recruitment 
enhancements that focus on the candidate instead of the hiring process; 
leverage partnerships and alliances with universities; and coordinate 
Agency-wide recruitment opportunities and outcomes. In addition, the 
Agency's automated resume submission process enables applicants to 
apply for jobs using an on-line service called NASA Staffing and 
Recruitment System (NASA STARS). We recently added an on-line 
notification system that allows individuals to be automatically 
notified of new vacancies that may be of interest to them.
    Given current workforce demographics, particular attention must be 
focused on assuring the Agency captures and makes available the wealth 
of expertise and experience the current workforce possesses--as well as 
that which resides outside the Agency in similar organizations--to aid 
in developing the next generation of project/business managers and 
leaders. Accordingly, NASA has identified an ``improvement initiative'' 
to ensure training and development programs build needed competencies, 
including more effective incorporation of knowledge sharing and 
mentoring in the development of employees.
    To help ensure a continuing pipeline of future talent, NASA has a 
number of programs, K-12 through post-graduate, to encourage students 
to pursue science, math, engineering, and technology studies. The 
Agency has made education a core mission and is pursuing a more 
coordinated management approach that will further enhance our reach and 
improve our performance in the education area. In addition to those 
efforts, NASA is working to improve the linkage between these 
``feeder'' programs and projected workforce requirements.
    We face challenging times as we reconstitute and reshape our 
workforce for the 21st century. While we continue to use our existing 
flexibilities, they are not entirely adequate. To help us address the 
challenge head-on, in May 2002, we recently forwarded to Congress a 
series of legislative provisions dealing with human capital. These 
provisions will complement the Administration's Managerial Flexibility 
Act, and we look forward to working with the Committee and Congress to 
ensure that these essential tools are enacted into law this year.
    Question. What barriers impeded NASA from achieving proper staffing 
levels?
    Answer. The rigidity of Federal workforce restructuring, 
recruitment and compensation laws and rules impede NASA's ability to 
respond in an agile and efficient manner to mission or program changes 
and workforce trends. NASA needs additional flexibilities and 
authorities to address its human capital challenges.
    NASA must reshape and reconstitute its current workforce to address 
its skills imbalances and lack of depth in critical competencies. The 
buyout and early retirement authorities are very useful tools to 
facilitate downsizing, but management must be able to use them for 
restructuring and reshaping (not just downsizing) and be able to target 
them on the basis of skills and occupations.
    Financial incentives are needed to attract and retain a world-class 
workforce and avoid a sudden drain of talent and corporate knowledge 
that could result from the departure of too many key employees at 
critical points. More competitive and flexible recruitment, relocation, 
and retention bonuses would address this need. Other incentives, such 
as the authority to offer new employees the same travel and 
transportation benefits available to permanent employees who transfer 
to other duty locations would make a difference when recruiting new 
employees for positions in high cost areas.
    Federal recruitment and placement processes are overly cumbersome 
and time consuming. As a result, NASA loses highly qualified candidates 
to the private sector, which can extend more lucrative offers much more 
quickly. Streamlining these processes will enable NASA to respond more 
quickly and effectively to workforce changes and compete more 
successfully with the private sector for talent. Among some of the 
suggested changes include:
    A streamlined hiring authority for severe shortage and critical 
needs positions.
    A more flexible term (time-limited) appointment authority. Term 
appointments, which currently are limited to 4 years, often are used to 
support scientific and technical projects and programs. The completion 
of such projects often is dependent on the technology, so their 
duration may extend beyond the original anticipated date--and beyond 4 
years. NASA needs the authority to make/extend a term appointment for 
up to 6 years. In addition, the process of converting term employees to 
permanent must be simplified. Doing so is likely to make term 
appointments more attractive to potential applicants and thereby 
provide a more robust labor pool from which to draw.
    Question. What is the status of the agency-wide workforce planning 
system NASA is developing, and what is its relationship to the 
Integrated Financial Management Project? How will the new system assist 
the agency in making strategic decisions about future workforce needs, 
including the size of the workforce and the knowledge, skills, and 
abilities needed to carry out agency operations?
    Answer. As mentioned previously, we are implementing a three-phase 
plan for developing an improved workforce planning capability at the 
Agency level. This effort began in fiscal year 2002 and is scheduled 
for completion in fiscal year 2005. The plan focuses on the 
competencies required and those possessed within the NASA workforce. 
Ultimately, we plan to use the Human Resources (HR) capabilities of the 
IFM enterprise software to integrate workforce planning with other 
planning processes in the Agency.
    Initially, we have had the Centers update an inventory of 
competencies in their civil service and contractor workforces. We are 
refining that data and improving our competency definitions. We will go 
back to the Centers later this year to get input identifying specific 
competency gaps related to NASA program needs. Simultaneously, we are 
working on standardizing and extending the use of a competency 
management system model devised at the Kennedy Space Center. A team has 
begun work on this model, which will provide the common framework 
needed across all the Centers to identify competencies and workforce 
needs. This framework will be used to configure the HR module in the 
IFM system. The new IFM HR software will give us the capability, for 
the first time at the Agency level, to associate skills and 
competencies with positions and with employees. It will further enable 
us to associate employees with the programs and projects on which they 
work. This will give us the information needed to plan and target 
hiring and training to the needs of the programs and agency operations.
                    next generation space telescope
    Question. NASA's current plans are for the Hubble Space Telescope 
to receive one more servicing mission and then to operate it until 2010 
or until subsystem failures render the Observatory inoperable. The 
schedule for the Next Generation Space Telescope (NGST)--an observatory 
that will enable NASA to estimate the total mass in galaxies even in 
non-luminous regions due to sensitive infrared capability--has been 
extended. NASA has acknowledged that delays are due to a number of 
factors, including foreign partner concurrence and the performance of 
an improved instrument cost estimate. Down select to a single prime 
contractor is currently scheduled for this fiscal year.
    Uncertainty in the details regarding the transition from the Hubble 
to the NGST is not unlike that associated with the transition from the 
Shuttle to a replacement Reusable Launch Vehicle. Indeed, in both the 
case of the Hubble and Shuttle, we are a long ways away from an 
operational replacement system, costs for the replacement are 
uncertain, and decisions need to be made in short order if additional 
upgrades to extend the life of the current system are to be cost-
effective.
    As the NGST schedule is extended, is it prudent to develop a 
contingency plan that will enable Hubble to operate beyond 2010? Has 
NASA developed such a plan? If so, what is the range of costs 
associated with possible contingencies? Are skill shortages a concern 
among HST staff in light of possible operations beyond 2010? Is 
sufficient time being allotted for testing to ensure that NGST's needed 
technologies--such as lightweight optical structures, new generations 
of infrared detectors, and energy-efficient cooling techniques--will 
operate successfully when launched?
    Answer. We currently plan to launch NGST in 2010. It is important 
to note that NGST and HST look at different portions of the 
electromagnetic spectrum, so even in the event that NGST slips, trying 
to keep HST going past 2010 wouldn't ``make up'' for the delayed 
science. This is not to say that astronomers interested in HST visible/
ultraviolet data would not be interested in NGST infrared data, but it 
is worth noting the difference. Therefore, because there is no pending 
``data gap'' to mitigate, we have not developed a contingency plan to 
extend Hubble's operational life.
    It is also important to point out that the amount of archival data 
from Hubble is immense and could easily keep the scientific community 
occupied for years. In fact, one of our most important discoveries from 
Hubble over the past year--the existence of ``dark energy'' that pushes 
galaxies apart--resulted from archival data, not from a recent 
observation. Even if there is a delay in NGST development or if HST's 
planned operational life is unexpectedly shortened, NASA plans to 
continue to provide grants to researchers to make use of archival data 
from Hubble.
                          aeronautics research
    Question. NASA's fiscal year 2003 Budget Estimates says that: 
``U.S. competitors are targeting aviation leadership as a stated 
strategic goal. Without careful planning and investment in new 
technologies, near-term gridlock, constrained mobility, unrealized 
economic growth, and the continued erosion of U.S. aviation leadership 
could result''.
    Mr. Administrator, I too am concerned about the apparent loss of 
U.S. aviation leadership. While NASA expresses concern, its budget 
request seems to say otherwise. How else could you interpret the 
decreasing funding trends in aeronautics research? Take ``Breakthrough 
Vehicle Technologies'' for example, a component of the Vehicle Systems 
Program. Fiscal year 2001 and fiscal year 2002 appropriations were 
$84.4 million and $83.2 million respectively. The fiscal year 2003 
request is for $61.9 million. Does this trend mean that the continued 
erosion of U.S. leadership has stopped?
    Answer. During fiscal year 2001 and fiscal year 2002, the budget 
for the Breakthrough Vehicle Technology project included a task 
associated with 3rd generation reusable launch vehicles unrelated to 
aeronautics technology. During the fiscal year 2003 program 
restructuring to provide more focus on aeronautics, this work ($20.5 
million) was appropriately consolidated with the Space Transfer and 
Launch Technology program. The fiscal year 2003 NASA request for 
aeronautics work within the Breakthrough Vehicle Technology project has 
increased over the fiscal year 2002 request.
    Question. The Aerospace Technology Enterprise Plan issued in April 
2001 is NASA's blueprint for a new era in Aerospace for the United 
States. Focusing on the goal of pioneering technology innovation, I am 
struck by the apparent absence of key markers that would demonstrate 
NASA's resolve. Is this indicative of a void in the Nation's strategic 
approach to aeronautics research?
    Answer. NASA is in the process of defining metrics for its 
pioneering technology innovation goal. NASA's Office of Aerospace 
Technology is working with its partners and customers in the NASA 
Enterprises to establish definitive objectives and metrics for this 
goal. The absence of the metrics is not an indication of a void in the 
Nation's approach to aeronautics research. For example, NASA's 
strategic plan has established quantitative metrics for aviation safety 
as follows: technology development to enable an 80 percent reduction in 
fatal accident rates by 2007, and a 90 percent reduction by 2022. 
Similar quantitative metrics have been established for aviation noise 
and emissions reduction, and capacity and mobility improvements.
                    space shuttle safety/astronauts
    Question. Richard Blomberg, who recently completed his term as 
chairman of an independent panel that oversees human space flight 
safety at NASA, told the House Science Committee: ``In all the years of 
my involvement, I have never been as concerned for Space Shuttle safety 
as I am right now.'' Is this country on the verge of another Challenger 
tragedy? What is NASA doing to allay Mr. Blomberg's concerns?
    Answer. The Space Shuttle is safe to fly. The recent discovery of 
the flow liner cracks exemplifies the risk adverse nature of the 
Shuttle team. For the future, NASA is currently assessing Space Shuttle 
supportability and upgrade candidates for hardware, infrastructure and 
obsolescence, and reviewing human capital investment required to 
operate the shuttle beyond 2012. The primary objective of this activity 
is to understand options to maintain safe Space Shuttle operations 
through 2020 should Agency planning for a transition to a second-
generation vehicle by 2012 change. No decisions have been made to 
extend Shuttle operations beyond 2012.
    Question. Last year, your predecessor was quite concerned about the 
prospect of ``tourists'' on the space station. But now NASA and the 
other space station partners have agreed to allow Russia to send 
``spaceflight participants'' to visit the space station regularly. 
Another one--a millionaire from South Africa--is up there now, and 
several more candidates are waiting in the wings. Do you consider this 
an appropriate use for the world-class research facility that we're 
building? Is this what NASA means by ``space station 
commercialization''? What are NASA's plans for flying non-professional 
astronauts either on the space shuttle or the space station?
    Answer. The International Space Station (ISS) is a partnership 
venture, where each partner has rights associated with activities 
utilizing the resources and capabilities that they contribute to the 
venture. As such, the Russian partner has the right to utilize their 
portion of the ISS to accommodate ``spaceflight participants'' whom 
they choose to sponsor and transport to the ISS. In general, each 
partner selects candidates for its own ISS crewmembers based on its own 
criteria and procedures. The ISS partnership has agreed on a set of 
criteria and processes to be used by all ISS partners when assigning 
their professional astronauts/cosmonauts or spaceflight participants as 
ISS (Expedition and Visiting) crewmembers. This document addresses the 
requirements for candidate crewmembers in the following areas: general 
suitability, medical requirements, behavioral suitability, linguistic 
ability, crew code of conduct, and training requirements.
    NASA has no plans for flying non-professional astronauts 
(``spaceflight participants''), either on the Space Shuttle or the ISS, 
and does not envision any consideration of such individuals until 
assembly of the ISS is completed (``US Core Complete''). Any future 
consideration to fly spaceflight participants on the Space Shuttle or 
the ISS would only be considered if it were deemed to be in the 
``national interest.''
    Question. Do women astronauts have the same opportunities as their 
male counterparts? We have heard that NASA's decision to curtail 
funding of a ``small torso'' spacesuit severely limits the number of 
women who can be assigned to space station crews. Is that correct? What 
percentage of the women in the astronaut corps currently cannot be 
assigned to space station crews because of the spacesuit issue? If 
women are not part of the long duration crews on space station, how 
will data be acquired on women's adaptation to the space environment to 
ensure they can be included on trips to Mars, for example? How much 
money will NASA save by not building that version of the spacesuit? 
What scientific research objectives will not be achieved--particularly 
in understanding human adaptation to the space environment--because 
there are so few women on space station crews?
    Answer. NASA's anthropometric criteria for astronaut candidates are 
intentionally broad to allow us to select from the nation's best and 
brightest, regardless of gender. Naturally, all astronauts are not 
going to be qualified for all the possible roles on a mission, with 
respect to their size or other characteristics.
    It is important to note that only EVA suits, which are only used 
for space walks, are in any way limiting which astronauts can fly on 
Shuttle missions. The Shuttle spacesuits for launches and landings 
accommodate all astronauts. While the small EVA suit could affect 31 
women astronauts in the current astronaut corps, only three are 
currently impacted for future missions. These three women have yet to 
be assigned to a mission, but they will likely be assigned within the 
next year. Given a recent change in policy that allows astronauts to be 
assigned to ISS Expedition crews even if they are not EVA qualified, it 
is now possible for these three women astronauts to qualify for an ISS 
Expedition mission.
    As far as the other 28 women astronauts potentially affected, 
fifteen can be accommodated in the medium EVA suit. One recent graduate 
of Astronaut Candidate training has yet to be evaluated for EVA suit 
sizing requirements. Seven female astronauts are not eligible for EVAs 
regardless of suit size. Four of these seven women are on inactive 
status and have already completed multiple space flights as mission 
specialists or pilots. The other three have been assigned mission-
critical roles as Shuttle pilots or as a mission commander. Of the 
remaining women astronauts, five have already had multiple flight 
assignments in mission-critical roles, such as Robotic Manipulator 
System operators, and have been instrumental in International Space 
Station (ISS) assembly operations. Deferral of the development of the 
small EVA suit will not eliminate opportunities for assignment to ISS 
flights since all long-duration crewmembers do not require EVA 
qualification. The length of the EVA suit shoulder determines who can 
wear the existing suits. Some male astronauts are too big for the extra 
large suit just as some women are too small for the medium EVA suit. 
Thus far, many women and men have trained and qualified in the medium, 
large, and extra large EVA suits. Women astronauts have performed 
significant EVAs in support of the ISS assembly within the past year 
most recently, Dr. Linda Godwin and Col. Susan Helms.
    NASA recognizes that the current EVA suit has limitations, 
including size constraints and interchangeability, which we hope to 
improve through further evolution in suit design and configuration. The 
next generation of EVA suits that we develop will improve functionality 
for all users and will also accommodate a broader range on both 
extremes of the anthropometric spectrum, small and large.
    We must emphasize that NASA has not terminated the small EVA suit, 
although its certification and production have been deferred in favor 
of higher funding priorities. Even if the development of the small suit 
resumed immediately, it could not be ready for use during the assembly 
phase of the ISS, when the demand for EVA is at its peak. In addition, 
operational problems would still exist since the small EVA suit parts 
are not compatible with the other suits.
                   mergers in the aerospace industry
    Question. Has there been any impact on competition in NASA 
contracting because of mergers in the aerospace industry?
    Answer. Mergers in the aerospace industry have reduced the number 
of competitors for NASA contracts. Despite these changes, however, NASA 
has experienced an increase in the percentage of competitive contract 
actions from 75 percent in fiscal year 1997 to 81 percent in fiscal 
year 2001. In spite of a relatively flat budget over the last several 
years, the percentage of dollars awarded competitively has also 
increased from 61.9 percent in fiscal year 1997 to 64.1 percent in 
fiscal year 2001.
    Question. Is competition less fierce today than, say five years 
ago?
    Answer. There is no indication that competition among contractors 
vying for work with NASA is any less fierce today than it was five 
years ago.
    Question. If so, is NASA paying more for products and services?
    Answer. To the extent that we obtain competition for NASA business 
as noted above, we believe that the prices are reasonable and 
reflective of the marketplace.
    Question. Should additional mergers such as Northrop Grumman's 
proposed merger with TRW be discouraged?
    Answer. In general, NASA defers to the Departments of Commerce and 
Justice to evaluate potential mergers. We believe each proposed merger 
should be reviewed on a case-by-case basis in cooperation with those 
Departments. NASA does not anticipate any adverse impact from the 
pending Northrup Grumman/TRW merger.
                           nuclear propulsion
    Question. When do you expect nuclear propulsion for planetary 
probes to be ready to fly? You have said that we should wait until 
nuclear propulsion is available to send a probe to Pluto because it can 
get there without a gravity assist from Jupiter, and will be able to 
conduct longer term studies of Pluto once it arrives. Assuming your 
nuclear systems initiative is funded as planned for the next 5 years, 
when will that nuclear-propelled Pluto probe be launched? Will it 
arrive at Pluto by 2020, when scientists say the atmosphere is likely 
to collapse?
    Answer. The proposed Nuclear Systems Initiative research and 
development program could enable the flight of a nuclear fission-
powered spacecraft early in the next decade. A mission to orbit Pluto 
would take approximately 10 years to reach and orbit Pluto. There is 
currently no consensus among the scientific community as to when or 
even if Pluto's atmosphere will freeze out. Nuclear electric propulsion 
reduces or eliminates the need for planetary gravity assists, and would 
therefore not have launch date constraints.
    The abundant on-board power and propulsion enabled by the nuclear 
fission system (more power than approximately 250 watts electric from a 
radioisotope power system) would permit the spacecraft to orbit the 
Pluto/Charon system, rather than simply fly-by, allowing significantly 
more time for detailed survey of Pluto/Charon through the use of remote 
sensing instruments. Additionally, the abundant energy would enable a 
much greater scientific data-return communications link to Earth 
compared to what could be achieved with a radioisotope power system.
                     status of russian commitments
    Question. What is the status of Russia fulfilling its commitments 
to the space station program? The cost overruns on NASA's part of the 
program have overshadowed concerns about Russia's ability to fund 
construction and launch of Progress and Soyuz spacecraft. Are you 
confident that Russia will meet those commitments? If not, what remedy 
do you propose?
    Answer. Russia continues to meet flight commitments including the 
provision of Service Module life support systems and launch of Progress 
and Soyuz spacecraft for re-supply, reboost, and crew escape functions. 
It is our expectation that Russia will continue to meet these 
commitments.
    Question. Of the space station segments Russia promised to build--
such as the Science Power Platform, docking units, and Research 
Modules--which do you still anticipate will be constructed? If Russia 
does not provide the Science Power Platform, will we have to provide 
electrical power for their segment of the space station? If so, will 
they be charged for that resource?
    Answer. The Science Power Platform (SPP) as originally envisioned 
has not been completed due to budget shortfalls and design 
uncertainties. Although some hardware has been built, it became clear 
that the original design would be too heavy for launch on the Space 
Shuttle. Most work on the project was halted, in order to allow time to 
re-design the SPP. The primary consequence of not building the SPP as 
planned is to reduce the amount of power available to the Russian 
Segment of the ISS.
    Relative to additional assembly hardware to be delivered, progress 
on these elements has also been limited due to funding issues. However, 
like the SPP, the primary consequence of not building out the full 
Russian segment is an impact to the Russian segment utilization.
    NASA has received alternative Russian design options for technical 
consideration. However, NASA is not in a position to discern whether 
Russia will be able to address the financial issues that continue to 
delay progress on their plans to build out the Russian segment nor the 
specific elements that will ultimately be deployed to orbit.
    Question. What is the status of discussions with Russia about 
providing additional Soyuz spacecraft to enable the space station crew 
size to grow to six? How much do you think Russia will charge the ISS 
partnership for two additional Soyuzes per year?
    Answer. NASA is currently not engaged in discussions with the 
Russian Aviation and Space Agency (Rosaviakosmos) on the subject of 
additional Soyuz vehicles to increase the size of the International 
Space Station (ISS) crew from three to six. A decision on the most 
effective crew size and associated crew return requirements is not 
expected until NASA completes its five-point assessment to reform and 
revitalize the ISS Program. The five areas of this assessment are: 
science priorities, engineering development and deployment, cost 
estimating and analysis, mission and science operations, and 
international partner coordination.
    Moreover, NASA is legally prohibited from purchasing ISS-related 
goods and services from any entity or element of the Government of the 
Russian Federation under Section 6 of the Iran Nonproliferation Act of 
2000 (INA) (Public Law 106-178) unless the President determines that 
Russia meets specific nonproliferation conditions. NASA has made it 
clear to Rosaviakosmos that any potential future purchase of crew 
return services would have to be within U.S. non-proliferation 
regulations, including INA.
    With USG interagency approval, NASA did discuss the feasibility of 
extending/expanding the use of Soyuz crew return vehicles with 
Rosaviakosmos in February 2002. Rosaviakosmos indicated willingness and 
ability to supply additional Soyuz spacecraft if NASA is able to 
provide lead funding at least 2 years prior to delivery. NASA did not 
enter into negotiation regarding the price of Soyuz crew return 
vehicles. The price would depend on the number of vehicles required and 
delivery schedule. Any requirement for additional crew return 
capability will come from the ongoing five-point NASA assessment of the 
ISS Program. This plan is premised on research requirements driving the 
ISS vehicle configuration. We have, with the Heads of the ISS 
Cooperating Agencies, agreed to a Program Action Plan for the remainder 
of calendar year 2002 that will allow for multilateral endorsement of 
an option path to meet utilization and research requirements. This 
option path will address NASA's demonstration that it has regained 
programmatic cost control, the timing of research requirements on 
orbit, as well as budgetary requirements and constraints, while 
recognizing NASA's prerequisite coordination with the Administration 
and Congress.
                      orbiter major modifications
    Question. Your decision to move Shuttle ``Orbiter Major 
Modifications'' (OMM) work to Florida from California has stimulated 
some controversy.
    Kennedy Space Center's press release announcing the transfer stated 
that performing all the OMM work in Florida ``would also minimize 
risk.'' What risks are minimized by moving this work to Florida? What 
risks are increased? For example, it would seem that there are 
increased risks in having the entire shuttle fleet in the same 
geographical location. Wouldn't it be prudent to keep at least one 
orbiter in a different location in case terrorists or natural disasters 
strike Kennedy Space Center?
    Answer. Several risk factors are lessened by the transfer of OMM to 
KSC: reduced risk of transporting orbiters cross-country from Palmdale 
to KSC; reduced Shuttle manifest impact planning risk; reduced Shuttle 
ground operations risk, reduced overall costs per year ($30 million); 
reduced risk of ``redoing'' OMM work. KSC is constantly improving its 
security procedures to protect the nation's Space Shuttle and ground 
facility assets, with an accelerated improvement effort in light of the 
events of September 11. While we must remain vigilant for future 
missions, past experience has shown that the orbiters are very well 
protected at KSC. Placing a single orbiter at a different location in 
order to protect it from a natural disaster or terrorist attack will 
only increase the strain on NASA security forces to protect more than 
one location.
    Question. How many people in California will lose their jobs? How 
many people in Florida will be hired? Are you or your contractors 
trying to motivate workers to move to Florida so their experience is 
not lost?
    Answer. Due to the periodic nature of the OMM's in Palmdale, the 
workforce is hired/terminated based on need. Utilizing synergies of a 
common workforce, United Space Alliance's plan uses 235 workers. This 
workforce is a combination of current and new hires. In addition, 30 
Boeing engineers for design-engineering support will be used. 
Management has been drawn from the existing Orbiter Element and Ground 
Operations Element teams.
    In September 2001, and March 2002, United Space Alliance held an 
``Open House'' in Palmdale for the purpose of interviewing and 
extending offers to Palmdale employees to relocate to KSC in Florida. 
Approximately 300 attended the September event, and 90 attended the 
March event. USA has extended 25 relocation offers, of which 15 have 
been accepted. Currently there are no other offers pending to 
California workers to relocate to Florida. It should be made clear that 
the Palmdale workforce was laid off after the completion of the last 
OMM, not as a result of the transfer to KSC. This is a cyclical process 
that occurs after each OMM at Palmdale. Many of the laid-off Palmdale 
workers have secured other positions at area aerospace firms.
    Question. What is your current estimate of how much money will be 
saved by this transfer on an annual basis for the next 5 years? What is 
your current estimate of the costs (including costs to the Federal 
Government, State government, local government, and contractors)? 
Please specify any facilities that must be built, renovated, or 
upgraded and the associated costs.
    Answer. The proposal to conduct OMM at KSC was based on a plan to 
use existing facilities, in their current configuration. The current 
savings per year due to the relocation is $30 million. NASA and United 
Space Alliance will perform OMM's in existing Orbiter Processing 
Facilities (OPF). Since OMMs are a labor-intensive effort and we are 
using existing facilities at KSC, there are no costs associated with 
this transfer. A declining flight rate has alleviated processing 
dependencies on facilities.
    Question. When will the transfer be completed and the Palmdale, CA 
facilities closed?
    Answer. The transfer has already begun and closure is dependent 
upon the USA & Boeing evaluation of remaining work at Palmdale.
    Question. How has your approach to shuttle security changed since 
the September 11 terrorist attacks? Much attention has been given to 
your decision not to announce shuttle launch times until 24 hours in 
advance. Since all shuttle flights, with one exception, are to the 
space station, and launch times can be calculated easily based on the 
space station's orbit, is it correct that the reason behind your 
decision was related to that one exception--this summer's launch of 
STS-107, which includes an Israeli astronaut? If so, will you return to 
your prior practice of announcing launch times well in advance of a 
launch after STS-107 is completed?
    Answer. Subsequent to the events of September 11, KSC received 
approximately $45 million to enhance security. While this work is in 
progress, a variety of security efforts have already been instituted. 
No, the decision not to announce shuttle launch times until 24 hours in 
advance is not related to STS-107--this decision was initiated 
immediately following the events of 9/11 and will remain in effect 
until NASA's security policy changes.
                           radiation exposure
    Question. In addition to the spacesuit issue, another factor that 
may limit women's participation in space station crews is radiation 
exposure limits. For example, your guidelines are that women who make 
their first long duration 6-month space flight at age 45 cannot make 
another long duration flight, but a male of the same age can make two 
such spaceflights. You note that the data on which you base your 
guidelines is quite dated, and new research could change those 
guidelines. Do you anticipate that your Space Radiation Initiative will 
demonstrate that women can participate in space missions to the same 
extent as men? If not, what are the implications for women 
participating in trips to the Moon or Mars? In general, your radiation 
exposure guidelines limit most men and women to either one or two 6-
month spaceflights over their lifetime. Is that a ``showstopper'' for 
human trips to Mars?
    Answer. The safety of flight crews is NASA's highest priority. As 
such, we strive to ensure that our astronauts are protected from undue 
hazards, including excessive exposure to radiation. NASA's standards 
for radiation safety are based on recommendations from the National 
Council on Radiation Protection and Measurements (NCRP) and approved by 
the Occupational Safety and Health Administration (OSHA). Several 
radiation limits are used to deal with specific exposure types. The 
current NASA radiation limits are based on NCRP guidelines issued in 
1989. New guidelines were published in 2000 and recommended for 
adoption by the NASA Aerospace Medical Advisory Board; procedures for 
implementation of that recommendation are being developed.
    The most restrictive radiation limit is the career radiation 
exposure limit. This limit has been set to ensure that the probability 
of fatal cancer during the individual astronaut lifetime is not 
increased by more than 3 percent above the average lifetime risk for 
the U.S. population (which is approximately 20 percent). This risk 
limit is imposed equally for both male and female astronauts of all 
ages. The radiation exposure of astronauts is controlled to ensure that 
this risk level is not exceeded. However, the risk associated with a 
given radiation dose is different for men and women, mainly due to 
radiation-sensitive organs in women. The risk is also dependent on age. 
For this reason, the cumulative career radiation dose allowed for women 
is less than that for men, and the cumulative career radiation dose 
allowed for younger astronauts is less than that allowed for older 
astronauts of either gender.
    The probability of fatal cancer is calculated using measured 
radiation doses. Current knowledge is not sufficient to establish this 
relation accurately, and therefore there are large uncertainties in the 
risk prediction for a given radiation dose. For this reason, large 
margins of safety are required to ensure that the risk is not exceeded. 
At a given radiation dose, the risk may be as much as three times 
greater than the average estimate. Therefore, in order to have 
reasonable confidence that the risk limit is not exceeded, further 
radiation exposure needs to be restricted after a radiation dose 
corresponding to only a third of the dose corresponding to a 3 percent 
risk limit.
    The Space Radiation Initiative will contribute in several ways to 
demonstrate that women can participate in space missions to the same 
extent as men. The increased knowledge gained from the research will 
reduce the uncertainty in risk prediction, allowing narrower safety 
margins to be applied. This means that higher dose and, therefore, 
longer duration missions for both men and women astronauts can be 
accepted with the same confidence that risk limits will not be 
exceeded. The Space Radiation Initiative will also provide 
significantly better data in physics and biology. This data will lead 
to improved utilization of spacecraft components for radiation 
shielding. Finally, development of a significant radiobiology research 
community will allow NASA to participate in, and benefit from the 
breakthroughs in biology. Even minor advances could lead to significant 
benefits for NASA, as well as society at large. For example, 
improvements in biochemical diagnostic techniques that lead to earlier 
diagnosis and lower fatality rates for breast cancer would 
significantly reduce the risk attributable to radiation in a given 
mission. Even further along the horizon, biological intervention to 
mitigate risks of all fatal disease is a realistic hope. A science 
community attuned to NASA mission requirements will be able to 
translate its benefits into meeting NASA requirements.
    The current limitations on astronauts are applicable to the Space 
Station. A Mars mission would have greater uncertainties, and require 
greater margins of safety. The Space Radiation Initiative is necessary 
for Space Station and is intended to be sufficient to assure three 180-
day missions for men and women astronauts within adequate safety 
margins. The advances of the Initiative are necessary for a Mars 
mission, but are not sufficient. Better prediction of biological health 
effects, including effects other than fatal cancer, is required for a 
Mars mission than for a stay on Space Station. In addition to 
optimization of spacecraft design for radiation shielding properties it 
will be necessary to design shielding for a planetary surface; a new 
concept of radiation shielding may also be developed for a long 
interplanetary transit. A Mars mission with only our present knowledge 
is likely to result in radiation exposures that exceed current NASA 
limits. However, it is reasonable to assume that, on the time scale 
needed for the execution of a Mars mission, adequate progress could be 
made to enable a Mars mission to proceed without exceeding safe risk 
limits.
                        earth science enterprise
    Question. How has your strategy changed regarding commercial remote 
sensing applications?
    Answer. With the advent of successful deployments of commercial 
remote sensing satellite systems starting in 1999, NASA assessed that 
it was appropriate to expand its role in the area of Earth science 
applications. In January of this year, NASA released the ``Applications 
Strategy: 2002-2012'' for the Earth Science Enterprise (ESE). The focus 
of this strategy is on national applications that extend and accelerate 
the operational use of the results of NASA research and development in 
Earth science and technologies. A copy of the Strategy is available at: 
http://www.earth.nasa.gov/visions.
    The Applications Strategy indicates a role for commercial remote 
sensing in serving NASA research purposes in understanding the Earth 
system. The Applications Program undertakes the functions of evaluating 
potential sources of commercial data, verifying and validating the data 
and information technologies, and then benchmarking their use for 
scientific research and applications development and demonstration.
    NASA proactively develops opportunities for using commercial data; 
e.g., partnerships with industry and leveraging investments in new 
products and services to serve the research agenda. The Landsat Data 
Continuity Mission (LDCM) is a public/private partnership enabling the 
private sector to provide data to meet a government specification for 
the Earth science community. This multi-year development effort sets a 
precedent for government requirements that may be served by the private 
sector on a sustained basis into the future.
    Question. For example, what is the significance of your decision to 
change the Commercial Remote Sensing Program (CRSP) at Stennis Space 
Center to the Earth Science Applications Directorate?
    Answer. The title was changed to reflect the broader role of the 
Earth Science Applications Directorate (ESAD) at Stennis in support of 
the ESE. The ESAD contributes to the systems engineering functions of 
evaluation, verification and validation, and benchmarking associated 
with the use of commercial remote sensing data, and for the use of NASA 
results in the national applications. ESAD serves in leading many of 
the crosscutting solutions associated with the systems engineering to 
enable the effective use of Earth science predictions and observations 
to be assimilated into decision support tools, including assessments 
and decision support systems. This approach is consistent with the 
approach of the Climate Change Research Initiative (CCRI) and other 
Federal agencies in addressing national needs for Earth science results 
to be deployed effectively to serve our citizens.
    Question. Your fiscal year 2002 budget estimate states that the 
goal of the CRSP program was to ``accelerate the development of a 
preeminent U.S. remote sensing industry,'' but your fiscal year 2003 
budget documents state that, as of fiscal year 2002, that no longer is 
a strategic objective. What has changed, and why?
    Answer. The U.S. remote sensing industry has grown in capacity 
recently, as manifested by the successful launches of commercial remote 
sensing satellites and successful operations of a number of airborne 
commercial remote sensing systems.
    The ESE recognizes the importance of systematically enabling the 
results from NASA's research and development of aerospace science and 
technology for increasing the understanding of the Earth system to 
enable decision support systems to serve our Nation. In January of this 
year, NASA released an Applications Strategy to accomplish the purpose 
of serving national applications (including energy forecasting, public 
health, agricultural competitiveness, homeland security, coastal 
management, etc.). The strategy directly addresses the NASA mission 
objective of ``understanding and protecting our home planet''.
    The National Academy of Sciences (NAS) is currently reviewing the 
Strategy, and their report is due to be released this fall. The NAS, 
the Earth Systems Science and Applications Advisory Committee (ESSAAC), 
the CCRI and the U. S. Global Change Research Program) (USGCRP) have 
all documented the importance of effectively enhancing and expanding 
the benefits of our increased understanding of the Earth system (in 
general) and NASA ESE results (specifically) to beyond the traditional 
scientific community. The ESE Applications Program's focus is to 
accomplish this purpose.
    Question. When do you expect the Administration to release its 
Climate Change Research Initiative and make decisions about the future 
of the EOS program?
    Answer. The Climate Change Science Program Office (CCSPO), led by 
Dr. James R. Mahoney, the Assistant Secretary of Commerce for Oceans 
and Atmospheres, and the National Climate Change Technology Initiative 
(NCCTI) group is coordinating the review of multi-agency climate 
research activities called for by the Administration in its fiscal year 
2003 budget submission. The inventory began in early 2002 and was 
completed in July 2002. The CCSPO integrated the information submitted 
into a single document shared among the Federal agencies. Draft 
criteria for the evaluation of the research programs have been iterated 
among the agencies and CCSPO. The other affected agencies are currently 
presenting their climate change activities to the CCSPO, and it is 
expected that all presentations and the overall synthesis of this 
information should be completed in time to affect the fiscal year 2004 
President's budget submission to Congress.
    The CCSPO's interagency review process of agency activities is 
expected to produce recommendations about plans for individual agencies 
from CCSPO to both the agencies and those components of the Executive 
Office of the President that oversee the overall budget process and 
content. However, any CCSPO recommendations will occur only after all 
agencies have made their presentations, and subsequent deliberations 
are carried out, which should be completed in August. NASA strongly 
believes that our EOS follow-on plans are critical to the success of 
the CCRI and the USGCRP, especially meeting the goal identified in the 
draft memo on criteria for program review to ``Enhance observation and 
monitoring systems to support scientific and trend analyses and to 
improve decision support tools.''
    Question. Have you received any indication so far as to what EOS-
Follow On projects will be approved? If so, what are they?
    Answer. The fiscal year 2003 budget continues funding for three 
Follow-On missions and one study for a mission:
    National Polar-orbiting Operational Environmental Satellite System 
(NPOESS) Preparatory Project (NPP) ($153 million)
    Landsat Data Continuity Mission (LDCM), which is being planned as a 
data purchase ($45 million)
    Ocean Topography ($32 million)
    Study of a potential Global Precipitation Mission (GPM) ($8 
million)
    All other EOS follow-on missions are on hold until the CCRI review 
is complete.
                             orbital debris
    Question. There have been conflicting accounts of NASA's plans 
regarding continuation of the office at Johnson Space Center that 
analyzes orbital debris. As space becomes more littered with debris, it 
would seem that more attention, not less, needs to be given to this 
type of analysis. Are you planning to close that office? If so, why?
    Answer. The NASA Orbital Debris Program Office, based at the 
Johnson Space Center, is not being closed nor does NASA plan to 
eliminate capabilities in this area. Customers that benefit from the 
expertise of the Orbital Debris Program Office are being identified to 
assure that requisite funding is maintained to meet those customers' 
requirements.
                               dreamtime
    Question. Press reports indicate that the space station 
commercialization agreement you signed with DREAMTiME has not been 
successful. What is the status of that agreement? What difficulties 
were encountered? What does the failure of DREAMTiME imply for other 
space station commercialization concepts?
    Answer. Dreamtime's funding to support its performance of the 
Agreement was largely based upon obtaining venture capital and 
anticipated revenues from Internet business ventures. With the general 
downturn in interested businesses beginning shortly after the Agreement 
was signed, Dreamtime was unable to raise the funds necessary to 
perform a number of its principal obligations under the Agreement. 
Because this was a collaborative agreement, rather than a normal 
procurement agreement, and NASA did not have significant resources at 
risk, NASA chose to give Dreamtime every opportunity to perform. 
However, by early this year it became obvious that Dreamtime's 
situation was unlikely to improve, and NASA elected to proceed to 
terminate under the terms of the Agreement. The termination became 
effective on June 1, 2002. The failure of Dreamtime was due to 
circumstances specific to the nature of its proposed business 
operations, and does not suggest that other types of space station 
commercialization initiatives would suffer a similar fate.
                        reusable launch vehicle
    Question. You are developing technologies both for a ``2nd 
generation'' reusable launch vehicle (RLV), and a ``3rd generation'' 
RLV. According to your briefings, you expect a 2nd generation RLV to be 
operational by 2012, and a 3rd generation RLV by 2025. Why develop a 
2nd generation RLV that would be obsolete in such a short period of 
time? Would it be more cost effective to invest in the 3rd generation 
technologies, and continue to rely on the shuttle until they are 
available? What cost-benefit studies have you conducted of the trade-
offs between doing 2nd and 3rd generation programs versus focusing on 
the 3rd generation technologies while continuing to rely on the 
shuttle? Please provide those studies to the committee.
    Answer. The 2nd Generation RLV program is pursuing the development 
of key technologies that are essential for future generations of RLVs. 
Specifically, the 2nd Generation RLV program is maturing technologies 
such as thermal protection systems, avionics, operations, long-life 
engines, and integrated vehicle health management systems. The 3rd 
Generation RLV program relies on these advancements as a foundation in 
its pursuit of breakthrough technologies required to help America 
maintain leadership in space far into the foreseeable future. NASA 
believes the risk associated with achieving 3rd Generation RLV 
technology breakthroughs is currently too high to justify maintaining 
the decades old Shuttle fleet until these breakthroughs occur. NASA's 
ISTP (Integrated Space Transportation Plan) lays out the agency's space 
transportation strategy for improving mission affordability and safety 
over multiple generations of launch vehicles.
    Over the past few months, NASA has conducted a number of reviews to 
assess the Integrated Space Transportation Plan (ISTP), which includes 
the Space Launch Initiative (SLI), the Space Shuttle hardware and 
infrastructure upgrades, and the longer-term 3'd Generation Reusable 
Launch Vehicle Program. The ISTP update has incorporated the ongoing 
reviews of the Space Shuttle Program, and has included an assessment of 
the timetable for a multipurpose vehicle to serve crew transfer and 
crew return functions. The ISTP review will conclude shortly. The 
outcome of the ISTP update will be a roadmap for future investment 
decisions including phasing decisions concerning Shuttle, 2nd 
Generation and 3rd Generation systems.










                                 ______
                                 

             Questions Submitted by Senator Larry E. Craig

                       nuclear systems initiative
    Question. NASA has proposed a new program, the Nuclear Systems 
Initiative, that will spend about $800 million over 5 years to develop 
new space nuclear power systems.
    The funding level in fiscal year 2003 would be about $125 million.
     How would this initial increment of funding be used?
    Answer. This initial increment will fund initiation of the Stirling 
Radioisotope Generator and Multi-Mission Radioisotope Thermoelectric 
Generator development projects; both technologies are under 
consideration for the 2009 Mars Smart Lander/Mobile Laboratory mission. 
In addition, technology research and development for next-generation 
power conversion for radioisotope power systems will be started via 
competitive solicitations.
    In the area of fission electric power and propulsion research and 
development, fiscal year 2003 funding would be used to support four 
principle areas: (1) electric propulsion research and development (via 
competitive selection of several proposed approaches) for electric 
thrusters that are about 10 times more powerful than those that have 
been flown before (e.g. the Deep Space-1 ion electric thruster); (2) 
power conversion research and development (via competitive selection of 
several proposed approaches) for power conversion about 25 times more 
powerful than what has been flown before (e.g. the SNAP-10A power 
conversion system); (3) reactor research to investigate design options 
for a fission reactor capable of supporting a nuclear electric 
propulsion system (which could ultimately be used for expanded 
exploration of the solar system); and (4) mission and spacecraft system 
design studies to enable the selection of the optimal fission power and 
propulsion technologies for expanded solar system exploration.
    Question What will be the division of responsibilities between NASA 
and DOE for this nuclear program?
    Answer. The DOE is responsible for developing all civilian 
technologies directly involving nuclear materials. Therefore, the DOE 
is responsible for Stirling Radioisotope Generator and Multi-Mission 
Radioisotope Thermoelectric Generator development, and for fission 
reactor development.
    NASA is responsible for power conversion and electric propulsion 
research and development, overall spacecraft design and integration, 
mission planning and design, and expanded scientific exploration of the 
solar system using radioisotope and fission power and propulsion 
systems.
    Your testimony makes reference to the Naval Nuclear Propulsion 
program, which has a proud history in the State of Idaho. The Naval 
Reactors Facility in Idaho continues to receive all expended Navy fuel 
cores for examination and storage.
    Question. The Naval Reactors program operates under strict secrecy 
requirements because of national security implications. Will that 
environment of secrecy be a complicating factor in collaboration?
    Answer. Any potential area of coordination or collaboration 
involving the Naval Reactors program must and will attend to national 
security requirements.
    Because the NASA Nuclear Systems Initiative is in the early stage 
of research, NASA and DOE are exploring available technical options to 
assess their applicability to, and utility for, expanding the 
exploration of the solar system using fission power and propulsion. At 
present, it is too early to determine the optimal combination of 
technologies for this task, and therefore too early to determine 
whether Naval Reactors program technologies might be appropriate.
    Question. NASA has traditionally worked with DOE's Office of 
Nuclear Energy on space nuclear applications. Is NASA collaborating 
with DOE-NE on the Nuclear Systems Initiative?
    Answer. DOE has supported NASA for over 30 years to enable solar 
system exploration, including exploration of the outer planets, using 
radioisotope power systems (e.g., radioisotope thermoelectric 
generators, or RTGs). This work has been accomplished by DOE through 
its Office of Nuclear Energy (NE) or its predecessor organizations. DOE 
has identified NE (specifically NE-50) as the lead for radioisotope 
power system development (at present, this includes the Multi-Mission 
Radioisotope Thermoelectric Generator, and Stirling Radioisotope 
Generator). DOE has also identified NE (specifically NE-50) as the lead 
for reactor system development planning.
    We anticipate that our close relationship, built over several 
decades of cooperation, will be a critical factor in the success of the 
Nuclear Systems Initiative.
                                 ______
                                 

               Question Submitted by Senator Ted Stevens

                     gilmore creek tracking station
    Question. With the potential of the Gilmore Creek Tracking Station, 
coupled with the other two facilities, cannot more be done to maintain 
or upgrade our domestic satellite tracking capabilities and not ship 
our Nation's meteorological satellite systems of the Department of 
Defense, Department of Commerce (DOC) and NASA to a foreign country?
    Answer. The Fairbanks, Alaska area hosts many satellite tracking 
stations, including the National Oceanic and Atmospheric Administration 
(NOAA) Tracking Station at Gilmore Creek and the NASA Tracking Station 
hosted on the University of Alaska's Poker Flat research launch range. 
There are commercial Datalynx and Universal Space Net stations, as well 
as a station associated with the Alaska Synthetic Aperture Radar 
Facility on the University campus.
    NASA's Ground Network (GN) is composed of a mix of assets owned by 
NASA and commercial service providers. The capabilities of NASA's and 
associated commercial tracking stations are focused on supporting 
science research missions rather than operational meteorological 
satellites. The locations of NASA's tracking stations are driven by 
mission needs related to on-board satellite data storage capacity, data 
delivery latency, and orbit geometry.
    Concerning the NOAA Fairbanks Command and Data Acquisition station 
(FCDAS) at Gilmore Creek, Alaska, the station is now and will remain an 
important capability to support multi-agency satellite programs. 
Indeed, significant resources have been expended and additional 
investments are planned in the future to maintain and upgrade NOAA's 
FCDAS. A recent upgrade added the NASA Ground System Interface 
Processing facility at Gilmore Creek, which makes the FCDAS a 
telecommunications hub. The new capability sends data collected from 
NASA's Earth Observing System (EOS) satellites to Goddard Space Flight 
Center in Greenbelt, MD. This connects the NASA Poker Flats operations 
to the FCDAS for initial processing of EOS mission data through local 
fiber optic telecom links.
    More broadly, the communications infrastructure in Alaska has 
benefited from approximately $29.5 million in investments in the last 3 
years alone. These include three new 13-meter antenna systems, signal 
and data processing equipment upgrades and control software upgrades. 
The upgrades added new commercial satellite communications systems to 
receive and disseminate mission data to Department of Defense and 
Department of Commerce operational weather users within the continental 
United States.
                                 ______
                                 

            Questions Submitted by Senator Pete V. Domenici

                           nuclear propulsion
    Question. One of the highlighted programs in this year's submitted 
budget, as well as in your testimony today, concerns research with 
nuclear propulsion. The research necessary to conduct this research may 
be able to be done through collaborative work with other Federal 
agencies. As an example, the DOE labs in New Mexico have extensive 
expertise in fission electric power systems.
    How does NASA intend to ensure that expertise of the national 
laboratories will be strongly incorporated into development of the 
fission electric power systems that will be required by NASA?
    Answer. The majority of this program will be competitively sourced, 
and NASA fully expects that the national laboratories will propose to 
lead or to team with industry for nuclear fission reactor research and 
development.
    Question. Can you explain further where the nearly $1 billion in 
funding comes from and how NASA intends to proceed with research on the 
feasibility and safety of nuclear propulsion in space?
    Answer. The budget for the Nuclear Power and Nuclear Electric 
Propulsion programs represents mostly new funding for NASA. There was 
some rebalancing within the overall Space Science program to cover a 
portion of this initiative; however, no Space Science missions were 
cancelled to pay for this initiative. The nuclear electric propulsion 
portion of this initiative will likely be a research program for the 
near future, leading to engineering test components that could then be 
developed for flight. During this stage, NASA will have the lead for 
non-nuclear portions of the initiative, and will work closely with the 
Department of Energy (who will have the lead for nuclear fission 
reactor research) to research and develop the safe and effective 
propulsion systems we will need to continue our exploration of the 
solar system.
                        management effectiveness
    Question. The Administration in its submitted budget has taken to 
reviewing programs, throughout the Federal Government to see what is 
being done effectively, and what is not. Two of NASA's highest profile 
endeavors, the International Space Station and the Space Shuttle, for 
safety upgrades, were assessed as being ineffective. The Mars 
exploration was given only a moderately effective assessment, with a 
comment that ``recovery from failures successful so far.''
    What will NASA be doing under your leadership to make all of NASA's 
programs more effective, and are these reforms addressed in your 
proposed 2003 budget?
    Answer. The President's Management Agenda is at the center of 
NASA's efforts to make its programs more effective. In pursuit of this 
Agenda, NASA has completed a pilot of its first agency-wide human 
resources tracking system, increased the number of positions that could 
be open to competition by 70 percent over its fiscal year 2000 FAIR Act 
inventory; and developed an interim plan for competing up to 40 percent 
of the positions identified as potentially commercial on its 2000 
inventory. We have aligned our budget structure with program outputs 
and prepared for full cost and performance budgeting in fiscal year 
2004. We will be working this fall with the Office of Management and 
Budget to review four major programs as part of the President's 
Management Agenda in Budget and Performance Integration. Those four 
programs will be the Space Shuttle, Space Station, Space Launch 
Initiative, and the Mars Exploration Program.
    As a major effort at removing internal barriers to program 
effectiveness, NASA has devoted considerable effort to its Freedom to 
Manage tiger teams. At the initiative of NASA staff and leadership, 
numerous personnel authorities previously held at Headquarters have 
been delegated to Center Directors; the number of overlapping Councils 
and Boards has been reduced, and on-going efforts are aimed at 
combining responses to numerous internal and external reviews.
    The major management reforms being undertaken at NASA, such as 
greater use of human resources flexibilities, competitive sourcing, e-
government initiatives, full cost accounting, and integrated financial 
management, are designed to create a more efficient and productive 
agency. This is accomplished by creating greater cost transparency 
across the agency, lowering the transaction costs involved in 
maintaining a competitive, diverse work force, and improving 
productivity in creating more scientific and technological results and 
research opportunities in line with NASA's Vision and Mission.
                  attracting and retaining scientists
    Question. Many agencies within the Federal Government are going to 
see large amounts of employees retiring from Federal service in the 
next decade. There has also been difficulty within the Federal 
Government to keep and attract scientists and employees with high 
technical skills.
    The National Space Grant College and Fellowship program is one of 
the tools at NASA's disposal to help promote research at the 
undergraduate and graduate education levels. This program is funded in 
the President's request at $19.1 million. (The New Mexico Consortium is 
ranked 8th in funding out of the 52 consortia nationwide.)
    How is NASA working to keep its scientists at NASA, as well as 
working to attract new scientific talent to come work for NASA?
    Answer. NASA reduced its civil servant workforce during the 1990's. 
This reduction along with little turnover in the scientist occupations 
has significantly compounded the phenomenon of the ``aging'' NASA S&E 
workforce. As these men and women choose to draw their successful and 
productive careers to an end, NASA may experience a serious loss in 
scientific competencies in addition to existing skills imbalances. 
While NASA does, and will continue to, take advantage of existing human 
resource flexibilities to recruit and retain needed talent, the current 
retention incentives are not always adequate to retain employees with 
critical skills. NASA is emphasizing strategic recruitment initiatives 
and creating long-term ``pipeline'' interest in scientific and 
engineering occupations to address skills imbalances.
    Our recruitment strategy to increase interest in NASA jobs includes 
personal networking and extensive networking with professional 
associations and universities to increase awareness in interested 
individuals of our NASA employment opportunities. As you mention, we do 
have access to some of the leading scientists through our promotion of 
research at the undergraduate and graduate education levels. We plan to 
aggressively leverage our alliances by networking with principal 
investigators at these colleges and universities to ensure that we have 
access to the students who are working on projects through our research 
and grant programs.
    We have identified scientific professional associations and 
established internet links on these associations' and universities' 
website to our NASAJobs web site (http://www.nasajobs.nasa.gov/). 
Adding instant access to NASAJobs from these websites will increase the 
level of awareness of NASA employment opportunities in the scientific 
community and will also serve as a catalyst to increase the number of 
highly qualified scientists who apply for our vacancies.
    NASA uses all available and appropriate financial incentives to 
make competitive job offers, including recruitment bonuses, salaries 
above the minimum rate of the grade, and repayment of federally insured 
student loans. In offering jobs, we emphasize the entire Federal 
package since our retirement, health, leave, and life insurance 
programs are competitive with those offered by many private sector 
companies. We also emphasize the other benefits we can offer, such as 
flexible work schedules, family friendly programs, professional 
development opportunities, and tuition support.
    But the currently available tools are no longer enough. We are 
faced with the convergence of several trends: a decrease in the number 
of students entering the scientific and engineering fields, an increase 
in competition for the S&E graduates from both the traditional 
aeronautics private sector and new, non-aeronautics business sectors 
(e.g., banking, entertainment) and the upcoming retirement wave 
mentioned earlier. NASA is finding it increasingly difficult to attract 
and retain the best and brightest S&E talent.
    NASA needs more tools to enhance our current efforts and 
initiatives to reshape and reconfigure our workforce. For example, we 
need streamlined and flexible recruitment and employment processes, 
recruitment and retention incentives that are flexible and meaningful 
to ``fresh out'' and mid-level employees, and a position classification 
and compensation system that is market sensitive and rewards 
performance. We also need voluntary separation and early retirement 
incentives not tied to a reduction in the workforce, but to reshape the 
workforce; that is, to reallocate the slots to areas where they are 
needed.
    These tools are critical for NASA to compete successfully for 
scientific talent in this increasingly competitive marketplace, and 
they require legislation. For these reasons NASA earlier this year 
submitted a series of legislative proposals to Congress and is working 
with its oversight committees to secure their enactment.

                          SUBCOMMITTEE RECESS

    Senator Mikulski. The subcommittee stands in recess until 
next Wednesday, May 8, on which we will be taking testimony 
from FEMA.
    Mr. O'Keefe. Thank you, Madam Chair. I appreciate your 
courtesy.
    Senator Mikulski. Thank you.
    [Whereupon, at 11:38 a.m., Wednesday, May 1, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
















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

                              ----------                              


                         WEDNESDAY, MAY 8, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:35 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Barbara A. Mikulski (chairman) 
presiding.
    Present: Senators Mikulski, Kohl, Johnson, Bond, Shelby, 
Craig, Domenici, and Stevens.

                  FEDERAL EMERGENCY MANAGEMENT AGENCY

STATEMENT OF JOE M. ALLBAUGH, DIRECTOR
ACCOMPANIED BY GEORGE OPFER, INSPECTOR GENERAL

            OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

    Senator Mikulski. Good morning, everybody. The subcommittee 
of VA-HUD will come to order. This morning we are going to take 
the testimony of Mr. Joe Allbaugh, the very able director of 
FEMA, and we have many issues to talk about. First of all, we 
want to acknowledge the tremendous role that FEMA has done in 
the last fiscal year. Who knew what was going to happen to our 
communities and to the United States of America. We know that 
FEMA has responded to over 50 disaster declarations that have 
ranged from the aerial terrorist attack on the United States of 
America to a tornado in my own State.
    We want to hear from the director of FEMA on what we can do 
to be able to help FEMA continue to be first responders, 
through prevention, readiness, response and recovery, we can 
save lives, save jobs, and save our community.
    Speaking as the Senator from Maryland, last week we were 
once again reminded how important FEMA is to our country. An F4 
tornado swept through three counties, Calvert, Charles and 
Dorchester hitting a number of our communities now called La 
Plata. I visited La Plata with my senior Senator and I will 
never forget what I saw, destruction and devastation. As I 
walked down St. Mary's Avenue, we saw the courthouse and across 
from that we saw Delegate Van Mitchell's Value City business 
just absolutely destroyed. Residential areas and parks 
devastated, local banks destroyed. The Catholic church and 
Catholic school and other churches, other schools and as the 
Senator from Maryland I am going to do everything I can to help 
those communities rebuild and recover.
    The people of Charles, Calvert and Dorchester County should 
know I am on their side as the Senator for Maryland. I am 
making sure the Federal Government is an active part in the 
rebuilding efforts. I talked to the county officials and all of 
the counties to hear directly from them about their needs. 
Today I want to thank President Bush for his very swift 
response to this tragedy. He signed a disaster declaration 
within 24 hours. We want to thank the President. Mr. Allbaugh, 
we want to thank you and the very able FEMA team that rushed to 
the aid of our State and local government. FEMA's role really 
shows that they can count on FEMA.
    This morning I want to go over some of the issues involved 
with that and I am going to hear from him what the people are 
doing, how the families need to connect to FEMA to get help. 
What actions they can expect in short term and long term and 
what can we do to start looking at recovery. As I visited La 
Plata, I was once again struck by the heroism of our first 
responders. Throughout southern Maryland, police, fire and 
emergency workers risked their lives to save others. It is so 
clear that we need to continue to support our first responders. 
That is why I am going to do everything I can to provide the 
$900 million for the program to give our firefighters the best 
equipment and training. We have to look at how we are going to 
spend the money.
    We also, I think, need to be really committed to make sure 
our first responders are all hazards, again whether it is a 
terrorist attack or tornado, whether chemical incident, our 
responders need to be ready. I am concerned that as we provide 
more resources to fight the war on terror, we make sure that we 
reinforce FEMA's role also in natural disasters.
    Fifty disasters, not including September 11. It is amazing. 
We want to hear what you do, what we need for your team and for 
those at the local levels so that we are getting double value 
for our taxpayers' dollars by being ready for all hazards, both 
natural disasters and other attacks. We want to hear about 
State preparedness as well. We also want to hear about your new 
thinking on hazard mitigation. Of course, there is the issue of 
flood modernization because so many Americans are hit by 
floods. Just over this weekend in West Virginia and once again 
FEMA had to respond, and I know you are very interested in 
flood insurance. Issues we need to talk about in the beginning 
of the year and that, of course, FEMA has been a partner in the 
emergency food and shelter program which gives FEMA really high 
marks for this program. So Mr. Allbaugh, we really want to 
thank you for the job that you have been doing in keeping up 
the spirit of reform that was started many years ago in both 
reform and at the same time response. So we look forward to 
hearing what you need and how we can show that by helping you 
we are helping the American people. Senator Bond, do you wish 
to have an opening statement?

                STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. I certainly do, madam chair. Thank you very 
much and my welcome to Director Allbaugh as well. We have had 
the pleasure of hearing the director testify on several 
occasions this year regarding the President's proposal on 
homeland security, and making FEMA the primary Federal domestic 
agency. That is an important area, one that we are going to 
have to address, but this is an important opportunity to focus 
on the needs for FEMA in carrying out its more traditional and 
primary responsibility in responding to natural disasters.
    As we all know, since its founding in 1979, FEMA has been 
the backbone of the Federal response to all types of hazards 
through a comprehensive emergency management program of 
mitigation, preparedness, response, and recovery. An area of 
responsibility for FEMA that has not been discussed this year 
as it has been overshadowed by the tragedy and horrific 
terrorist events of September 11 and FEMA's new efforts in 
developing a comprehensive homeland security strategy.
    I believe generally that FEMA has been doing a very good 
job in responding to the needs of States and localities, as 
well as our citizens in harm's way. I know Senator Mikulski has 
been very much involved and concerned as we all have been about 
the swath of damage and death left by tornados in La Plata and 
others. Those of us who see those tornados frequently know the 
extent and the scope of the damage they can cause. Missouri 
also has not had a good spring, ice storms in Kansas City late 
January and February and more recently, severe storms and 
tornados that struck Bollinger, Butler, Carter, Howell and 
Madison Counties in late April.
    We lost a 12-year-old boy from Marble Hill in those storms, 
but the tragedy simply reinforced FEMA's ability to respond 
quickly to national disasters. I have just been handed an 
article in today's Cape Gerardo Southeast Missourian saying 
Tornado Victims Have Trouble with Federal Aid. While others are 
speaking, I am going to see what the problems are in Southeast 
Missouri and I will share that with you later. But we do 
appreciate the response of FEMA.
    Nevertheless, a lot needs to be done as the chair has 
already mentioned and that includes improving accountability 
for disaster relief expenditures, revamping the flood insurance 
program, streamlining disaster field operations and improving 
the management of mitigation programs. FEMA is also proposing a 
number of controversial reforms to the flood insurance program, 
as well as a controversial new program for funding disaster 
mitigation efforts that would replace several current 
successful mitigation funding approaches. I guess you thought 
we weren't paying attention. We are.
    But I look forward to working with the chair, members of 
the subcommittee and FEMA on these important issues, but 
effective implementation, accountability with respect to the 
disaster relief program and the flood insurance program are my 
key priorities. They become even more important as we begin to 
face a series of natural tornados throughout the Nation that we 
have already discussed, and FEMA is already responding to major 
disasters in 11 States. The year is still young. We want to 
make sure that you have adequate resources to respond to what 
nature does to us as well as the other problems we may have.
    I would also ask that FEMA work closely with your FEMA 
Inspector General. As I noted the appropriate expenditure of 
FEMA funds accountability is key to FEMA's credibility and 
effectiveness. And in particular, the Federal Government and 
FEMA are dealing with really huge sums of money as we try to 
rebuild the New York City portions destroyed on September 11. 
There is great pressure to get FEMA money funds out quickly, 
however, we have seen in the past that quick sometimes means 
sloppy, and can result in excessive expenditures of tax 
dollars. They say we need to do it right, and I think FEMA can 
help make sure it is done right and I think the same is true as 
FEMA winds down to Cerro Grande office in New Mexico. A lot of 
it has gone up as the system, an appropriate system, has been 
in place to make sure that the people who need it got it and 
others did not.
    I also want to make sure that FEMA is not strapped with so 
many responsibilities that it cannot meet its primary mission 
in responding to disasters. There has been so much focus on 
homeland security and more recently on related new proposals 
such as the CitizenCorps that I am concerned that FEMA's 
disaster relief responsibilities may be forced to a back seat 
to homeland security issues.
    We need to ensure that FEMA is capable and committed to 
meeting all of its responsibilities. FEMA needs to be balanced 
in how it meets them. I know we on this subcommittee will want 
to ensure that you, your staff had the funding and the 
capabilities to meet whatever responsibilities are placed in 
your portfolio. Thank you, madam chair.
    Senator Mikulski. Senator Stevens? As a courtesy?
    Senator Stevens. Thank you very much. I have no statement.
    Senator Mikulski. Senator Shelby?

                 STATEMENT OF SENATOR RICHARD C. SHELBY

    Senator Shelby. Madam Chairman, Thank you, I would like to 
welcome Mr. Allbaugh to the committee. We had a nice 
conversation about a lot of issues that I will bring up with 
him in a few minutes publicly. We welcome you and look forward 
to your testimony.
    Senator Mikulski. Mr. Allbaugh, why don't you proceed to 
address the committee.
    Mr. Allbaugh. Thank you Madam Chairwoman, Senators Bond, 
Shelby, Stevens. It is an honor to be before this committee 
primarily because you have been strong supporters of our agency 
over the years. I am pleased to come here today to talk about 
three particular priorities. I have submitted for the record a 
written statement and I will just take a few minutes, Madam 
Chairman.
    Senator Mikulski. Without objection.
    Mr. Allbaugh. I will talk about three priorities in our 
budget that deal first with FEMA and homeland security and part 
of that is driven by our new responsibilities, visibility and 
scope that has grown since 9-11. Two primary areas in homeland 
security. The first responder initiative that the President has 
talked so much about as well as myself and our new 
responsibility for our Office of National Preparedness. 
Management in the First Responder initiative will capitalize on 
FEMA's great ability to expedite grant money out the door to 
those who actually need it.

                       FIRST RESPONDER INITIATIVE

    First, let me speak about the First Responder initiative. 
$3.5 billion for planning, training, equipment and exercising 
will focus on two particular areas within that. 
Interoperability, both of individuals and communities. I 
witnessed as you may have heard me say before individuals in 
New York City passing notes back and forth, communications was 
a disaster in and of itself. When it comes to personnel, 
oftentimes individuals show up at a disaster who are not 
properly trained, and put into harm's way, and thus putting 
additional lives in jeopardy.
    Second to that, is planning. We do not provide enough 
assistance, in my opinion, for States and the local level in 
the area of planning and exercise. We want to improve our intra 
and interstate mutual aid agreements, which means that we need 
to do a certain amount of resource typing. When one county 
across the State calls for assistance from another county 100 
miles away, we need to ensure that the assets that they are 
calling for are exactly what they need and everyone understands 
that.
    I hope that the $3.5 billion will be a down payment for 
years to come. There is no way, in one budgetary year, that we 
can address all of the needs. And I know you all feel the same 
way, quite frankly. This is a problem nationwide trying to 
improve our infrastructure. $175 million in the supplemental, 
which I will talk about in a minute, will be 100 percent money 
to the States this year. From the $3.5 billion, we want to give 
all States $5 million and distribute the remainder based on a 
population formula.
    Our supplemental funding request is critical, so that 
States and communities can start to develop their plans now. We 
will distribute the money down to the local level, but at the 
same time, our Office of National Preparedness will be charged 
with developing national standards to use that money. We 
desperately need national standards. The central role of the 
Office of National Preparedness is to be the focal point for 
coordination for all Federal response activities.
    In addition to developing those standards, will deal again 
with equipment standards, interoperability, training standards. 
We want to make sure that everyone knows the capabilities of 
their neighboring responders and again to re-emphasize the 
importance of mutual aid agreements.

                              ODP TRANSFER

    Let me speak for a minute about the transfer that the 
President has proposed from ODP to Justice to FEMA. It makes 
sense. One, as I said earlier FEMA has a great history of grant 
management. Last year alone we did $3.5 billion in grants. We 
are on our way to $8 billion currently. We also want to 
eliminate the redundancy in our Federal training programs. The 
recipients of these training programs across the country are 
the State and local individuals who are the first responders. I 
want to make sure that there is uniformity in our training.
    And lastly, I want to build upon the positive relationship 
with our first responder community. Let me say, as a couple of 
members have already addressed, that our new responsibilities, 
our enhanced responsibilities, will not compromise our 
responsibilities in natural disaster response management. That 
is one of our core responsibilities. I know everyone is focused 
on weapons of mass destruction, terrorism preparation, training 
since 9-11, but at the same time, we have responded just since 
Sunday evening, five disasters. Our core responsibility will 
not fall away, which brings me to point number two of our 
priorities.

                        PRE-DISASTER MITIGATION

    It is the hazard mitigation grant program. The President 
wisely has suggested in his 2003 budget for FEMA a new program 
which will amount to $300 million in the first year, a 
predisaster grant process. We want to be able to help 
communities who have identified their risk before a disaster 
hits. Right now, communities identify their risk and they sit 
on the shelf at city hall until the disaster happens and we can 
come in with post disaster mitigation. I want to make sure, as 
the President does, that we can address these risks up front 
prior to a disaster and at the same time keep our post disaster 
mitigation intact. And this will require us, which we are in 
the process of developing a competitive grant process as I said 
to take effect before, any disaster that takes place. The third 
component and third priority of our budget this year is another 
mitigation program that the President requests.

                        FLOOD MAP MODERNIZATION

    It is our flood map modernization project. Everywhere I go, 
everyone, members in both houses, members from State 
legislatures across the country, mayors, city council members, 
all are asking about flood mapping. And quite frankly to solve 
the problem it is a matter of money. We have historically been 
given $5 to $15 million annually to address a billion dollar 
problem. I think the President has wisely stepped forward, 
stepped up to the plate, and asked the Congress for $300 
million to update and digitize our current flood mapping 
problem.
    We can address this in a 3-year program to improve these 
maps, and they are absolutely essential for better planning for 
these communities and again identifying those risks up front. 
The 3-year program at $300 million a year will essentially wipe 
out our current backlog of flood mapping.

                   SUPPLEMENTAL APPROPRIATION REQUEST

    Finally, let me take a moment to highlight FEMA's portion 
of the supplemental appropriation request. The request totals 
were $3.07 billion, $2.75 billion of which is requested for 
further World Trade Center relief efforts, focusing on public 
infrastructure. The other $326 million for planning and 
assistance are broken down in the following ways. $175 million 
for planning to first responders, $56 million for State and 
local planning for emergency operations centers, $50 million 
for Citizen Corps and $32.4 million for weapons of mass 
destruction training, for the balance of our urban search and 
rescue teams. As you know we only have six of our 28 USAR teams 
that are WMD trained. I think it is inexcusable for our agency 
not to go forward and fund the rest of the teams, the other 22 
teams, to make sure that they are WMD trained and qualified. We 
need to be prepared. We never know when an incident is going to 
be taking place, and it is important that all 28 teams are 
trained to the same standard.

                             THE FEMA TEAM

    Those basically complete my, conclude my oral remarks. I 
want the members to know that it is an extreme honor and 
privilege for me to serve our President, to serve our country, 
to be a part of a great FEMA team.
    I am not the one that makes this thing work. It is the long 
hours, the sweat, the toil, the sacrifices that FEMA employees 
make, not only the full-time employees, but the disaster 
assistance employees who are at each one of our open disasters 
right now across the Nation and they number about 5,000 that we 
have the ability to draw from. This is a tremendous 
responsibility. It is our core mission and I am honored to be 
in this position for a short period of time and I thank you for 
the opportunity to be here today.
    [The statement follows:]

                 Prepared Statement of Joe M. Allbaugh

                      introduction and background
    Good morning Madam Chair, Senator Bond, and members of the 
subcommittee. I am Joe Allbaugh, Director of the Federal Emergency 
Management Agency (FEMA). Thank you for the opportunity to brief you 
today on FEMA's budget proposal for fiscal year 2003.
    FEMA is the Federal Agency responsible for coordinating our 
nation's efforts to mitigate against, prepare for, respond to and 
recover from all hazards. Our success depends on our ability to 
organize and lead a community of local, State, and Federal agencies, 
volunteer organizations, private sector entities and the first 
responder community. We know whom to bring to the table when preparing 
for a disaster and when a disaster strikes in order to ensure the most 
effective management of the response and recovery effort. We provide 
management expertise and financial resources to help State and local 
governments when they are overwhelmed by disasters.
    When I say ``we'' do that I'm talking, of course, of FEMA. FEMA has 
a lot of Cal Ripkens; the folks that come to work each day and do their 
job with skill and grace. I depend on those staff for their counsel and 
advice due to the experience and perspective they possess.
    But I am also referring to this Committee that has provided us so 
much support, and the resources we need to do our job. You have a great 
amount of experience--you have seen FEMA through the rough times and 
the good times. In fact, a lot of those good times were partly a result 
of your efforts, so I want to acknowledge that help and express the 
thanks of our staff for that steady support.
    As I explained, we don't profess expertise in every subject area, 
but we do know whom to bring to the table. The best example of this 
convening process is the Federal Response Plan (FRP). The FRP forms the 
heart of our management framework and lays out the process by which 
interagency groups work together to respond as a cohesive team to all 
types of disasters. This team is made up of 26 Federal departments and 
agencies, and the American Red Cross, and is organized into 12 
emergency support functions based on the authorities and expertise of 
the members and the needs of our counterparts at the State and local 
level.
    Since 1992, in all manner of horrific natural disasters like the 
Northridge Earthquake and Hurricane Floyd and also in response to the 
Oklahoma City bombing and the terrorist attacks of September 11, 2001, 
the FRP has proven to be an effective and efficient framework for 
managing all phases of disasters and emergencies. The FRP is successful 
because it builds upon existing professional disciplines, expertise, 
delivery systems, and relationships among the participating agencies. 
FEMA has strong ties to the emergency management organizations--fire 
service, law enforcement and emergency medical communities--and we 
routinely plan, train, exercise, and operate together to remain 
prepared to respond and recover from all types of disasters.
                        fiscal year 2003 request
    First, I will outline our 2003 request. Then, after I've completed 
that review, I will explain our recent request for emergency 
supplemental funding for this fiscal year.
    As you are aware, FEMA's budget request is for appropriations 
totaling $6.44 billion. A significant increase from the 2002 budget, 
the bulk of this funding is requested to dramatically enhance the 
homeland security preparedness capabilities of our nation's first 
responders. In addition, this budget will fully fund FEMA's core 
operations for responding to disasters and continues to emphasize 
empowerment and personal responsibility as they pertain to disaster 
preparedness and mitigation.
       national preparedness--homeland security responsibilities
    The President has requested that FEMA receive $3.5 billion to 
administer a major component of the Homeland Security efforts--the 
First Responder Initiative. Grants based on this initiative will give 
the first responder community--firefighters, police officers, and 
emergency medical personnel--critically needed funds to purchase 
equipment, train their personnel and prepare for a Weapons of Mass 
Destruction (WMD)/terrorist incident. The Office of National 
Preparedness (ONP) within FEMA will be responsible for administering 
these First Responder grants.
    Following the events of September 11, and in light of the funding 
this Committee approved as part of the December 2001 Emergency 
Supplemental, FEMA has staffed up and refined the mission and functions 
of the ONP to fully support the budget initiatives of the President.
    Some of the goals established by ONP for the First Responder 
Initiative are as follows:
  --Giving the first responder community critically needed funds to 
        purchase equipment, train their personnel and plan;
  --Provide states and localities with the proper balance of guidance 
        and flexibility so that the funds are used in the local areas 
        where they are needed most;
  --Establish a consolidated, simple, and quick method for disbursing 
        federal assistance to states and localities;
  --Foster mutual aid across the nation so that the entire local, 
        state, federal and volunteer network can operate together 
        seamlessly;
  --Create an evaluation process to make sure that all programs are 
        producing results and to direct the allocation of future 
        resources, and;
  --Involve all Americans in programs to make their homes, communities, 
        states and nation safer and stronger.
    ONP will first concentrate on developing a streamlined mechanism 
designed to speed the flow of resources to the States and localities. 
The $3.5 billion will be used to sustain the first responder activities 
with a special focus on the following areas:
  --Planning.--Support state and local governments in developing 
        comprehensive plans to prepare for and respond to a terrorist 
        attack;
  --Equipment.--Allow State and local first responder agencies to 
        purchase a wide range of equipment needed to respond 
        effectively to a terrorist attack, including personal 
        protective equipment, chemical and biological detection 
        systems, and interoperable communications gear;
  --Training.--Train firefighters, police officers, and emergency 
        medical technicians to respond and operate in a chemical or 
        biological environment;
  --Exercises.--Support a coordinated, regular exercise program to 
        improve response capabilities, practice mutual aid, and assess 
        operational improvements and deficiencies.
    We fully intend to keep the focus of this program at the State and 
local level. The program will be run through and coordinated by the 
States. States will be allowed to use up to 25 percent of the funds, 
with at least 75 percent of the funds distributed to local 
jurisdictions.
    But we will also insist on the funds being based on comprehensive 
planning. As a condition of receiving these grants, States will receive 
plans from local jurisdictions, submit their own plans, and allocate 
funding based on locally driven needs identified through various 
assessments. The funding will have a matching requirement, and in-kind 
matches will be allowable. This match can be part of the money that 
States have spent to secure a facility for training, or the costs that 
have been incurred paying overtime to employees who are providing 
coverage for other employees participating in exercises or training.
    The final component we will insist on at all levels--from FEMA to 
the State to the local governments--is full accountability. We must 
maintain the confidence of our citizens that the funds are being used 
swiftly but wisely to provide increased protection for our nation.
        transfer of the office for domestic preparedness to fema
    Of the $3.5 billion funding request, $235 million represents the 
President's request that the Office for Domestic Preparedness (ODP) be 
transferred from the Department of Justice to FEMA. With this proposal 
the President has shown true leadership in his willingness to address a 
long-standing problem--the need for central coordination among the 
myriad Federal programs dealing with terrorism preparedness.
    Some forty Federal Departments and Agencies have been involved in 
the overall effort to build the national capability for preparedness 
and response to the consequences of terrorist incidents. Many of these 
activities have been primarily focused on the development or 
enhancement of Federal capabilities to deal with terrorist incidents, 
including plans, personnel and physical security upgrades, and 
specialized resources such as protection and detection technology and 
response teams. Other Federal programs and activities are focused on 
building the local and State first responder and emergency management 
capabilities, to include the provision of resources and funding to 
support planning, training, exercises and equipment acquisition.
    Various independent studies and commissions have recognized the 
problems inherent in this uncoordinated approach. Recommendations by 
the Gilmore Commission, for example, stress the importance of giving 
states and first responders a single point of contact for Federal 
assistance for training, exercises and equipment.
    At the request of the Appropriations Committees we recently 
completed an ``Assessment of Federal Terrorism Preparedness Training'' 
report that we transmitted to the Committees last month. The study 
found that Federal training is generally effective, but that it is also 
fragmented and, in some instances, redundant. State and local officials 
continue to be frustrated by the lack of a single coordinating point 
through which they can obtain the needed training.
    In the post-9/11 environment, we can ill afford to wage turf 
battles that in effect protect the inefficiencies of the status quo. We 
must instead focus on the merits of a proposal that seeks to address 
duplication, shore up gaps, eliminate confusion and reduce 
complication. As the attacks of September 11 have drawn much comparison 
to the attacks of December 7, 1941, there is a forward to a book about 
Pearl Harbor that has been brought to my attention that speaks of the 
worst-case scenario in a government's preparation and response:

    ``Surprise, when it happens to a government, is likely to be a 
complicated, diffuse, bureaucratic thing. It includes neglect of 
responsibility but also responsibility so poorly defined or so 
ambiguously delegated that action gets lost . . .
    ``. . . It includes the contingencies that occur to no one, but 
also those that everyone assumes somebody else is taking care of. It 
includes straightforward procrastination, but also decisions protracted 
by internal disagreement. It includes, in addition, the inability of 
individual human beings to rise to the occasion until they are sure it 
is the occasion--which is usually too late,'' (Thomas Schelling, 
forward to Roberta Wohlstetter's Pearl Harbor: Warning and Decision).

    FEMA's core responsibilities are its all-hazard emergency 
management activities involving preparedness, response, recovery and 
mitigation. FEMA's involvement in terrorism preparedness and response 
is based on statutory authorities, executive orders, and Presidential 
Decision Directives (PDDs). As the designated lead agency for 
consequence management, FEMA coordinates Federal disaster and emergency 
assistance programs and activities to support state and local 
governments in their preparedness and response efforts.
    FEMA's role in planning for the response to and the recovery from 
any type of disaster or emergency, including WMD/terrorist incidents, 
is clear under the authority granted by the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act. Also clear is the fact that FEMA 
is the lead Federal entity empowered by statute and executive direction 
to facilitate and oversee the implementation of the national 
preparedness effort as it applies to consequence management. This 
includes the responsibility for ensuring that a coordinated and 
comprehensive emergency preparedness and response capability exists 
among Federal, State, and local governments for dealing with all 
hazards, natural and man-made.
    Lest there be any question about FEMA's commitment to our 
communities or our ability to live up to the mission of ONP, we have 
available upon request a chart that documents FEMA's long and 
successful record of distributing grant monies to States and local 
jurisdictions. Indeed, that track record and the relationships our 
people have made with local communities around the country have made 
FEMA the first federal point-of-contact for local First Responders for 
many years.
                             citizen corps
    In order to help Americans strengthen their communities, President 
Bush tasked FEMA with overseeing the Citizen Corps. This initiative is 
part of the overall effort of Freedom Corps, whose mission is to assist 
individuals and communities with implementing Homeland Security 
Programs in their areas.
    Since September 11, 2001, Americans are more aware than ever of the 
threat of terrorist acts on home soil. In the days following the 
attacks we saw immediate and selfless volunteering, generous monetary 
gifts, blood donations, and an outpouring of support and patriotism 
across America. The President has understood the need for people to be 
involved, to feel that they are making a contribution toward the health 
and safety of their communities. Citizen Corps taps into those civic 
desires through the organization and coordination of a lot of ongoing 
efforts across the nation. Sustaining that spirit of volunteerism and 
unity is crucial to defending the homeland.
    FEMA expects that $230 million will be needed to help with the 
Citizen Corps initiative. This broad network of volunteer efforts will 
harness the power of the American people by relying on their individual 
skills and interests to prepare local communities to effectively 
prevent and respond to the threats of terrorism, crime, or any kind of 
disaster.
    The Citizen Corps will build upon existing crime prevention, 
natural disaster preparedness, and public health response networks. The 
Citizen Corps will initially consist of participants in the following 
five programs:
  --the Volunteers in Police Service Program--this unique program 
        provides volunteer support for law enforcement by tapping 
        volunteers to perform administrative and non-intervention 
        policing activities to free up officers to be out in the 
        community;
  --an expanded Neighborhood Watch Program--will incorporate terrorism 
        prevention and education into its existing crime prevention 
        mission;
  --the Medical Reserve Corps--currently practicing and retired health 
        care professionals will augment emergency medical response 
        resources during large-scale emergencies. These volunteers can 
        also support non-emergency public health needs of the community 
        throughout the year;
  --Community Emergency Response Teams (CERT)--the CERT program trains 
        individuals in emergency preparedness and basic response 
        techniques to enable them to take a more active role in 
        personal and public safety; and
  --Operation TIPS--the Terrorist Information and Prevention System, 
        will tap millions of workers who, by the nature of their jobs, 
        are well-positioned to serve as eyes and ears for law 
        enforcement. Operation TIPS will provide them with a toll free 
        number to report suspicious activity to the nearest FBI field 
        office.
    FEMA has the responsibility for approving additional programs to be 
affiliated with Citizen Corps in the future. We will call upon our 
communities to employ their creativity and inventiveness to develop 
other programs that will encompass the needs of the community and 
encourage more people to be involved.
    Finally, the Citizen Corps will bring together local government, 
law enforcement, educational institutions, the private sector, faith-
based groups and volunteers into a cohesive community resource. The 
Federal role is to provide general information, to develop training 
standards and materials, and to identify volunteer programs and 
initiatives that support the goals of the Citizen Corps.
                      the u.s. fire administration
    The U.S. Fire Administration (USFA) provides a unique focus on fire 
programs within the Federal Government. These programs are included in 
the Agency's mission-related preparedness and mitigation strategies.
    The Assistance to Firefighters Grant Program remains an important 
element in supporting the most pressing needs of at risk communities 
and fire service providers in reducing the loss of life and property 
from fire, including loss of life and injury to firefighters. As a 
result of the last year's appropriations, the Grant Program has 
received $150 million that must be obligated by September 30 of the 
current fiscal year and an additional $210 million received in last 
December's Emergency Supplemental that is expendable until September 
30, 2003. We expect most of the supplemental appropriation will be 
obligated in fiscal year 2002 with almost all of the remainder 
obligated in the first quarter of fiscal year 2003.
    I have confidence that we can do that, and that confidence is based 
on our experience last year. In less than a year the USFA, with a lot 
of dedicated work from other parts of FEMA, especially Financial 
Management, was able to get out $100 million in grant funds to more 
than 1,800 communities. This was a cooperative effort not only within 
FEMA but also with the Fire Service organizations that volunteered 
their expertise to make our peer review panels just that; the work of 
true peers that understand fire fighting issues and needs. So I'm 
pleased to take on this challenge again this year.
    The fire fighters obviously were heroes on September 11, that's a 
given. But we need to remember that they are heroes every day of the 
year in towns large and small across the country. So we at FEMA are 
particularly proud to administer programs that help them to carry out 
their jobs.
    Our nation's firefighters will continue to bear an increasing 
portion of the burden for Homeland Defense, responding to a variety of 
emergent issues including terrorism. I would like to again thank the 
Subcommittee for all of the support they have given to the fire 
community over the last few years.
    While FEMA's role in Homeland Security is expanding, we will 
continue to meet our core functions of natural disaster response and 
mitigation. I would like to touch upon just a few of our major funding 
requests in our other program areas.
                      flood map modernization fund
    FEMA's 2003 request includes $300 million in new discretionary 
appropriations for our Flood Map Modernization Fund and $51 million 
from the federal policy fee for a total appropriation of $351 million.
    Since the late 1960's, the Federal Government has produced flood 
maps for over 19,000 communities. The maps and flood data are used an 
estimated 20 million times a year by communities, lenders, insurance 
agents, and many others to make critical decisions on where to build, 
where insurance is required, and what is the appropriate premium to 
pay. Two-thirds of these maps are over 10-years old, and many do not 
reflect the change in risk that has occurred due to increased 
development. Nearly all of the maps have out-dated streets that make it 
difficult to accurately determine if a property is located in the most 
risky flood zones. Furthermore, there are 2,700 flood-prone communities 
that have never been mapped. This adversely affects the ability of 
communities to guide new development away from flood risks, impacts the 
ability of the National Flood Insurance Program to collect appropriate 
premiums to pay flood claims, and the Federal government is forced to 
pay more in disaster assistance. It is estimated that some $800 million 
in new funding is needed to fully update and modernize the maps. It is 
conservatively estimated that benefits exceed cost by a factor of two, 
and over the next fifty years, the savings will amount to $26 billion.
    FEMA has reengineered the way we make maps with increased focus on 
technology, such as GIS, exciting new remote sensing techniques, and 
the opportunities for Internet distribution that will reduce costs. In 
addition, FEMA has established the Cooperating Technical Partner 
initiative, a program that brings together other Federal, state, and 
local governmental agencies into long-term partnerships to actively 
participate in the re-mapping process, and to share in the cost. This 
partnership is essential. These are not just FEMA maps, they need to 
belong to the communities. Through this partnership communities will 
take on ownership of these maps, both in their quality and in their 
responsibility to reflect the risks outlined in the maps when they go 
about their planning and policy-making at the local level.
    In my 12 months as Director of FEMA, I have not come across many 
who disagree with the map modernization initiative, and I have heard 
from environmentalists, homebuilders, realtors, lenders, insurance 
companies, engineers, planners, surveyors, and numerous organizations 
representing state and local governments. Each year that implementation 
is delayed, the cost of the plan, and the cost to the Nation, 
increases.
    The result of getting this funding will be greater reliability and 
accessibility for State Emergency Managers, local planners, and 
developers alike. It's a win-win investment situation, and again, I 
thank you for your help on this issue.
               new pre-disaster mitigation grant program
    The fiscal year 2003 budget proposal includes $300 million in no-
year monies under the National Pre-Disaster Mitigation Fund to initiate 
a shift from a post-disaster grant system to a pre-disaster, 
competitive grant process. These changes will in no way limit FEMA's 
basic Disaster Relief efforts--as always, when tragedy strikes, we will 
be there. However, I also believe we must refocus our efforts to save 
lives, protect property, and, over the long term, increase overall 
Federal assistance for local communities.
    The proposed program creates a separate funding source for pre-
disaster mitigation and continues to support the goals of the Disaster 
Mitigation Act of 2000 (DMA2K). DMA 2000 provides a real incentive for 
communities to assess their risks, evaluate their vulnerabilities, and 
incorporate an action plan into the ongoing planning processes that 
many jurisdictions undertake already. With the recognition of the 
importance of mitigation planning, many communities are better 
positioned to develop cost-effective proposals for mitigation projects 
and activities.
    An annual grant program that provides a consistent source of 
funding would allow States and communities to develop more 
comprehensive proposals and projects to reduce their overall risks. 
Communities would no longer be dependent on a disaster declaration in 
order to obtain a FEMA grant to help protect their constituents.
    Specifically, the proposal calls for the grants to be awarded on a 
competitive basis. This will help to ensure that the most worthwhile, 
cost-beneficial projects receive funding. In addition, grants will be 
made without reference to State allocations, quotas or other formula-
based allocation of funds.
    The goal is to fund activities that will reduce the risks of future 
damage in hazard prone areas, thereby reducing the need for future 
disaster assistance. Eligible activities would include: vulnerability 
assessments; State and local mitigation planning; the reinforcement of 
structures against seismic, wind, and other hazards; elevation of 
flood-prone structures; acquisition or relocation of structures at 
risk; and minor flood control or drainage management projects.
    As States currently play an essential role in the implementation of 
all of FEMA mitigation grant programs, FEMA's strategy is to include 
the States in the new program. States provide technical assistance to 
communities, solicit and review applications, and coordinate statewide 
mitigation activities. A project evaluation process will be established 
to determine how well projects achieve mitigation goals. This 
effectiveness evaluation would help to better link resources to 
performance information for planning and reporting purposes. Results 
will also be used in reviewing and adjusting the evaluation criteria 
for future grant competition, as appropriate.
    Mitigation should be a regular investment priority and should not 
only track with the unpredictable level of disaster activity in a given 
year. The new competitive process will make sure the best thought out 
and cost-effective programs get funded every year, so that our 
communities are prepared before disaster strikes.
                    national flood insurance program
    The 2003 Budget proposes several reforms to the National Flood 
Insurance Program to improve financial performance and transfer greater 
financial liability to individuals building in flood-prone areas. Some 
of the primary reforms are as follows:
    (1) Phase out insurance policy rate subsidies for non-primary 
residential structures, including second homes, vacation properties, 
rental properties and non-residential properties. Rates for primary 
residences, which represent the majority of the program's policies, 
would not change under this proposal.
  --The net savings in fiscal year 2003 would be $13 million;
  --The estimated net savings grows to about $200 million annually in 
        the outyears;
  --Approximately 350,000 policyholders would be affected by this 
        proposal;
  --The average premiums for the policyholders impacted would increase 
        from $650 to an average between $1,600 and $1,800; and
  --Assuming a 5-year phase-out, premium increases for these policies 
        would average about 20 percent a year during the phase-out.
    (2) Require that mortgage borrowers insure the full replacement 
value of their properties. Under current law, lenders must only ensure 
that flood insurance covers the outstanding principal balance of a 
loan.
  --Changing the requirement for the amount of insurance to be the 
        value of the property brings the requirement in line with what 
        is the general practice in the insurance and lending industries 
        for about the last 25 years.
  --By providing full coverage this reduces the need for disaster 
        assistance and tax write-offs for uninsured losses.
                          disaster relief fund
    The 2003 Budget request fully funds the Disaster Relief Fund's 
(DRF) 5-year average obligation level of $2.9 billion. The President's 
Budget includes $1.8 billion in new funds for the Disaster Relief Fund. 
An aggressive campaign is also promised during the remainder of 2002 
and 2003 to recover unspent balances from previous disaster 
declarations.
    Once a Hazard Mitigation Grant Program (HMGP) project has been 
approved and funding has been obligated, the performance period for 
construction grants ranges from 1 to 5 years, depending on the 
complexity of the project and length of the construction season. Given 
the 5-year window for completing projects and liquidating funds, FEMA 
is focusing its efforts to liquidate and/or recover funds on HMGP 
grants obligated during and prior to fiscal year 1997.
                     disaster, response & recovery
    In fiscal year 2003, the Readiness, Response and Recovery (RRR) 
Directorate will continue to focus resources on carrying out its core 
function of coordinating the activities of the interagency community to 
prepare for, respond to, and recover from all significant disasters and 
emergencies to minimize the suffering and disruption that they cause. 
Emphasis will be placed on working with the interagency community to 
incorporate disaster lessons learned into the Federal Response Plan to 
continue its improvement and ensure that it can be effectively 
implemented to manage the consequences of all types of disasters, 
including acts of terrorism. By utilizing lessons learned from past 
disasters, such as the World Trade Center, we can develop more 
effective and efficient response and recovery capabilities. Related to 
this, work will continue on enhancing existing plans and preparedness 
measures to address special events, such as the Weapons of Mass 
Destruction Contingency Plan that addresses terrorist attacks in the 
National Capital Region.
    The RRR Directorate programs will work toward improving disaster 
response capabilities and the speed and effectiveness with which 
disaster assistance can be provided to disaster victims, while reducing 
costs and achieving greater accountability of disaster equipment and 
assets. We are also examining a number of possible alternative 
approaches for building a more nationally integrated and robust 
operational capability to address more complex future Federal disaster 
operations. We will continue to work with the States to maximize their 
role in managing disasters and will begin producing incident-specific 
response plans for truly catastrophic disasters, such as hurricanes, 
earthquakes, and terrorist attacks. The importance of satisfying the 
needs of disaster victims is paramount in our Individual Assistance and 
Public Assistance disaster recovery programs. In this capacity we will 
provide resources to ensure timely and efficient inspections of damages 
to residences and provide the capability to respond to multiple 
disasters requiring manufactured housing.
                  the emergency food & shelter program
    The 2003 Budget proposes the transfer of the Emergency Food and 
Shelter Program to the U.S. Department of Housing and Urban Development 
(HUD). The purpose of this proposal is to permit better coordination of 
services for the homeless under one agency.
    Funds for this program are obligated to a National Board, which is 
chaired by FEMA and whose non-profit partners (The Salvation Army, 
American Red Cross, United Way of America, and others) provide 
professional expertise to the board. The National Board then works 
through similarly composed Local Boards to advertise the availability 
of funds, assess community needs, and make allocation choices.
    In fiscal year 2002, FEMA is allocating $140 million for this 
program. Due to the proposed transfer, no resources are shown in the 
FEMA Budget request for the Emergency Food and Shelter Program.
             fiscal year 2001 independent auditor's report
    I would also like to discuss briefly the fiscal year 2001 
Independent Auditor's Report. We welcome this kind of review of 
accounting practices government-wide. After 3 years of ``clean'' 
opinions, FEMA's 2001 financial statements were issued a ``qualified'' 
opinion.
    There are two reasons for the qualifications: (1) adjustments to 
unliquidated obligations and (2) property and equipment tracking and 
accounting. First, FEMA reduced it unliquidated obligations by $77 
million or 1.27 percent. This reduction was necessary because of errors 
made when converting financial data to a new general ledger based 
financial management system in 1996. It is FEMA's belief, however, that 
the one time adjustment has improved the overall accuracy of the 
financial statements and should satisfy any further audit requirements 
on obligations.
    Second, with regard to property and equipment tracking and 
accounting, FEMA did not maintain customary records for its equipment 
and related depreciation, therefore the auditors determined that it was 
not practicable to extend their auditing procedures to sufficiently 
satisfy themselves as to the accuracy of the equipment with a net book 
value of $10.8 million.
    Finally, the audit concluded that FEMA has long-standing internal 
control/material weaknesses in several areas. We generally agree with 
the overall findings of the audit and have in fact already taken many 
steps to correct the identified shortcomings. For instance, a 
remediation plan, developed in September 2001, will be refined and 
updated to address needed improvements to assure compliance with the 
ever-changing government-wide accounting standards and OMB and Treasury 
reporting requirements. A JFMIP compliant version of our financial 
management system is currently being implemented. This system upgrade 
will greatly enhance FEMA's reporting capabilities and correct many of 
the deficiencies cited in the report. Resources and expert personnel 
are key to assuring changes and improvements. We are seeking additional 
qualified staff and contractor support to help us improve FEMA's 
financial management operations. FEMA will continue to address the 
issues identified in the audit and work toward making improvements.
                 fiscal year 2002 supplemental request
    The President's request for supplemental appropriations includes 
just over $3 billion for FEMA. From that total, $2.75 billion is 
devoted to the Disaster Relief Fund to assist in the ongoing recovery 
efforts from September 11.
    The remaining $326 million is requested to enable FEMA to 
immediately begin getting our Urban Search and Rescue Teams WMD-
capable, to assist the States with comprehensive planning that includes 
mutual aid and other important operational elements, and to begin the 
Citizen Corps initiative.
    This supplemental, if approved, will give FEMA the opportunity to 
jump-start several critical preparedness-related initiatives that 
shouldn't wait for the changing of the fiscal year.
    The additional funds for the Disaster Relief Fund will ensure that 
our commitment to New York and New Jersey and Virginia to assist in 
their recovery from the events of September 11 will proceed without 
interruption.
    The start-up funding for the First Responder Grant Program is 
vitally important. The funding will allow us to begin to construct an 
infrastructure at the State level to support the larger grant program 
next year. For example, this will include secure phone and fax lines 
for the States to use.
    Senator Mikulski, you have often mentioned the importance of having 
strong offices at the State level that would be able to coordinate with 
the Federal agencies. A good example is the funding in the Supplemental 
to support security clearances at the State level. Getting these basic 
administrative steps in place is going to make the program of real help 
to the State and local first responder community from the moment the 
funds are available. It can increase both their effectiveness and their 
long- term accountability.
    Another important element in the request will support improvements 
and greater support to our Urban Search and Rescue (USAR) Teams. 
Senator Bond, I know this is of great interest to you because you have 
introduced legislation recently along these lines. I think you can see 
from the details of the Supplemental that we are in synch on the 
importance of these teams. We agree on the need to provide them with 
increased support that will allow for updated equipment and additional 
training. Believe me, my experience in New York with our USAR teams as 
they searched, day after day, 24 hours per day, will always be etched 
in my memory. And I intend to turn that experience into informed 
support for those teams.
    This Supplemental legislation also puts in motion our new Citizen 
Corps program. These funds will assist communities in organizing their 
volunteers and giving their citizens the opportunity to realize their 
greatest wish since September 11; to be of service in protecting the 
health and safety of their communities.
    While this hearing is rightly devoted to the 2003 budget, I hope 
you will be able to look favorably on this Supplemental request as a 
logical and appropriate starting point to move us toward the direction 
of the 2003 funding proposals.
                               conclusion
    While there are more goals for FEMA in the coming year, these are 
some of the major ones. I look forward to working with this committee 
on these priorities. Again, I thank you for the opportunity to be here 
this morning and will be happy to answer any questions you may have.

                      LA PLATA, MARYLAND DISASTER

    Senator Mikulski. Thank you very much, Mr. Allbaugh. We 
have a lot of ground to cover. I'd like to ask some questions 
about southern Maryland. First of all, I understand that as of 
yesterday, FEMA received close to 360 applicants from Charles, 
Calvert and Dorchester County. The bulk of the applicants were 
from Charles County and also Governor Glendening is also asking 
for disaster declaration.
    Could you tell us what is FEMA's current estimate of the 
cost of the tornado that hit southern Maryland last week?
    Mr. Allbaugh. I can't give you a hard number. We are in the 
process of reviewing with our disaster assistance teams the 
damage that has taken place. I believe we amended the disaster 
declaration yesterday for two of these three counties, adding 
those counties for public assistance. We will add the third 
should the teams agree with the governor's request. But it will 
take a while to recover from an F4 tornado, as you heard me 
talk last week. Then-Governor Bush and I participated after the 
fact in an F5 tornado in Jarrell, Texas. Lives were lost. That 
community is still rebounding.
    FEMA will be there as long as we need to be there. I think 
my numbers show 87 homes were totally destroyed, 174 received 
major damage, 368 received minor damage. We are there. We have 
already processed I do not know how many hundreds of thousands 
of dollars in assistance to those individuals, and the 
businesses who have been affected.

                         DELIVERY OF ASSISTANCE

    Senator Mikulski. That is exactly right. There were three 
categories of injury. One, of course, was the homes. The others 
were to people's livelihoods such as the hardware store, 
florist shop, bank building; at the same time was the public 
infrastructure aspect. How long do you think it will take to 
provide assistance to everyone who is eligible and when do you 
think that we can expect that the checks will start to arrive?
    Mr. Allbaugh. The checks were electronically transferred or 
in the mail within 24 hours of when the President declared this 
disaster when we got his request. We have a fabulous system 
that Larry Zezinger runs in our office for the agency. We have 
that ability, normally within 2 to 5 days, to put money in the 
hands of those individuals who are harmed, and we have already 
done that.
    Senator Mikulski. I know that our very able county 
commissioners established something called People's Place. I 
bet you like that because it put all of the agencies like FEMA, 
SBA and some that were going to help families in one place 
while they had an incident management operation center 
someplace else. If you recall, our rescue squad even lost its 
roof. From the people operating out of People Place, would you 
describe for committee how it works, how someone comes in and 
how they apply and what can they expect in terms of timeliness?
    Mr. Allbaugh. Normally what takes place is we try to lean 
as far forward out of the foxhole as we can when one of these 
incidents takes place. That basically entails a disaster 
response team that is flown to the site. They start searching 
for an area where we can house all the Federal and State 
agencies under one roof so we can offer in a disaster field 
office setting a one-stop shopping for those individuals who 
have been harmed. This happens in two ways: they can either 
come to the disaster field office to register in person for 
State and Federal assistance, and even local assistance, and 
also charitable organizations are a part of that disaster field 
office, or mainly the norm is to call our 800-621-FEMA, our 
hotline, where we teleregister those individuals who have been 
harmed or even think that they have been harmed.
    Senator Mikulski. We think that is a terrific system. I 
think part of preparedness has to do with where would you 
operate an incident management situation which goes then to 
your need for technology, interoperibility, and mutual aid. We 
were gratified in southern Maryland the way others responded to 
help our responders. Therefore we need to be looking at 
interoperability incident management and then preparedness 
which is where would the people go if they need to seek 
shelter, where do the people who are going to help them get 
benefits need to go and where would be the command and control 
environment.
    Is that part of what you see needs to be, therefore not 
only helping, would help both as I said against tornados or 
national disasters, as well as against terrorism?

                             CITIZENS CORPS

    Mr. Allbaugh. The interesting thing about our agency is 
that we believe we are an all hazards agency, whether it is 
man-made or of natural design. We implement the same process. 
We go through the same procedures. Our people are very well 
trained in going in and quickly making assessments as to 
individuals, businesses and a community's need. Nine times out 
of 10, the individuals who respond to a disaster are those 
innocent citizens who were right there if they have not been 
harmed themselves. That is why I think one of our programs 
which is a part of Citizen Corps is a great program. It is a 
Community Emergency Response Training that we do. We certify 
individuals with 18 hours of training. And we essentially have 
a fabulous program in Pittsburgh where we train the trainers 
trying to reach as many people as we possibly can to identify 
when they are in a disaster situation and respond immediately 
to before fire, police and utility individuals can show up at 
the scene and clearly before the Federal assets are able to 
arrive.
    But our system works. We reach out with great regularity to 
State and our local partners and communities to make them aware 
of how our programs work, and again, it is the tireless effort 
of the FEMA employees who actually make this work day in and 
day out.
    Senator Mikulski. Thank you. Just one final question. How 
many offices do you have in southern Maryland, and how long 
will they remain open?
    Mr. Allbaugh. They will remain open as long as they need to 
be open in assessing and assisting those individuals. We have 
77 FEMA employees on the site right now. I think there is one 
main disaster field office and two satellite offices. We may 
even have a mobile office in the area. I do not know. But I 
will find out exactly and respond back.
    Senator Mikulski. Again, the next time you see the 
President and the next time I do on behalf of all of southern 
Maryland and all of Maryland, we just want to say thank you. I 
think our colleagues know when they are hit by something, 
nobody knows that lady with that flower shop or that man with 
his business or that senior citizen with their home, nobody 
knows if they are Republican or Democrat. They just know they 
are Americans. And thank you very much for your response.
    Mr. Allbaugh. Thank you, Senator.
    Senator Mikulski. Senator Bond.

                    HAZARD MITIGATION GRANT PROGRAM

    Senator Bond. Thank you, madam chair. You mentioned the 
proposal to replace the hazard mitigation grant program which 
now retroactively awards percentage of the disaster relief for 
future mitigation. With a forward-looking approach. This is 
something that I have asked about over the last several years. 
I believe your IG is also supporting it. Now FEMA is proposing 
to establish a new $300 million competitive mitigation program. 
I'd like to ask you sort of a three-part question.
    How--what benefits do you see accruing in this program, 
rather than in the current HMGP program since we do not have 
any authorizing language, how would the program be structured, 
two. And three, what would be the priorities for funding? 
Advantages. Structure. Priorities.
    Mr. Allbaugh. Senator, the biggest benefit is that you 
remove individuals from harm's way immediately by buying out 
those businesses or homes that have been identified as being at 
risk. I remember last year touring the Red River of the North 
in the Grand Forks area. They identified many areas from the 
flood of 1993 where the community had gone in, identified after 
the fact and subsequently bought out those homes and businesses 
that were in harm's way. This time around, last year when 
flooding was severe, those homes and businesses were not at 
risk. Basically that area had been turned into a green belt 
area or park and--
    Senator Bond. I fully support mitigation. I am just saying 
with a, what would be, how do you see the advantages of the new 
program, rather than the previous program which did provide 
mitigation resources on a percentage basis to the disaster 
relief?
    Mr. Allbaugh. The biggest thing immediate would be that the 
vast communities across the country already know where their 
risk are. They have identified them. They are on the shelf. 
They do not have the ability to buy those properties right now 
and remove them from any type of threat. This allows them up 
front a competitive basis to remove those properties from risk, 
as opposed to waiting until a disaster takes place where we go 
in after the fact and offer up mitigation money to buy 
individuals out.
    Senator Bond. How would the program be structured? What 
would be the guidelines? What would be the priorities?
    Mr. Allbaugh. Well, we are in the process of establishing 
that. There would be eligible activities based upon 
vulnerability assessments.
    Senator Bond. Maybe we ought to ask you to submit that for 
the record. Maybe part of the answer is in my second question. 
According to FEMA's IG's 2001 report, as of April 2001, out of 
more than $2.5 million for the HMGP program since 1989, 48 
percent had not been disbursed. The bulk of the funds that make 
the disasters have been sitting there 5 to 11 years. In 
particular the HMGP funds generated by two disasters, 
Northridge Earthquake and Hurricane Georges in Puerto Rico 
account for more than one-third of the total amount of HMGP 
funds awarded since the program's inception and nearly 75 
percent of all undisbursed funds. It appears that only a couple 
of areas backed the tank truck up to suck out of that wonderful 
trough.
    What is, what is happening? What is the problem with 
everybody else?
    Mr. Allbaugh. Well, we had a history of allowing 
communities to not step up to the plate and take advantage of 
those HMGP funds. I realize it is a problem. It is a priority 
for me to close out those loans. They are given 4 or 5 years to 
tap into HMGP and we need to reclaim that money. We have not 
done a good job on that and the IG is absolutely on target.

                       TORNADO DAMAGE IN MISSOURI

    Senator Bond. I mentioned the article. I just read the 
article today's Southeast Missourian, tornado victims have 
problem with Federal aid. 19 areas hit, 86 homes completely 
destroyed. They had been denied individual assistance. My own 
friend, the fire county chief, Chief Bollinger appropriately 
enough said we got people here that are beyond welfare. One is 
living out of a car. Other is living in a house with a tarp 
over it and they say we do not qualify. If the tornado hit a 
metropolitan area, the situation would have been handled 
differently. People in rural areas are penalized and he is 
aggravated. I guess the other thing that is aggravating is that 
FEMA put in place a toll free number urging families to apply 
for individual assistance and when they called the number they 
found out that they were not eligible for individual 
assistance, which kind of raised some expectations that were 
destroyed.
    If you followed----
    Mr. Allbaugh. This is the first I have heard about it. I 
will sure check in and respond back to you. There could be a 
sizable portion of those individuals who are insured and that 
may preclude them from being eligible.
    Senator Bond. There is some that are insured. We have not 
looked at it.
    Mr. Allbaugh. I was just handed it as well.
    Senator Bond. That brightens your day.
    Senator Mikulski. Senator Shelby.
    Senator Shelby. Thank you, Madam Chairman. We talked about 
Maryland and Missouri. I thought I would get into my home State 
of Alabama, Mr. Director.
    Mr. Allbaugh. Good.

       CHEMICAL STOCKPILE EMERGENCY PREPAREDNESS PROGRAM (CSEPP)

    Senator Shelby. I have been working, as you know with 
Senator Sessions, and Congressman Riley to facilitate the 
discussions between the Army and FEMA and our State and local 
officials in Alabama regarding critical CSEPP safety 
requirements associated with chemical weapons. CSEPP, you are 
familiar with that?
    Mr. Allbaugh. Yes, sir.
    Senator Shelby. Officials from your agency participated in 
all the operational assessment team meetings which were 
convened at the direction of Secretary Rumsfeld and overseen by 
Under Secretary Pete Aldridge regarding funding for critical 
CSEPP safety requirements. Two issues remain unresolved as of 
today. While the Army has transferred the necessary funding to 
FEMA and the State and county EMA have developed training to 
make those plans, funding for level A suits and protective 
hoods remains blocked. The OAT process provided numerous 
opportunities for FEMA representatives to raise important 
concerns. But none of the recent criteria produced by FEMA for 
the level a suit and protective hoods were brought up during 
the process.
    Several questions. First, tell us why FEMA officials, your 
officials, did not raise objections to these protective suits 
and hoods during the OAT process and second, since DOD and the 
Army have transferred the funding to you, this is not an 
issue--it shouldn't be an issue of money. What are the reasons 
FEMA continues to refuse to agree with DOD and the Army that 
protective suits and hoods are a safety device?
    Mr. Allbaugh. Senator, I have no idea why FEMA employees 
who attended those meetings failed to speak up. They have known 
our position from day one and there is no excuse for them not 
making people's position well-known.
    Senator Shelby. Will you look into this?
    Mr. Allbaugh. Sure. I will report back to you.
    Senator Shelby. And straighten that out.
    Mr. Allbaugh. To the best of my ability. I sure will.
    Senator Shelby. You are the director. I think you can 
straighten it out. In FEMA. Maybe not elsewhere in the 
government. In FEMA. I have confidence in you as the director 
to run your agency, and if you run your agency as I believe you 
have and will, you will straighten that out.
    Mr. Allbaugh. Well, I have been about the business of 
trying to straighten out the issue on Anniston since this has 
come to my attention several months ago. What I am concerned 
with first and foremost and if you want to blame someone for 
the holdup, you can blame me and hold me responsible.
    Senator Shelby. We are more interested in performance. We 
have talked about this. I am not here to blame you. I am here 
to get it straightened out.
    Mr. Allbaugh. I understand. We are in the position right 
now of trying to work with the community to make sure that they 
have a certain amount of training. We have asked for a plan and 
proposal from the city after they were not too interested in 
what we had offered up and I expect that to take place in short 
order, Senator, and we can resolve those issues. I do want to 
make sure that individuals if we are going to be buying hoods 
or masks are properly trained.
    Senator Shelby. Absolutely. We are all interested. The 
bottom line at Anniston dealing with chemical demilitarization 
is nothing but safety. Safety at whatever because the people 
there have no one to speak up.
    Mr. Allbaugh. I agree.
    Senator Shelby. If we do not speak up, if we up here do not 
speak up, no one will. I want to commend again Senator Mikulski 
for conducting the hearing regarding other issues in Anniston 
several weeks ago.
    Mr. Allbaugh. There is not anything more paramount to our 
agency than safety. We are about the business of protecting 
lives and saving properly property, and just as soon as it is 
feasible, I have the ability to sit down with the Anniston 
folks, I think we can resolve this issue. We have given them 
everything that the Army has promised except for the issue on 
the hoods and I see no reason why this cannot be solved in 
short order.

                          FEMA'S ROLE IN CSEPP

    Senator Shelby. Mr. Director, I only have a minute. Given 
our recent conversation about your level of frustration with 
the CSEPP program, I want to know what your thoughts are 
regarding FEMA's continued involvement in the program. Second, 
do you believe any statutory changes need to be made that would 
improve FEMA's ability to execute the CSEPP program and third, 
what discussions have you had with Dr. Fiori and Secretary 
Aldridge regarding these unresolved OAT safety issues?
    Mr. Allbaugh. I have not had any personal conversations 
with Dr. Fiori. I know numerous members of our staff have. I 
believe the CSEPP program is better served returning to the 
Department of the Army. We have nine facilities nationwide. Our 
only role in CSEPP programs needs to be continued and that is 
one of planning, assisting those communities with their 
evacuation routes, and their planning. But I believe the Army 
runs a program that is a good program. I think they should have 
the entire program, just not part of the program.
    Senator Shelby. Thank you, Madam Chairman.
    Senator Mikulski. Senator Johnson?
    Senator Johnson. Thank you, Madam Chairman. Welcome.
    Mr. Allbaugh. Good to see you, Senator Johnson.

                             PROJECT IMPACT

    Senator Johnson. Thank you for your attendance. I observed 
the Project Impact is not part of the initiative we are talking 
about today. It has been a popular program in my State, 
numerous communities have been able to secure the resources 
they have needed to prepare in advance of disaster. How does 
FEMA intend to support legal strategic disaster planning at the 
local level outside of the project impact?
    Mr. Allbaugh. The President's First Responder program 
serves that purpose, to offer assistance, technical assistance 
and planning, training, equipment purchases and exercises. 
Standardization is probably one of our number one priorities 
across the Nation. Many communities have plans that have not 
been looked at in recent years. They need to be taken off the 
shelf once again, dusted off and we can provide that assistance 
through our State partners to improve those disaster response 
plans.
    Senator Johnson. Any sense of what kind of, you not only 
have to work with communities that have no plans but update 
communities that do have old plans which may not be up to date, 
may not be appropriate to contemporary needs. How far down the 
road are we going to get in assisting these communities?
    Mr. Allbaugh. Well, the supplemental has $175 million to be 
used totally for planning. We already asked States and 
communities to start their planning process so if Congress acts 
in the affirmative with the $175 million it will be 100 percent 
grant money and we can expedite getting that money out the door 
to further assist those communities.
    Senator Johnson. Very good. Thank you.
    Senator Mikulski. Mr. Allbaugh, I'd like to pick up on 
that--excuse me. Senator Craig. Sorry.
    Senator Craig. If you have got a follow through on that.
    Senator Mikulski. You go right ahead. You have been waiting 
very patiently. Please proceed, sir.

                        INTER-AGENCY FIRE CENTER

    Senator Craig. Madam chair, welcome. Joe, welcome to 
committee. One question--well a couple in relation to the fire 
administrations and the National Fire Act. Do you see expanding 
roles with the Interagency Fire Center in Boise? I know FEMA 
has a presence there now on a concurrent basis with all of the 
other agencies that interface as it relates not just to fire, 
but they also deploy equipment materiel in national disasters?
    Mr. Allbaugh. Actually, I'd like to have a more expanded 
role there at the center. It is a fabulous facility. We only 
have personnel there located during the seasonal hot spots.
    Senator Craig. The peak of the season. That's right.
    Mr. Allbaugh. Yes, sir. We have a great organization in the 
United States Fire Administration led by chief Dave Paulison. I 
would like to improve that relationship. I was there last year. 
There is a willingness with the Ag department to do the same 
thing. As you know we are about the business early on in the 
fire season of administering our fire management grants which 
used to be called fire suppression grants. We have done several 
over the last several days, I think 5 in the last 3 days alone 
where private property and public buildings have been 
threatened. It is an area that we need to work closer with Ag 
to improve our relationship, and I'd like to achieve that.

                           FIRE GRANT PROGRAM

    Senator Craig. Fire management grants are different than 
the kind of grants that are going to the local communities and 
local fire departments?
    Mr. Allbaugh. That is correct. Yes, sir, they are. Fire 
management grants tend to be one of an emergency nature where 
there is an immediate threat to property and individuals. The 
fire grant program that Congress in my opinion wisely passed 
last year, we had a 5-month period to get the first $100 
million out. We were successful. That goes to basic 
firefighting needs to local fire departments. This year 
Congress has given us $150 million plus $210 million in the 
supplemental for a total of $360 million, which I know will be 
out the door by the end of this calendar year and I thank you 
for that support. It is a strong program, and it makes a 
difference in those local fire departments.
    Senator Craig. That is a strong program. It is very popular 
in my State. I have been visiting most of my fire departments. 
They just do not want it lost inside the bigger issue today.
    Mr. Allbaugh. I agree with that, Senator if you do not mind 
me interrupting. I know OMB wants to combine the fire grant 
program with First Responder program. I am dead set against 
that. It is for two different purposes. And I think it is a 
mistake to try and put those--I am going to get in trouble for 
this, but it is a mistake quite frankly.
    Senator Craig. You won't get in trouble with this Senator 
and my guess is my colleagues will agree with that.
    Senator Bond. Last time I agreed with somebody disagreeing 
with OMB, he was canned 3 days later. We wish you well, Joe.
    Senator Craig. I will leave you my phone number.
    Senator Bond. Mike Parker.
    Mr. Allbaugh. I consider myself not only working for the 
American public, but directly for the President of the United 
States and I think I still have a fairly good relationship. I 
might survive this area.
    Senator Craig. The program that you have talked about is 
very popular amongst fire departments because it picks up some 
of the pieces they cannot afford to pick up in training, 
equipment and material. It remains very valuable. I met with 
Idaho's fire chiefs a couple of weeks ago and that was their 
first request. Do not lose this program. It is the best we have 
seen to date. It is quick to respond to our needs. And it is an 
opportunity. I am pleased also to hear you talk about the 
potential of an expanded role at the Interagency Fire Center in 
Boise because while we look at it as a fire center, it will 
also buy caches of equipment and readiness, it does respond and 
has responds to communities all over the country with the 
deployment of communications equipment and all kinds of things. 
It is a natural for the area, the region because it services 
the whole western States that it literally is the whole 
national center. I am glad that you see that in its provincial 
and present management system.
    Mr. Allbaugh. It is a tremendous facility. I look forward 
to expanding our role there. Back on the fire grant program 
just for a minute to refresh everyone's memory. Last year the 
first year we had over 20,000 applications for $100 million. 
Twenty thousand plus applications represented over $3 billion 
in needs and requests. This year, we are right at 19,000 and 
some applications and we are going to be moving quickly getting 
that money out the door, so it is an extremely popular and 
successful program.
    Senator Mikulski. I just want to reiterate how supportive 
we are of the fire grant program because it helps particularly 
the volunteer fire departments where we are asking people on 
their own time and in their own mind, to meet the bottom line. 
This has been an excellent program. This then also takes me to 
the whole issue of State and local, strengthening State and 
local emergency management.

                    INTEROPERABILITY AND MUTUAL AID

    First of all, we want to thank Governor Tom Ridge for 
taking a look at our capital region in terms of the need for 
disaster planning. That is the District of Columbia, my own 
State of Maryland and Virginia. We are the capital region. I 
must say, we are a high security issue but also as part of 
that, is southern Maryland and La Plata, a little county run by 
commissioners and a lot of great volunteer fire departments. So 
let me get to the point. I'd like you to elaborate what is in 
this year's budget to help with interoperability and mutual 
aid. What I heard you talk about was in New York people wanted 
to help but they couldn't because of the failure for 
interoperability. When I walked the streets of La Plata, what I 
saw was that county executive Doug Duncan from Montgomery 
County rushed to be able to help La Plata. That the Ocean City 
mayor had come because they had some experience with natural 
disasters, and it showed why we need to have mutual aid and 
also the need for interoperability in communications. Mr. 
Duncan of Montgomery can talk to Mr. Curry of Prince George's, 
but I am not sure both of them can talk to Charles County or be 
able to even go across the river to get help from Northern 
Virginia.
    I note this is a high priority with you. Could you tell us 
how we could put money in the Federal budget to ensure 
interoperability and also this great approach of mutual aid 
where I think is the key to a successful rescue and recovery 
operation.
    Mr. Allbaugh. Thank you Senator, for the question. 
Interoperability comes in many forms, not only in 
communications, but equipment, personnel. In our first year, 
which would be this year I hope with the supplemental, $175 
million we are requesting which is 100 percent money to go to 
those local departments to start that planning process. It is 
basically similar to playing a football game. You do not want 
to go out and put your players on the field until you have a 
game plan, and it is important that States and local 
communities have that game plan and we need to assist those 
communities in that game plan. Coupled with that, there are two 
particular areas in mutual aid arena that we want to spend $5 
million in assisting those communities in crafting the 
requirements when it comes to mutual aid, and $7 million for 
secure communications with State and local individuals 
nationwide.
    It is important for us, when there is an incident that is 
ongoing, to have the ability to communicate in a secure 
fashion, something that we do not have between the governors 
and other State officials and the Federal Government. We do 
among most Federal agencies, but not at the State level. So 
there is $7 million we would like to spend in that arena. We 
are asking for $50 million in the area of Citizen Corps. This 
is probably one of the greatest programs that can help a 
community be prepared. And the reason we are asking for that 
money is to accentuate an already excellent program that 
started in Los Angeles in 1985 and we picked it up in the later 
1980s, which is the community emergency response team, the CERT 
training. It's a fabulous opportunity to train the trainers, 
get them out of the communities and train individuals on how to 
respond to a disaster to assist their fire, police utility 
departments, city council, hospitals, EMTs. Many people just do 
not know what to do and what we will do by making this training 
available is enhance the already well-established local 
response capability. That is just some of the dollars we will 
be spending this year, I hope.
    Senator Mikulski. Mr. Allbaugh, I want to assure you that I 
regard the whole issue of interoperability and mutual aid to be 
one of our highest priorities to be able to serve our 
communities and serve the Nation. I am going to work with you 
through the appropriations process and any help that you need 
with other Federal agencies on establishing national standards 
for equipment and using other resources like the National 
Institutes for Standards and Technology. The private sector is 
developing excellent technology and improving it every day and 
second, we want to have this interoperability and mutual aid. I 
have seen it at the Pentagon when Maryland and Northern 
Virginia responded with citizen soldiers helping our American 
military and now I have seen it in my own disasters and you 
have heard it from my colleagues. So we really want to work 
with you because I think this is how we are going to get 
maximum value for our dollar and maximum assistance for our 
communities.
    Mr. Allbaugh. If I could add two more points, Senator. At 
the Federal level, there has been some confusion in the 
interoperability arena. We have taken steps with Treasury to 
head up a consortium of all Federal agencies called SAFCOM that 
will solve this interoperability problem at the Federal level. 
I believe first we have to get our own house in order before we 
can help others.
    Second to that, Bruce Baughman, who is heading up our 
Office of National Preparedness, second from your left is doing 
a fabulous job. One of his challenges is to set nationwide 
standards in the area of communications and equipment 
interoperability. I hate to be redundant but I remember so 
vividly showing up at the Pentagon and people had their own 
breathing apparatus with them and they couldn't use the freshly 
charged bottles because the threads would not be 
interchangeable.
    In New York City we had pumper trucks that we desperately 
needed from lower Manhattan and Yonkers and New Jersey, great 
vehicles, great equipment, people with the drive and training 
to use them and we couldn't use those pumper trucks when we 
wanted to use them because the threads weren't uniform. We had 
a variety of uniformity issues across the board in equipment 
and personnel we are going to solve.
    Chief Paulison and I are going to have all the 
manufacturers in the next couple of weeks to use my 275 pounds 
of intimidation and kind of beat them about the heads and say 
we are putting lives at risk unnecessarily because we cannot 
solve the interoperability problem and we are going to solve 
it.
    Senator Mikulski. Terrific. Senator Bond?
    Senator Bond. Senator Domenici has come in.

                           CERRO GRANDE FIRE

    Senator Domenici. I think my first round here I will talk 
about a parochial issue, the fire in New Mexico that you are 
wrapping up in terms of the management plans, the Cerro Grande 
forest fire in the Los Alamos area. First, I want to thank you 
personally for the attention that you have given to the 
recovery of Los Alamos and the surrounding areas around the 
Cerro Grande fire. Just about 2 years ago is when it occurred. 
The fire consumed about 50,000 acres, 48,000 I think, destroyed 
about 400 homes, caused damages and injuries to a thousand 
families and countless businesses. The county of Los Alamos, 
State of New Mexico, four Indian Pueblos and the Federal 
laboratory. I want to remind my colleagues that this was 
started by Federal Government when a monument burned out of 
control.
    For that reason Congress enacted the Cerro Grande fire 
claim assistance act of 2000 and appropriated $455 million to 
FEMA to establish a claims program to compensate victims of the 
fire. Senator Bond, I remember vividly your cooperation after 
you went through this issue and made sure that we understood 
that FEMA had not, before that had not been doing this kind of 
work but remember they had an emergency response and then 
somebody else would do the kind of things that we had here, 
Small Business Administration, HUD, etc.
    But I want to suggest to you that from what I know, they 
have done an excellent job. They are not quite finished, but I 
think today you can wrap this up for us and perhaps you could, 
we could start by saying as of the 28th of August the fire 
claims under this act will expire. There will be no more time 
to file their claim. They had a short time fuse if they wanted 
to participate under this act this they to file claims. Perhaps 
some will save their claims and file in Federal court.
    Director, would you please give the subcommittee the latest 
figures on the fire, the number and amount of the claims filed, 
the number of claims approved, and the number of claims paid 
and the pending number of claims and the number of claims 
anticipated to be filed by August 28. Could you do that or 
would you rather do it----
    Mr. Allbaugh. I will take a stab at it, Senator, based on 
what I recall. Principally to remind everyone, I was aware that 
the program would not be extended. The clock is running. They 
need to file their claims by August 28 of this year. Originally 
the program officials on site only estimated they would be the 
recipient of about 1,500 claims. We have handled over 20,000 
claims to date thus far and we spent almost $300 million of the 
original $455 million that was granted by the Congress. We 
expect another 2,000 claims to be added to that prior to the 
28th of August.
    I have not paid any insurance company the subrogation of 
claims because I wanted to make sure that 95 percent or so of 
the claims of individuals would be paid prior to the insurance 
companies and we are adhering to that and I am proud of all of 
our agency folks for helping us achieve that goal.
    I do believe that there, in my request for an additional 
$80 million there is a need to have a safety net. I would 
prefer to disclose and play all my cards on top of the table. 
There is no reason to believe we are going to go beyond the 
$455 million, but to protect ourselves and make sure everyone 
is taken care of I think it is a prudent course and action to 
take. If this committee gives us the $80 million extra, we 
would turn back anything that is unused. I would be happy to do 
that. We are well on track. We still have about a, 45 
individuals at the Los Alamos office every day and I am pleased 
with our progress of this program.
    Senator Domenici. I am going to submit further questions to 
you for the record.
    Senator Mikulski. Absolutely, Mr. Chairman. We really look 
forward to cooperating with you. We know that it is a most 
devastating, devastating situation.
    Senator Domenici. I have some other questions, but I will 
wait.
    Senator Mikulski. Senator Kohl.

                     FIRST RESPONDER GRANT PROCESS

    Senator Kohl. Thank you, Mr. Allbaugh. There were a number 
of concerns regarding FEMA grant process and I will address 
just two of his and my concerns. First the emergency response 
community in Wisconsin is pleased that FEMA is taking over the 
Office of Domestic Preparedness programs in the Department of 
Justice for First Responder assistance and I have heard several 
complaints regarding the complex process that the Office of 
Domestic Preparedness had used to provide equipment grants to 
first responders. Many local people believe that these programs 
were too cumbersome and took too long for the money to filter 
down to the people who needed it. So will FEMA make a concerted 
effort to make the process easier for local communities so that 
the money can be spent more rapidly?
    Mr. Allbaugh. That is our plan, Senator. I think our fire 
grant programs our application is down to a page and a half, 
maybe two pages maximum. We believe training for first 
responders ought to be consolidated into one location 
regardless of where it is as opposed to a fragmented system 
that we currently have right now. The Office of Domestic 
Preparedness of Justice has focused in my opinion on the small 
part of the entire emergency response arena. It is something we 
do. This is our core mission. This is why we exist, and I hope 
that at some point we will be able to consolidate these 
programs but I appreciate what you are saying.
    Senator Kohl. Second, State and local emergency management 
officials are concerned that all the additional funds provided 
at the Federal level will not be well used if there is not a 
strong foundation at the local level to absorb these funds. 
They tell me they need money to hire full time staff, 
coordinate local and regional efforts. This funding for 
emergency management performance grants should be boosted so 
States and localities can have the staff and infrastructure to 
handle these new funds as widely as possible.
    Mr. Allbaugh. I'd like to see that we improve our funding 
to assist the States in those arenas. I know they cannot do it 
with the resources they have right now. We need to assist them 
with personnel and technical assistance to make sure the money 
goes exactly where it is intended to go.
    Senator Kohl. So we can hope maybe there will be some 
additional funds for personnel?
    Mr. Allbaugh. I hope so, too. For a number of years EMPG 
funding has been level. I am not sure I understand the 
rationale why we did not include an upgrade in our EMPG money 
for the 2003 budget, except we were totally focused on events 
after 9-11. It is my plan to increase that money. State 
directors in NEMA know that. They understand that. If there is 
any money that I can utilize in the interim, I would be happy 
to do that.
    Senator Kohl. I thank you so much. I thank you, madam 
chair.
    Senator Mikulski. Senator Bond.

                          CERRO GRANDE AUDITS

    Senator Bond. Following up on my good friend from New 
Mexico there asking questions about the Cerro Grande program, I 
wonder if the FEMA IG Mr. George Opfer could come forward and 
answer a couple of questions if you would please. We want to 
find out how you think it is been going. Are there adequate 
accountability requirements to assure that payments were 
consistent with losses? Was the office providing 
accountability, were they cooperative and were the payments 
consistent with the types of models used by insurance company 
for losses?
    Mr. Opfer. Senator, there was a learning curve for both for 
the FEMA and OIG personnel who were assigned there. We had some 
coordination problems in the initial stages of operations, that 
is, making sure program officials understood the role of the 
Inspector General both in terms of our audits and 
investigations. That relationship has worked out very well 
recently and, we are seeing a number of improvements. We have 
full time audit personnel assigned there who are now working 
closely with FEMA management. Once our work is done, we intend 
to prepare an after-action report from the General's 
perspective addressing questions concerning operational 
effectiveness and accountability, as well as our own 
experiences in dealing with program officials.
    Right now we think that the process or the experience level 
of the people who are involved with the Cerro Grande program 
has dramatically improved and it is functioning quite well.
    Senator Bond. Joe, you had a view on that? It is not as 
bad?
    Mr. Opfer. We had some problems in the field in the 
beginning. We had to address it at a higher level in the 
agency. Program staff appear to be cooperating now, however. I 
would like to comment on the efforts of the Acting Deputy 
Director, Mike Brown, in helping us attain that cooperation. 
When things came to my level, I oftentimes turned to Mike for 
assistance. He was very helpful in making sure personnel from 
the management side of the Cerro Grande program were responsive 
to our inquiries. We have had excellent cooperation from Mike.

                        NEW YORK INVESTIGATIONS

    Senator Bond. While you are up there, Mr. Opfer, we 
indicated lots of money going into New York after the tragedy 
of 9-11. Are there adequate controls in place, procedures in 
place to ensure that any fraud or abuse or misuse of taxpayer 
money with regard to New York City assistance are in place? Can 
we be comfortable that all the money going there is being spent 
well?
    Mr. Opfer. I think you can understand from my accent that I 
am quite familiar with New York, being born and raised there. I 
started my government career with the Secret Service in 1969 
working in the New York field office. I was with the Secret 
Service for 25 years before coming to FEMA.
    Senator Bond. Takes one to know one.
    Mr. Opfer. We worked very hard with the District Attorney 
in New York. He has opened up his office to us. We actually 
have our agents located in the Manhattan District Attorney's 
office so, from an investigative point of view, we are working 
quite well with the city of New York and their police 
department, investigators, and all their appropriate law 
enforcement agencies. We are also working with the U.S. 
Attorney's Office in Manhattan. I believe we have a very good 
handle on how the money is being used in New York City. 
Furthermore, some of the other Federal agencies involved, 
Social Security Administration Inspector General, for example 
working very closely with us are reviewing all complaints or 
allegations that are referred to us to determine whether. 
Federal funds are involved, and to determine who would be best 
equipped to address the issue. We are on site, and from our 
perspective, we feel very comfortable at this stage that all 
the appropriate Federal guidelines are being followed.
    Senator Bond. Are there a relatively large number of actual 
indictments or criminal proceedings which have been commenced 
in New York City?
    Mr. Opfer. At this stage, we have made 39 arrests, mostly 
dealing with false applications for Federal assistance. In one 
case an applicant claimed that her spouse was killed in the 
World Trade Center, but was actually alive and well in another 
State. We are also looking at some contractor fraud that is, 
false billings. Unfortunately, what we are seeing is not 
anything that we do not see in other major disasters. In the 
Northridge Earthquake, for example, we had people that would 
take the identity of the deceased victims and file for Federal 
assistance. We are basically, unfortunately, seeing the same 
type of problems in New York.
    Senator Bond. Thank you very much.

                      MERGER OF TRAINING PROGRAMS

    Senator Shelby. Thank you, Madam Chairman. Director 
Allbaugh, in earlier conversations, you discussed the need to 
collapse all training programs into one. Could you explain to 
me in detail what you mean by collapse? Does this merely mean 
put all existing programs under one roof or literally collapse 
them all and give rise to another, to one specific training 
program? In other words, could you discuss exactly how you 
envision FEMA operating at the current national domestic 
preparedness consortium that the President has proposed your 
agency take over?
    Mr. Allbaugh. I think what we have to do is merge those 
programs that we know about that exist at the Federal level 
already, and take advantage of the pluses of all the programs, 
improving those programs and training so that the recipients of 
the training can go one place, as opposed to hunting around for 
training. Now what concerns me right now is that I cannot 
certify the type of training that ODP is conducting nor can 
they certify the type of training that we are doing. The 
American taxpayer deserves to know that there is one entity, 
regardless of where it is, that is going to be held accountable 
for that training that local responders desperately need.
    Senator Shelby. Mr. Director, could you discuss how FEMA 
proposes to deal with a live agent training facility at the 
center for domestic preparedness? How does FEMA propose to 
obtain live agents for training? Under the current law I 
believe it authorizes the Secretary of Defense to transfer 
chemical agents to the Department of Justice. In addition, 
there are issues relating to the existing Chemical Weapons 
Treaties. If you could comment on these issues and how FEMA 
proposes to address them?
    Mr. Allbaugh. Well, I can't speak to the law, Senator, 
directly. I will have to check on that and respond back. But 
there are two particular facilities that I know, have seen one 
and know about another. Yours at Fort McClellan is a first 
class facility that I think would do nothing but enhance the 
training that already goes on for our first responders. The 
other facility is the Nevada test site outside of Las Vegas. It 
is extremely important for individuals, whether it is hazmat, 
chemical, radiological or biological to experience as much as 
they possibly can reality in real live exercises.
    Last week I was at the Nevada test site and witnessed a 
radiological exercise where a hazmat team had come in from 
another State, for the specific purpose of this type of 
training and those individuals learned so much from this 
exercise.
    Senator Bond. Under real conditions.
    Mr. Allbaugh. That makes a vast amount of difference as 
opposed to a table top exercise in a classroom, or even 
exercises that they may do in their own community. It is a 
vital asset to take advantage of what you have at Fort 
McClellan and at the Nevada test site.
    Senator Bond. Thank you, Madam Chair.
    Senator Mikulski. All right. I see Senator Domenici.

                     FIRST RESPONDER GRANT PROGRAM

    Senator Domenici. Could we talk a minute about first 
responders.
    Mr. Allbaugh. I will do my best.
    Senator Domenici. First responders are statutory and they 
are created by law. As I understand it, what you wanted to do, 
I do not have any feelings as to whether I favor it or do not. 
I would assume that for consolidation purposes if nothing else 
that I will. But as I understand it, this activity by our 
Federal Government has been shifted from one place to another 
over the last three or 4 years. It is very hard at this point 
to decide who really has jurisdiction. I think it is the 
Justice Department. I am not sure. Have you been told that to 
do the consolidating that you desire you are going to have to 
pass a statute permitting this First Responder training?
    Mr. Allbaugh. What I understand, Senator, is that for the 
most part under the fire act we really have broad authority to 
implement and operate these programs, but we are working with 
our authorizing committees in both houses with language that 
OMB has brought forth to further clarify the authorization that 
some individuals believe that we need to have. And we will 
continue to do that.
    Senator Domenici. Under the First Responder program that 
the Appropriations Committee finally put into effect through 
the great efforts of Senator Judd Gregg who worked for a year 
and a half, as I understand it, that program has been used in 
128 cities of America to bring the responders together 
programmatically and they worked together, the fire department, 
the police department, the doctors in the town, the hospitals 
and they prepared a so-called preparedness First Responder 
plan. Now, that whole effort is going to change and be under 
FEMA?
    Mr. Allbaugh. I wouldn't say it is going to change. I think 
we will merge the two programs and it will be a stronger 
program at the end of the day. We do that with the rest of the 
communities across the country right now to the best of our 
ability along with the States.
    Senator Domenici. Well, I think it ought to be in one place 
and if we can get it in your shop, I am all for it, count me as 
one at this point from what you have told me we ought to do 
something like that. There is no reason to have it in three 
places.
    Mr. Allbaugh. I commend Senators Shelby and Gregg and 
Hollings. They were caring about this program long before 
others did. It was shopped around and it was, ended up in 
Justice and probably, in my opinion based upon what my 15-month 
exposure has been at FEMA, it should have been in FEMA all 
along.
    Senator Domenici. Actually that is a statute prepared by 
Senators Lugar, Nunn and myself. We left it up to the President 
as to the whole program and where it would be headquartered. We 
thought it would be best as part of a national security effort 
with the country but nobody wanted it and he did not want to 
push too hard so maybe we could make it work in a consolidated 
matter.
    Mr. Allbaugh. It is a high priority for this President, as 
all of you know.

                       FIRE MANAGEMENT ASSISTANCE

    Senator Domenici. One last question has to do with forest 
fires. Actually it hardly seems realistic that the fire season 
is back upon us, but--for forest fires, but it is. And New 
Mexico is currently in a drought State, which you know from 
going out there, and on top of that, we had already some major 
fires. We now have a fire management assistant system 
assistance grant program. We did not have that before, and it 
is kind of a program that is born out of frustration that there 
weren't any adequate assistance grants for drought areas that 
had forest fires.
    Could you explain to the subcommittee what authorities you 
have and how you are responding to wildfire forest fire 
emergencies now?
    Mr. Allbaugh. Yes, sir. I have learned also in that 15-
month period that many of the programs that we now have, have 
been born out of frustration with the inability to respond 
immediately, which is why FEMA exists to begin with.
    Senator Domenici. That's right.
    Mr. Allbaugh. Fire Management Assistance Program is a 
wonderful program that gives us real time ability to respond to 
a States request when life and property are in danger. We turn 
this around within a 24-hour process. It is a verbal 
communication. We have done five in the last 3 days. We have 
three or four in New Mexico, a couple in Colorado that we 
utilized. It is a successful program and the greatest benefit 
of this program quite frankly, most of these small communities 
worry about how they are going to pay for a fire that could get 
out of control. We removed that responsibility right at the 
outset, that way they can focus on putting out the fire when 
they need to do it and utilizing the assets they need to and to 
the State it is a 75/25 match program.
    It is a very successful program and unfortunately, as you 
pointed out we will probably use this program quite a bit this 
year. We are suffering a drought all over the United States and 
fires tend to start in the South but later on in the year and 
move North, Northwest and I remember vividly using a couple of 
fire management grants in January and February of that year, 
which is basically unheard of. It is going to be a tough year, 
but it is a successful program and I appreciate your support 
for the program.
    Senator Domenici. I just wondered since every one knew that 
was going to be a tough year, was there an extra amount of 
money asked for in the President's budget because of this, it 
was pretty obvious we would all predict you would have a heavy 
load in this area. Do you remember whether there was any extra 
money?
    Mr. Allbaugh. This comes out of our disaster relief fund. I 
don't remember if we asked for extra money. It is treated as 
part of a whole. I know that Congress will always make sure we 
have enough money in the disaster relief fund to do what we 
need to do.
    Senator Domenici. Thank you.

                             FLOOD MAPPING

    Senator Mikulski. The time is growing short and we have so 
many questions. I am going to submit for the record my 
questions on flood insurance reforms, as well as the very 
important need for mapping because I feel that so much of our 
communities are hit by flooding that really flood mapping would 
go a long way to maximizing resources for hazard mitigation. In 
fact, that was the flooding in Senator Bond's State and my own.

                             CITIZENS CORPS

    I really need to ask some questions about the Citizen Corps 
initiative. First of all, we support President Bush's effort 
for renewed and reinvigorated sense of volunteerism and the 
concept behind freedom Corps but the Citizen Corps is something 
that I have questions about whether not the need to volunteer, 
but the need for FEMA to be in charge of a volunteer effort.
    Looking at the President's request, he is talking about, 
for example, five programs under FEMA, one would be what you 
are doing already, the CERT program. You spoke about that. But 
then there are three Department of Justice programs, volunteers 
in police service, a neighborhood watch program and something 
called TIPS, terrorist information and prevention. Why FEMA 
would be involved in that I do not know. Then there is the 
Medical Reserve Corps, $10 million which I think would be a new 
program which I think offers tremendous potential. Why you and 
not HHS that interacts with the timing they have this excellent 
office of bioterrorism that my own former head of the school of 
public health Dr. Henderson was involved in.
    I am concerned that we are going into a corps du jour with 
a lot of new corps and then second, others that are just not 
connected to FEMA where a CERT definitely is. I see volunteers 
in disasters even in La Plata for many nights showed up really 
to help with building, women who had heard that a senior 
citizen in the hospital lost her wedding band and some key 
things and over 30 women showed up to dig to help her find her 
treasures. You know what, they found it. They found her wedding 
ring of over 60 years. This is terrific.
    But at the same time why would you be involved in terrorist 
information tips. What do you have to do with the Neighborhood 
Watch Program? And I will tell you, the volunteer firefighters 
are prickly about this because they feel they are the 
volunteers and last year we were foraging for funds to put 
money in the fire program. So we have got $360 million, we have 
a request here for $230 million more than we put in fire grants 
so you see where we are headed here?
    Mr. Allbaugh. I sure do.
    Senator Mikulski. We want to encourage volunteerism, to 
have them really help you in response to any disasters, but I 
think we are not so sure the Citizen Corps is the way to go. 
Could you tell us about this?
    Mr. Allbaugh. The best logic I can offer is one that makes 
sense is that we do well in coordinating other activities at 
Federal agencies when there is any type of response mechanism 
required. We have a great relationship with all of these 
agencies you mentioned, and I believe the President, what he 
had in mind was one of a coordinating role. Except for Citizen 
Corps. There we have the ability to specifically offer 
technical assistance.
    I know it is a concern of members of the committee that it 
detracts from our obligations day-to-day. Thus far from what I 
have seen there has been no inability to provide those 
services. Quite frankly, it occupies a few individuals, their 
time on a regular basis, but it is not something that will ever 
detract from our core responsibilities responding to man-made 
or natural disasters. That is probably about the best logic on 
the coordination of those other programs that I can offer you 
at this time, Senator.
    Senator Mikulski. Let me conclude. First of all, you have 
got the CERT program. And there is a request in that, there is 
a line item for $61 million. We absolutely want to help you 
with CERT but let me ask, are you going to own and operate the 
Medical Reserve Corps?
    Mr. Allbaugh. No, ma'am. That will be at HHS.
    Senator Mikulski. I apologize. Are you going to own and 
operate that?
    Mr. Allbaugh. That will be under coordination.
    Senator Mikulski. Same with the Neighborhood Watch Program?
    Mr. Allbaugh. Correct.
    Senator Mikulski. Same with the police search program?
    Mr. Allbaugh. Yes, ma'am.
    Senator Mikulski. How do you coordinate it, and why does it 
mean anything to FEMA? Particularly with the watch program and 
TIPS program. The Medical Reserve, of course, is very 
important.
    Mr. Allbaugh. I think there is an advantage to be in a 
coordinating role because of our relationships with State and 
local officials already. We are just trying to capitalize to 
make sure that everyone knows what is going on. It is not that 
we are going to be running those programs. It is more one of 
awareness than anything else.
    Senator Mikulski. Well, I do not know. I do not know. But I 
do know that some of the programs have been outstanding. The 
CERTS program. We really do applaud the Medical Reserve Corps. 
Those are the programs that we respond to. But Neighborhood 
Watch and TIPS. I am not sure. I will yield now to Senator 
Bond.

                          FIRE FIGHTER GRANTS

    Senator Bond. Thank you very much, Madam Chair. I want to 
say thanks and amen to a couple of things. Number one, the fire 
grant program, the firefighters in my State is I think as in 
all States really believe strongly in the peer review process 
and we are delighted to understand where you are coming from, 
and whatever your position was, I think we could say that 
Congress was probably going to keep that fire grant program 
administered by fire professionals.

                      CITIZEN CORPS AND VOLUNTEERS

    Second, I concur 100 percent with the chair on the Citizen 
Corps. I admit having daily conversations with my good friend 
John Ridgeland. I have a minimum amount of high enthusiasm for 
adding that responsibility of coordinating those programs to 
people. We have gone down a whole list of things that you have 
to do and we are going to give you more and you have got, you 
have got every kind of crisis to handle and if you think that 
with just a few individuals and taking away very little time 
from your other responsibilities, you could coordinate large 
groups of volunteers, you have not had the same experience with 
volunteers I have.
    We have traditionally had the best volunteer organization 
when it comes to politics in the State of Missouri. We have a 
dynamite volunteer organization, but if you do not have a good 
professional staff running it, they are going to run into each 
other, run over each other, get you in trouble and absolutely 
drive you nuts. Volunteers well managed are the greatest 
resource we have. I think we have got something called National 
Service Corps, which has been in the business of dealing with 
volunteers. I'd like to see them use their people, their 
recipients as wholesale coordinators. We will have, we will 
continue that discussion later, but I just, I like the 
President's idea. I think it is great. I just think that you 
have got more than you can shake a stick at and you do not need 
to put a new volunteer coordinator hat on.
    Mr. Allbaugh. Senator, thank you for your comments on the 
fire grant program. And one of the reasons I feel so strongly 
about the fire grant program is that for years and years 
firefighters have always been the first in line for budget cuts 
and the last in line for recognition and for the first time in 
a very long time Congress has recognized the need, Congress has 
stepped up to the plate to devise a very successful program and 
we are doing a good job of implementing it, and I thank you for 
your support.

                     FLOOD INSURANCE PARTICIPATION

    Senator Bond. I have just got two quick questions 
remaining. They are not brief ones and you may want to submit 
more for the record. The first is what can we do about the poor 
participation in the flood insurance program? I have seen ads. 
This thing, this thing requires more people involved. We are 
not getting involved in it. And really what can we do? How can 
we get more people?
    Mr. Allbaugh. I would like to respond because it does take 
an elaborate answer that is pretty lengthy to solve this. There 
are ways to improve it. I think we have taken some concrete 
steps just recently with Bob and hopefully today Anthony Lowe 
is having his hearing as new Federal Insurance Administrator. 
We will have him on board. That will be a tremendous step.

                 PREVENTION AND CONSEQUENCE MANAGEMENT

    Senator Bond. The final one I will pass along to my 
colleagues. We are, I believe very strongly that FEMA should 
handle the consequence management in any kind of homeland 
security emergency. I think that is very clear that is what you 
do. That is what you ought to focus on. The question is how do 
we draw the line between prevention and consequence management 
and that is I think that is going to be a lengthy discussion. 
We have already raised a lot of troubling questions and we 
would like to be able to discuss with you and that your 
thoughts on how we draw that line.
    Mr. Allbaugh. I would be happy to do that, Senator. We have 
had great conversations about this. I would point out to the 
members here that we may have stumbled into a process and a 
template that works in the future, and by that I mean the setup 
between the Secret Service, the FBI, and FEMA that we utilized 
at the Super Bowl this past year and the Olympics that took 
place. It was a relationship. It was a partnership that 
absolutely worked when it comes to delineating those lines of 
responsibility between crisis and consequence and response. I 
think it is something that we can look to to talk about in the 
future.
    Senator Bond. Thank you very much.
    Senator Mikulski. Senator Shelby.

                    FIRST RESPONDER TRAINING BUDGETS

    Senator Shelby. Mr. Director, you might want to, submit 
this answer for the record, and I hope you will. Could you 
please explain to the subcommittee the budget request for the 
existing consortium members, specifically, how much money FEMA 
proposed to spend on each of the consortium members and how 
those programs will expand or contract in light of the new 
focus on First Responder training?
    Mr. Allbaugh. It is a great question. I would like to 
respond for the record. I'd like to do a little research. I 
know a little bit about it, but I would respond for the record.
    Senator Shelby. Thank you for your appearance today.
    Mr. Allbaugh. Thank you.

                            CONCERN FOR FEMA

    Senator Mikulski. Well, thank you very much, Mr. Allbaugh. 
I think the number of Senators that appeared, the length of 
questions shows our concern of course, like yours and the 
President's for the Nation and we do look forward to working 
with you and making sure that FEMA has the right sources as 
well as the right framework to respond. We look forward to 
seeing you again and we look forward also in seeing you take a 
tour of southern Maryland and also for the excellent 
responsibilities that you have assigned to the Fire Academy in 
Emmitsburg. So again, 50 disasters, an aerial attack on the 
United States. You and your team have had a lot on your plate.

                     ADDITIONAL COMMITTEE QUESTIONS

    We would like to thank you for really all that you have 
done and know that you and your team are not alone.
    Mr. Allbaugh. Thank you very much.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

            Questions Submitted by Senator Patrick J. Leahy

    Question. Director Allbaugh, I am very happy to see the proposal to 
add $300 million for FEMA's flood map modernization initiative. Many 
town and regional planners in Vermont do not have updated maps, so it 
is difficult to know exactly what areas might be affected by different 
rain or run-off levels. I am concerned, though, that a small State like 
Vermont will not receive adequate funding from the program, either 
because it lacks the matching funding or because funds might be 
distributed in a manner that favors more urban areas. Can you please 
tell me exactly how FEMA plans to distribute this funding? Do you see 
the need for Congress to include strong small-State minimums when it 
authorizes the modernization program?
    Answer. It is important to note that FEMA's Map Modernization Plan, 
if funded and implemented as planned, will result in the issuance of 
modernized flood hazard mapping for all States and territories, 
regardless of size. The plan requires funding in fiscal year 2003 and 
the two subsequent fiscal years to accomplish this.
    Over the past several months, FEMA has been working with the States 
and territories to develop statewide mapping plans to accomplish the 
remapping effort. These plans call for remapping work to commence in 
all fifty States in fiscal year 2003. Accordingly, FEMA sees no need 
for Congress to include strong small-State minimums when it authorizes 
the modernization program.
    Question. Director Allbaugh, I am very concerned about proposed 
reductions to the Hazard Mitigation Grant Program, otherwise known as 
404 mitigation funds. This funding allows communities to reduce 
potential repeats of disasters, permitting such sensible moves as 
buying out homes located in floodplains. This program needs 
improvements, especially in disbursing funds more quickly and fairly to 
small States. Yet it will save lives and reduce disaster costs over the 
long-term. Don't you think it would have been more effective to make 
changes to the program, including adding in very strong small-State 
minimum funding levels, than to request a total elimination of the 
program?
    Answer. The President's 2003 Budget did not propose a reduction in 
funding for FEMA mitigation programs overall. In general, the Hazard 
Mitigation Grant Program has been a flexible and effective tool for 
States and communities to accomplish mitigation priorities in the 
aftermath of a disaster, while at the same time assisting residents 
affected by the disaster. However, because the funds are tied to 
specific disaster events, implementation of long-range mitigation 
priorities established through a comprehensive planning process at the 
State and local community level is sometimes difficult to achieve. 
Therefore, I believe that some combination of both pre and post-
disaster mitigation is worth considering.
                                 ______
                                 

           Questions Submitted by Senator Christopher S. Bond

                               hmgp plans
    Question. HMGP permits States to receive an increased amount of 
HMGP's funding from 15 percent to 20 percent of the disaster funds if 
the State has an approved State Hazard Mitigation Plan. This plan would 
ensure that HMPG funds are used for important and comprehensive 
mitigation efforts. How many States have these plans in effect and what 
is FEMA doing to ensure that States develop these plans.
    Answer. The Disaster Mitigation Act of 2000 (DMA) amended the 
Stafford Act by adding Section 322 on Mitigation Planning. FEMA's new 
planning regulation, 44 CFR Part 201, Hazard Mitigation Planning, which 
was published as an Interim Final Rule in the Federal Register on 
February 26, 2002, establishes new criteria for State and local hazard 
mitigation planning consistent with the requirements of Sec. 322. The 
deadline for approval of State and local mitigation plans as a 
condition of receiving Hazard Mitigation Grant Program (HMGP) grants 
will be November 1, 2004. A November 1, 2003 deadline for plans has 
been set as a condition for local governments to receive Pre-Disaster 
Mitigation (PDM) grants (authorized by Section 203 of the Stafford Act, 
as amended by the DMA) for ``brick and mortar'' mitigation projects. 
The Interim Final Rule:
  --Continues the requirement for State mitigation planning as a 
        condition of disaster assistance (which allows a State, tribal 
        or local government to receive HMGP funding based on 15 percent 
        of the total estimated eligible Stafford Act assistance), and;
  --Provides incentive for strengthening mitigation programs by 
        establishing criteria for States to receive increased (20 
        percent) HMGP funding if, at the time of the declaration of a 
        major disaster, they have an enhanced mitigation plan in place;
  --Establishes a new requirement for local mitigation plans as part of 
        the HMGP, which will be phased in; and
  --Allows States to use up to 7 percent of HMGP funds for the 
        development of State, Tribal, and local mitigation plans. This 
        provision has been in effect for all disasters declared after 
        October 30, 2000.
    The new planning initiative provides a framework for linking pre- 
and post-disaster mitigation planning and initiatives with public and 
private interests to ensure a comprehensive approach to disaster loss 
reduction. Such decision-making, based on sound understanding of 
vulnerability to hazards and appropriate mitigation measures, is the 
best indicator of a successful mitigation strategy that can be 
sustained over the long-term.
    Because meaningful, effective mitigation planning takes both time 
and resources, FEMA established the 2003 and 2004 deadlines to give 
States, tribal and local governments sufficient time to understand the 
intent and scope of the requirements, and to undertake the planning 
process that will meet those requirements. It is in the States' 
interest to submit and have approved an Enhanced Mitigation Plan as 
soon as possible. Although no States have yet met the requirements for 
an Enhanced Plan, several States have submitted plans to their FEMA 
regional offices to get feedback on what it will take to upgrade them 
to the Enhanced level, so we know that work is underway to develop 
these plans.
    FEMA has undertaken an aggressive technical assistance effort to 
ensure that States develop plans that meet the Standard Plan 
requirements at a minimum, and to go beyond those to meet the Enhanced 
Plan requirements as well. Technical assistance is also being provided 
to support local and tribal governments efforts to meet the new plan 
requirements.
    Shortly after publication of the Interim Final Rule, FEMA conducted 
mitigation planning workshops in all 10 FEMA Regional Offices for 
Regional and State mitigation staff, to provide a detailed orientation 
on the planning provisions of the DMA and requirements of the Interim 
Final Rule. In addition to training on the requirements of local plans 
and Standard and Enhanced State Mitigation plans, the workshops 
included an opportunity for each State, in close coordination with the 
FEMA regional office staff, to begin developing its approach to meeting 
the requirements for the Enhanced Plan.
    Each workshop also explained and provided copies of planning 
technical assistance tools developed by FEMA to assist State and local 
governments in undertaking a meaningful mitigation planning process 
that will meet the requirements of the DMA. These materials include 
Mitigation Plan Guidance and Evaluation Criteria, a ``canned'' workshop 
for local mitigation planning that each State may use ``as is,'' or 
adapt as it chooses, a series of ``How-To'' Guides for Mitigation 
Planning, and numerous other publications, courses, etc.
    In fiscal year 2002, FEMA awarded PDM grants to every State as well 
as the District of Columbia, the U.S. Virgin Islands, the Commonwealth 
of Puerto Rico, American Samoa and the Commonwealth of the Northern 
Mariana Islands. FEMA placed an emphasis on mitigation planning in 
fiscal year 2002 in order to position States and local governments to 
meet the new criteria for State and local hazard mitigation plans. Most 
States have chosen to use fiscal year 2002 PDM funds to support 
planning and risk assessment for local governments. In addition, we 
awarded 18 PDM grants directly to Indian tribal governments for hazard 
identification and risk assessment, comprehensive multi-hazard 
mitigation planning, and public education and outreach.
    The mitigation planning process begun at the Regional workshops 
held in March and April, 2002 envisioned continual two-way 
communication between States and their respective FEMA Regional Offices 
to facilitate the development of effective mitigation plans that will 
meet the new requirements. We know from our Regional Offices that this 
process is, in fact, occurring. Further, FEMA Regional and Headquarters 
staff are also taking every possible opportunity to speak at national, 
regional and State-level conferences and meetings held by professional 
associations, States, etc., to discuss the mitigation planning process 
and the new requirements, and disseminate our technical assistance 
materials. FEMA is providing materials in both traditional hard copy, 
as well as on CD-ROM, and posting them on our website.
    FEMA is confident that all States will have an approved Standard 
Plan in place by the November 1, 2004 deadline, and that several States 
will have approved Enhanced Plans by then, if not sooner.
                  goals for assisting disaster victims
    Question. Per the Budget, the Administration has set a goal of 
meeting the needs of disaster victims for shelter, food and water 
within 12 hours after the President declares a major disaster. What has 
FEMA done to meet this goal?
    Answer. Mission assignments are one tool that FEMA uses to meet 
requests for Federal assistance. When a State lacks the capability to 
perform or to contract for eligible emergency work, FEMA may issue 
direct Federal assistance (DFA) mission assignments to provide 
essential assistance for eliminating an immediate threat to life and 
property resulting from a major disaster or emergency. FEMA has been 
working with the U.S. Army Corps of Engineers to develop pre-scripted 
statements of work (SOWs) under FEMA issued mission assignments. These 
pre-scripted SOWs are intended to expedite the mission assignment 
process and provide the needed assistance quickly and effectively. When 
mission assignments are required, it is anticipated they will be issued 
from the Regional Operations Center and/or the Disaster Field Office.
    FEMA has also improved its ability to preposition essential 
supplies and equipment in affected States and has accelerated the 
establishment of FEMA's field infrastructure, including disaster field 
offices and disaster recovery centers.
                       fema disaster relief fund
    Question. Outside of the available FEMA Disaster Relief funds for 
New York City, how much Disaster Relief funding is available for the 
rest of the Nation for fiscal year 2002? Are these funds consistent 
with the 5-year rolling average that FEMA uses to assess its needs for 
disaster assistance?
    Answer. Outside of the set-aside for the Inspector General and the 
funding provided as a result of the September 11 terrorist attacks, 
there was approximately $2.7 billion available for other disasters in 
2002. Fortunately, 2002 was a less than normal year in disaster 
activity with no disasters that exceeded $500 million in projected 
costs.
                                buyouts
    Question. As you know, former FEMA Director Witt was a big 
supporter of buyouts of properties in the floodplain. Unfortunately, 
despite massive dollars provided by Congress for buyouts, FEMA still 
does not have a coordinated cohesive buyout program with clear rules 
and procedures. What is your view about the role of Federal buyouts in 
terms of a national mitigation plan?
    Answer. FEMA's Mitigation grant programs generally operate 
successfully as flexible and effective tools for States and communities 
to accomplish mitigation priorities, including buyouts. In fact, these 
programs have become an integral part of the overall recovery process. 
Many States across the nation have successfully used buyouts to move 
homes and businesses out of harm's way. As many as 24,000 properties 
have been purchased nationally as part of this program since 1993. In 
many of those cases, the land left behind has been flooded again. 
Without a buyout, those homes and families would have suffered once 
more.
    To the extent allowable, given differences in the authorizing 
statutes, FEMA guidance on buyouts for all funding sources is 
consolidated and consistent. Our guidance provides adequate flexibility 
to States and local communities to plan and implement the best project 
to meet their unique situations and needs.
    FEMA continues to evaluate the implementation of buyouts in order 
to strengthen our ongoing program. During fiscal year 2002, FEMA 
entered into a cooperative agreement with the University of North 
Carolina to conduct a study on the Impact of Property Acquisition 
Programs on Participating Communities. The purpose of this research is 
to conduct a national study that focuses on the process of conducting 
buyout programs as well as an evaluation of outcomes of these programs. 
The research focuses on examining the structure of buyout programs and 
their impact on individual decision-making. The study will provide FEMA 
with useful information to evaluate existing practices in the property 
acquisition program, and to identify steps to strengthen coordination 
and collaboration with other Federal programs, such as the National 
Flood Insurance Program (NFIP) and the Small Business Administration 
(SBA) in order to better assist households and communities affected by 
disaster events.
    In addition, FEMA's believes that effective coordination and 
planning at the local, Tribal, State and Federal Government levels, as 
well as the coordination of pre- and post-disaster mitigation funding 
opportunities, is essential to achieving mitigation goals and the 
prevention of disaster losses. FEMA's new planning regulation, 44 CFR 
Part 201, Hazard Mitigation Planning, establishes new criteria for 
State and local hazard mitigation planning, carrying out the 
authorities provided by Congress in the Disaster Mitigation Act of 
2000. With this emphasis on mitigation planning, many communities will 
be better positioned to develop proposals for cost-effective mitigation 
projects and activities, including buyouts, and to link pre-and post-
disaster mitigation planning and initiatives with public and private 
interests to ensure a comprehensive approach to disaster loss 
reduction. Such decision-making, based on sound understanding of 
vulnerability to hazards and appropriate mitigation measures, is the 
best indicator of a successful mitigation strategy that can be 
sustained over the long-term.
    In fiscal year 2003, FEMA expects to publish a proposed regulation 
that will amend the existing regulations for HMGP. The proposed rule 
revises the existing regulations to implement amendments to the 
Stafford Act that provide for delegating the administration and 
management of the HMGP to States. FEMA is taking this opportunity to 
amend the existing regulations to clarify implementing procedures for 
buyout projects and open space maintenance, to more fully reflect 
program and grants management practices previously detailed in 
guidance, to strengthen the use of cost-effectiveness in prioritizing 
and selecting projects at the State level, and to make the rule more 
reader-friendly.
                      cerro grande fire assistance
    Question. On May 4, 2000, the National Park Service initiated a 
prescribed burn that exceeded the containment capabilities and 
destroyed a significant amount of New Mexico. In response, the Congress 
appropriated $455 million through the Cerro Grande Fire Assistance Act 
to compensate residents for losses from the Cerro Grande fire. What is 
the status of this program? I also would like to understand what 
accountability requirements were put in place to ensure that any 
payments were consistent with losses.
    Answer. Earlier this year, FEMA notified Congress of a projected 
$80 million funding shortfall. In July, $61 million of the projected 
$80 million shortfall was included in a $20 billion supplemental 
appropriations bill passed by Congress. This $80 million was included 
in the $5.1 billion in non-emergency funding contained in the 
supplemental appropriation and, as a result, was not funded. Without an 
additional appropriation, FEMA will run out of claims money early in 
fiscal year 2003 before all valid claims are paid. Consistent with the 
priority provisions of the Cerro Grande Fire Assistance Act, FEMA has 
not paid any of the subrogation claims, which are estimated to total 
around $104 million.
    FEMA plans to prioritize payments within the remaining 
appropriation pending receipt of additional funding. FEMA will use the 
following order of priority in paying claims: individual claimants, 
business claimants, claimants awarded compensation during the 
administrative appeal process, claimants awarded compensation in an 
arbitration decision, claimants seeking individual mitigation measures 
and lastly, insurance subrogation claimants. If insufficient funds 
remain to pay claims, FEMA will notify claimants with valid claims that 
the claim will be paid pending the appropriation of additional funding.
    The deadline to receive all claims except those seeking mitigation 
assistance passed on August 28, 2002. Now that the final date to submit 
most claims has passed and the universe of claims is known, FEMA 
estimates that as of September 17, 2002, an additional $150 million 
plus $5 million in administrative costs will be needed to complete the 
program.
    Initial claim evaluation and approval is now nearly completed, and 
the program is beginning to transition the remaining files to FEMA's 
National Processing Service Center in Denton, Texas. As FEMA brings the 
initial claim process to a conclusion, however, claimants who are 
dissatisfied with the award continue to pursue the internal appeal 
process implemented by regulation that serves as the preliminary to 
statutorily-mandated arbitration. FEMA anticipates that the appeals and 
arbitrations procedures will not be completed for most claims until 
well into 2003 and for claims for mitigation assistance through 2004.
    FEMA has implemented procedures to ensure that payments from the 
Cerro Grande Fire fund are consistent with losses suffered in the fire. 
First, the Agency prepared policy guidelines that deal with the most 
common types of losses and provide guidance on the appropriate 
methodology to document, analyze and pay each claim. To ensure 
consistency and accountability, each claim is processed by a minimum of 
four people: (1) a thorough review is made by claims reviewers who make 
an initial payment recommendation; (2) the recommendation is reviewed 
and approved by a supervisor; (3) an authorized official then 
independently reviews the claim on the merit of the documentation 
provided and either approves or reduces the recommended amount; and (4) 
a comptroller signs the payment schedule.
    Computer systems and a mandatory review help us to identify and 
avoid duplicating benefits from insurance companies or other aid 
providers. FEMA's Office of the General Counsel provides periodic legal 
review of the policies and procedures to ensure that our determinations 
are consistent with New Mexico law. An experienced private contracting 
firm with expertise in evaluating medical records and personal injury 
claims reviews the bodily injury claims and assists us in determining 
whether an injury was caused or aggravated by the fire and in setting a 
fair amount of compensation consistent with similar claims paid 
elsewhere in New Mexico.
                new york city 9/11 losses from terrorism
    Question. What steps has FEMA put in place to ensure that fraud and 
abuse with regard to FEMA disaster assistance funds are minimized?
    Answer. Under the direction of FEMA's Inspector General, George 
Opfer, the Office of Inspector General at FEMA became proactively 
involved within a week after the September 11 attack. Both auditors and 
investigators were dispatched to New York and have remained on site 
since that time actively auditing and investigating allegations or 
complaints of fraud, waste and abuse involving the FEMA programs. They 
provided fraud awareness and financial accountability briefings to 
FEMA, State, and City disaster personnel. They created a permanent 
satellite office in New York and staffed it with five full-time 
employees. In addition, they continue to rotate five to six temporary 
disaster assistance employees to the Disaster Field Office on a regular 
basis. They are currently auditing the City's major debris removal 
contracts and working criminal investigations with the Manhattan 
District Attorney's Office, the Southern and Eastern Districts of the 
United States Attorney's Offices, and the State of New York Attorney 
General's Office. The OIG's investigative cases are being coordinated 
with the New York Police Department, Port Authority Police Department, 
New York Department of Investigations, Small Business Administration 
OIG, Internal Revenue Service Criminal Investigation Division, General 
Services Administration OIG, Social Security Administration OIG, and 
others. Following are their investigative statistics as of September 
30, 2002:

Information/Indictment............................................    61
Arrests...........................................................    60
Open Complaints...................................................    91
Closed Complaints.................................................   619
Open Investigations...............................................   104
Closed Investigations.............................................    24
                        flood map modernization
    Question. FEMA's Budget Request for fiscal year 2003 includes $300 
million for flood map modernization as well as $51 million derived from 
flood insurance premium fees. This must be a priority since flooding 
causes some $6 billion annually. Unfortunately, 63 percent of the flood 
maps are more than 10 years old and some 38 percent are more than 15 
years old. How much are the overall costs to improve or replace the old 
and inaccurate maps? Does FEMA have any estimate for savings once all 
flood maps are modernized? How does the flood map modernization program 
work with the Flood Insurance program?
    Answer. Funding levels of $300 million in new monies (over and 
above $51 million derived from flood insurance premium fees through the 
National Flood Insurance Program) in fiscal year 2003 and the two out 
years are planned to fund the Map Modernization Program. Program costs 
will be evaluated and refined as scoping meetings are held with the 
individual communities to be mapped, and community needs are factored 
into the mapping process.
    The following chart illustrates that that modernized flood mapping 
for the Nation will help avoid an estimated $45 billion in flood 
damages to new buildings and infrastructure over a 50-year period. 


    The modernized flood maps will serve as the actuarial and 
floodplain management bases of the National Flood Insurance Program. 
Moreover, the digital form of the flood mapping will facilitate policy 
rating by insurance agents, enhanced floodplain management by 
communities, and more accurate determinations by banks of whether a 
structure must be protected by flood insurance.
                        flood insurance program
    Question. FEMA is recommending that the Flood Insurance program be 
reformed to, among other things, (1) phase-out the pre-firm taxpayer 
subsidy on second homes, vacation properties and rental properties; and 
(2) include the expected costs of coastal erosion in the premiums for 
policies in coastal areas. I assume that these changes need 
legislation. Are you working with the appropriate authorization 
committees?
    Answer. Yes, legislative changes will be needed in order to bring 
about these proposals. FEMA has briefed key staff on the appropriate 
subcommittees of both the Senate Committee on Banking, Housing and 
Urban Affairs and the House Committee on Financial Services, on the 
legislative changes needed for these proposals.
    Question. The Flood Insurance program is not actuarially sound. 
What does this program owe on its Treasury line of credit? What other 
steps can FEMA take to make this program actuarially sound?
    Answer. Although the NFIP is not actuarially sound in the 
traditional sense the term is used of charging full actuarial rates for 
all coverage, NFIP enabling legislation authorizes the charging of 
actuarial rates only for structures that are newly constructed after 
being provided with detailed flood risk information by FEMA. At the 
same time, such legislation has required the charging of highly 
subsidized rates for older, existing structures in Special Flood Hazard 
Areas. In the aggregate, NFIP premium levels are sufficient to pay 
losses associated with the average NFIP historical loss year.
    In addition to the proposal contained in FEMA's portion of the 
President's fiscal year 2003 budget, to phase out the pre-FIRM taxpayer 
subsidy on second homes, vacation property and rental property, as 
mentioned above, FEMA engages in a number of activities that assist in 
making the program more actuarially or financially sound. FEMA 
continues to review its annual and historic loss experience to 
determine and make annual adjustments to NFIP rates, as needed, and 
within the limitations contained within the NFIP's enabling 
legislation. At this point in time, more than 70 percent of NFIP 
policyholders are charged premiums that are considered to be full-risk 
premiums. Annual review and adjustment maintains the integrity of these 
rates. Slower progress is being made in reducing the levels of program 
subsidy by gradual rate changes for older construction.
    FEMA also continually promotes sound floodplain risk management 
among State and local governments to minimize the risk of flooding to 
new structures, which lowers their flood risk exposure and related loss 
potential. FEMA estimates that these efforts result in reduced damages 
by about $1 billion each year.
    Finally, FEMA further promotes sound floodplain risk management by 
aggressively administering the Flood Mitigation Assistance and Hazard 
Mitigation Grant Programs, encouraging State and local governments to 
take definitive flood loss reduction actions to properties at risk. 
Marketing the NFIP Community Rating System and providing technical 
assistance to local communities also promotes loss reduction which 
contributes to a more actuarially sound program.
    Question. FEMA has a poor record of getting homeowners to 
participate in the Flood Insurance program. What is the current rate of 
participation? How does this compare over the last 4 years and what is 
FEMA doing to ensure increased participation?
    Answer. As of July 31, 2002, the NFIP has 4,370,066 policyholders 
with over $617 billion of insurance coverage in force. Participation in 
the NFIP varies around the country. In areas without recent flood 
threats or with low mortgage activity, it can be particularly low. On 
the other hand, market penetration in much of the Southeast and States 
bordering the Atlantic and the Gulf of Mexico is relatively high.
    As an example of the result of that market penetration, in 2001 the 
NFIP paid over $1.1 billion in claims to more than 30,000 flood 
insurance policyholders in Texas and Louisiana after Tropical Storm 
Allison--the NFIP's biggest payout to date. Tropical Storm Isidore 
struck in September 2002 and is projected to result in 9,200 claims 
from policyholders in Louisiana, Mississippi, Alabama, Florida and 
Texas. Hurricane Lili affected many of the same Louisiana and 
Mississippi policyholders in October 2002, with 3,000 claims projected.
    Total flood insurance policies in force over the last four calendar 
years are as follows:
        Calendar Year                                  Policies in Force
2001.......................................................... 4,476,836
2000.......................................................... 4,369,087
1999.......................................................... 4,329,985
1998.......................................................... 4,235,138

    In fiscal year 2001, through the work of our stakeholders, new 
business increased nearly 15 percent with the addition of 630,944 new 
policies to the National Flood Insurance Program's (NFIP's) books. 
These gains in flood insurance policies, however, were offset by 
attrition (552,783 policies) from the previous year's total number of 
policies in force. While a certain degree of policyholder non-renewal 
has to be expected, we recognize that to improve overall NFIP 
participation we must not only continue to attract new business, but 
also boost the retention of current policyholders. Therefore, we have 
initiated a number of strategies and tactics to improve policy 
retention, both from a mandatory and a voluntary purchase perspective.
    FEMA will be working to reinvigorate its marketing and advertising 
campaign. FEMA will be developing a fresh campaign with a paramount 
objective of increasing the number of NFIP policies. This new national 
marketing and advertising campaign will be grounded in effective risk 
communication principles and practice. In this way the campaign will 
address one of the major obstacles to flood insurance purchase, the 
lack of perception of risk. It is expected that the campaign will 
effectively convince consumers of their vulnerability to flood damage 
and the value of buying and retaining flood insurance protection. 
Retention has been identified as a key issue.
    FEMA does not have oversight authority for lending institutions. 
Nevertheless, we foster lender compliance with mandatory purchase 
provisions by conducting lender training seminars across the country, 
developing guidance materials for lenders both in hard copy and 
electronically via our website, and by maintaining regular 
communication with Federal lending regulators, Government Sponsored 
Enterprises (GSE's), and the lending community.
    Recent analyses indicate that lenders may be correctly requiring 
the purchase of flood insurance as a condition of mortgage loan 
origination. We believe, based on policy attrition rates for the past 
several years and other data, that enough borrowers may not be 
maintaining flood insurance throughout the term of the loan, as 
required by law, to have a significant impact on our policy retention. 
GAO issued a June 2002 report on this issue, ``Flood Insurance: Extent 
of Noncompliance with Purchase Requirements Is Unknown''.
    We plan to work with Federal lending regulators and GSE's to 
identify actions we can take to ensure borrowers are required to renew 
flood insurance policies annually. Although we do not have oversight 
authority, we can help identify whether there are any means by which we 
can prevent renewals of mandatory purchased policies from ``falling 
through the cracks.''
    Also, we plan to assess State escrow laws and systems to determine 
whether any obstacles to flood insurance escrow may exist and, where 
necessary, work with the States on amendments. It bears further 
research and consideration because monthly-automated payments have been 
shown to improve the persistency of flood and other lines of insurance.
    To better guide our strategies we need current information 
regarding customers' views of our products. FIMA is in the process of 
contracting for research to determine why policyholders do or do not 
renew their policies. Another research project will assess the 
relationship of customers' perception of risk to the pricing and 
structure of the flood insurance product.
    To encourage retention of policies voluntarily purchased, we are 
seeking opportunities to drive the message that flood insurance should 
be maintained. When maps are updated and a flood risk zone is 
determined to be of lower risk than before, the message will be for 
policyholders to switch to a lower premium policy, not to drop 
coverage. Additionally, as the memory of certain significant flood 
events fades, we are working to convey to policyholders the importance 
of renewing their coverage, and that damaging floods can occur again. 
These efforts involve working through the media and asking lenders, 
insurance companies and agents to amplify the messages through their 
own direct mailings, advertising and public relations.
    A pilot project is underway to enable certain State risk pools to 
sell flood insurance to publicly-owned buildings. These risk pools will 
operate under the same rules as insurance companies that participate in 
the Write Your Own Program.
    Additionally, FEMA published an interim final rule on September 30, 
2002 to adjust the Group Flood Insurance Policy (GFIP) to be consistent 
with changes in the disaster assistance program. At that time we asked 
for comments about allowing the States to renew GFIP policies after the 
36 month expiration, provided the States pay the premium on behalf of 
certificate holders. This rule has a 6-month comment period.
    Last, we are implementing a number of technology improvements over 
the next several years that will make flood insurance easier for 
insurance companies and agents to sell and for consumers to buy.
                   emergency food and shelter program
    Question. The Administration is recommending that FEMA transfer the 
Emergency Food and shelter program from FEMA to HUD. This program has a 
long history of success at FEMA. What are the advantages to moving this 
program to HUD?
    Answer. The success of the Emergency Food and Shelter (EFS) Program 
is primarily due to the structure in which Congress established the 
program. As such, the program is administered by FEMA and governed by a 
board whose membership includes representatives from six national non-
profit organizations. The National Board, as it is referred to, governs 
the day-to-day operations of the program, develops program policies and 
requirements, ensures the timely distribution of funds, monitors 
program compliance by the funded agencies, and compiles reports 
detailing accounting of the use of all program funds. FEMA's role is to 
chair the National Board and provide oversight and guidance to ensure 
adherence to Federal laws. Therefore, continued success is predicated 
on preserving the current structure of the EFS Program, which is 
allowing the National Board to continue to govern the program and 
allowing a Federal agency to administer it. Should the program be 
transferred to HUD and operated in the same manner, it will continue to 
be successful.
    The advantages of transferring the program to HUD are:
  --It will be easier to assess how the EFS Program is being 
        coordinated with other major Federal homelessness prevention 
        and assistance programs and to determine if structural changes 
        to the program are necessary to ensure an integrated approach 
        to assisting persons facing housing emergencies.
  --It will enable the EFS Program to link housing and services for the 
        chronically homeless to other comprehensive services. Linking 
        emergency homeless services for the homeless would mean that a 
        full range of needs of the homeless could be addressed in a 
        coordinated and comprehensive manner.
  --It would decrease duplication of services and allow for scarce 
        resources to be utilized more efficiently and effectively. 
        Currently, several Federal homeless assistance programs are 
        providing funding to the same agencies for the same services 
        and same individuals.
             fiscal year 2001 independent auditor's report
    Question. After 3 years of clean opinions, FEMA's 2001 financial 
statement was issued a qualified opinion. What are the key concerns 
raised in the qualified opinion and what steps is FEMA taking to 
address these concerns?
    Answer. A qualified opinion was received in the fiscal year 2001 
Independent Auditor's Report for the following reasons: (1) the 
auditors could not sufficiently satisfy themselves as to the accuracy 
of the net amount ($10,753,000) of FEMA's equipment and related 
depreciation and (2) FEMA recorded an unsupported reduction 
($77,000,000) to unliquidated obligations. FEMA management has 
addressed these areas and both financial management and the IG expect 
an unqualified opinion for fiscal year 2002. To resolve the equipment 
issues, a complete inventory of equipment is being conducted and values 
established for fiscal year 2002 statements. This effort and new 
procedures for the current year should eliminate this qualification in 
fiscal year 2002. To resolve the reduction to unliquidated obligations 
issue, a complete reconciliation of all unliquidated obligations has 
been completed which will eliminate this qualification.
                    prevention vs. homeland security
    Question. There remain significant concerns among Members as to how 
best to allocate Homeland Security responsibilities among Federal 
agencies. The President supports FEMA as the lead domestic agency over 
DOJ because of its experience and expertise in responding to natural 
disasters, such as earthquakes, hurricanes and tornados. In addition, 
FEMA has been developing additional expertise to plan and respond to 
acts of terrorism through its Office of National Preparedness. Others 
suggest that DOJ is the appropriate agency because of its experience in 
developing strategic planning through the Office of Domestic 
Preparedness. What are the strengths and weaknesses of each of these 
agencies in taking on the responsibilities for being the lead domestic 
agency in preventing and responding to acts of terrorism?
    Answer. In preparing and responding to a man-made national disaster 
or emergency, FEMA's core mission is to save lives, limit casualties, 
and minimize damage to property. Police officers, firefighters, and 
emergency medical teams are America's front-line responders in the 
event of both man-made and natural disasters, including a terrorist 
attack. With the right training and equipment, these first responders 
have the greatest potential to accomplish the mission of saving lives, 
limiting casualties, and minimizing damage to property. In the same 
terrorist scenario, Justice's core mission is to gather intelligence to 
prevent or mitigate the event, and to conduct the criminal 
investigation to identify and prosecute the perpetrator(s).
    FEMA has an established history of working with the State and local 
governments and the first responder community to prepare for, mitigate 
against, and respond to all-hazards. Our mission is to provide 
leadership and support to reduce the loss of life and property and to 
protect our nation's institutions from all types of hazards through a 
comprehensive, risk-based, all-hazards approach. As evidenced in the 
Federal Response Plan, FEMA coordinates all facets of emergency 
management without directly ``owning'' many of the specific programs 
and activities. The First Responder Initiative will require an agency 
well skilled in coordination, and FEMA is the lead agency in both 
Federal and State and local government coordination. This permits FEMA 
to coordinate programs in the most effective manner possible.
    One of the primary reasons for locating the new consolidated 
program within FEMA is the agency's strong record for quickly 
distributing emergency planning and assistance grants. FEMA has 
extensive experience providing direct assistance to local governments 
through its disaster assistance programs and its Fire Grant program. 
Because First Responder grants will be allocated to States according to 
a formula, FEMA will be able to disburse these funds quickly and 
without difficulty. We are already working with our State and local 
partners to establish a sound, working grants management process 
specifically for this program so that a system is in place and ready 
should the First Responder Initiative receive Congressional approval.
    Since FEMA is the lead agency for consequence management and for 
preparing State and local governments for all hazards, including 
weapons of mass destruction terrorism, FEMA is the most logical agency 
to coordinate all these functions.
    Question. There seem to be a clear demarcation in how we view the 
responsibilities of domestic Federal agencies with regard to acts of 
terrorism. First, there is prevention and then there is response and 
consequence management. It seems clear that DOJ is best equipped to 
handle prevention and FEMA is best equipped to handle response and 
consequence management. The key appears to be, in part, how we define 
prevention and how we define consequence management. How do we define 
these issues? Are there overlapping issues? What are those issues and 
how do we reconcile overlapping issues in order to allow DOJ and FEMA 
to work together?
    Answer. FEMA is not seeking the transfer of a law enforcement 
function. In preparing and responding to a man-made national disaster 
or emergency, FEMA's core mission is to save lives, limit casualties, 
and minimize damage to property. Police officers, firefighters, and 
emergency medical teams are America's front-line responders in the 
event of a terrorist attack. With the right training and equipment, 
these first responders have the greatest potential to accomplish the 
mission of saving lives, limiting casualties, and minimizing damage to 
property. In the same terrorist scenario, Justice's core mission is to 
gather intelligence to prevent or mitigate the event, and to conduct 
the criminal investigation to identify and prosecute the 
perpetrator(s). FEMA has not, nor does it intend to train and exercise 
law enforcement officials with respect to these core investigative 
duties.
    In the President's Executive Order establishing the Office of 
Homeland Security, elements of preparedness and prevention were 
defined. Preparing for and mitigating the consequences of terrorist 
threats or attacks involves working with Federal, State, and local 
agencies and private entities to review and assess emergency response 
plans, coordinating domestic exercises and training programs, ensuring 
the readiness of response teams, and ensuring national preparedness 
programs and activities are evaluated under appropriate standards.
    Prevention involves working with Federal, State, and local agencies 
and private entities to facilitate the exchange of information related 
to preventing the entry of terrorists and terrorist materials, 
coordinating investigations of threats and attacks, and coordinating 
the security of borders, water, and airspace.
    To reconcile these issues, the President has recommended in both 
the fiscal year 2003 Budget and the Department of Homeland Security 
proposal that the Office for Domestic Preparedness be transferred to 
FEMA. With this proposal, the President has shown true leadership in 
his willingness to address a long-standing problem--the need for 
central coordination among the myriad of Federal programs dealing with 
terrorism preparedness.
    FEMA looks forward to enhancing the training provided by ODP and 
serving as a ``single point of contact'' for State and local 
governments as numerous Commissions and recent GAO reports have 
recommended. In fact, by eliminating the duplication, confusion and 
inefficiencies of the current system as the fiscal year 2003 budget 
proposes, we will be helping to ensure that our nation's first 
responders are better trained, better equipped and better prepared. 
This consolidation and simplifying of the Federal Grant process by 
consolidating all First Responder grants at FEMA will allow our 
terrorism preparedness programs to mirror our terrorism response 
programs and satisfy repeated State and local government requests.
                            fire act grants
    Question. FEMA currently is administering the FIRE Act Grants 
program at $360 million in fiscal year 2002. This is a popular program 
that targets funds to firefighters, who are the first line of response 
to both disasters and terrorism. The program is authorized at $900 
million for both Fiscal Years 2002 and 2003. Nevertheless, the 
Administration's budget assumes that this program will be absorbed into 
a proposed larger block grant program that is administered by States. 
There are real concerns that these funds will be slowed by a new 
bureaucracy and watered down at a time of great need. I believe that we 
need to preserve this program. However, if we do, how will this impact 
the proposed Homeland Security block grant and is there a way to 
reconcile this program with the block grant proposal?
    Answer. We believe as you do that the FIRE Act program does need to 
be preserved separately from the grants provided to States for the 
first responder initiative. Subsequent to the President's submittal to 
the Congress of the 2003 budget, the Administration is on record as 
supporting separate programmatic funding between the first responder 
grant program and the Assistance to Firefighter grants. There are 
numerous reasons to maintain this separation: (1) the governing statute 
for the fire grants emphasizes fire prevention as well as response 
capacity (2) the first responder program funding priorities will be 
based on a different threat profile (i.e., terrorism) than the fire 
grants; and (3) the fire grants are required by statute to be made 
directly to local fire departments, not to the States as the first 
responder grants will be made.
    Nevertheless, there clearly are ties between the two programs, and 
therefore we also believe these two programs demand a close 
coordination with each other.
                              legislation
    Question. Many of the Administration's proposals for Homeland 
Security depend on appropriations without any authorization structure. 
I believe that we need authorizing legislation in order to ensure a set 
of standards and benchmarks with regard to Homeland Security as well as 
ways to ensure accountability on how Homeland Security funds are spent. 
Please provide your comments.
    Answer. We believe FEMA's current authorities, transferred to the 
Department of Homeland Security as well as sections 502 and 506 of H.R. 
5005, or section 102 of S. 2452 should provide adequate authority and 
accountability.
    Question. On March 21, 2002, I introduced the S. 2061, the National 
Response to Terrorism and Consequence Management Act of 2002, which is 
designed to provide a statutory structure for the full funding of the 
Urban Search and Rescue Response System as well as a new FEMA program 
to provide technical and planning grants for States to develop State 
and local capacity to respond to acts of terrorism, including those 
involving weapons of mass destruction. If you have had an opportunity 
to review the legislation, I would like your views on the bill. If not, 
I would like your views on the need to fund fully the urban search and 
rescue response system.
    Answer. We have reviewed the legislation and believe that it 
contains important authorizing language for the National Urban Search 
and Rescue System. We have taken steps to develop a rulemaking for the 
system, which is currently under review. Your legislation provides FEMA 
with an important framework for the system and will allow for better 
financial support to the program in future years. Under the legislation 
the number of teams will continue to be 28, with the option for 
expansion resting on the judgment of the agency based on need and the 
expectation that all 28 teams will be fully capable and mission ready. 
We support this concept as we work to develop greater capability within 
the existing system. We feel that it is critical to provide the utmost 
support to the existing teams before adding additional teams.
    We believe it important to fully fund the National Urban Search and 
Rescue System to include the 28 teams and their equipment, training, 
exercises and support for deployment. It is also critical that we have 
the staff resources within the program office to provide an outstanding 
level of support to the teams before, during, and after deployment. 
Toward that end we have requested the $32 million in the emergency 
supplemental for fiscal year 2002 to bring the teams up to status to 
respond to WMD situations. Thanks to your support that effort to equip 
and train all of the teams is underway. We also have requested $16 
million for fiscal year 2003 to develop the training and exercise 
program further and to allow us to implement improved team 
accountability and peer review programs. We are looking at the addition 
of at least seven critical positions to the National Urban Search and 
Rescue Division of USFA to carry out these tasks. It is essential that 
we develop the system with care to provide increased capability, while 
meeting the needs of the teams and providing them with the training and 
equipment they need.
                      disaster assistance criteria
    Question. Congress has repeatedly sought to have FEMA establish 
clear criteria for evaluating a Governor's request for a presidential 
disaster declaration. However, FEMA has continued to employ county-wide 
and State-wide per capita cost thresholds as its primary means of 
determining whether damages exceed a State's capabilities. The FEMA 
Office of Inspector General and the General Accounting Office have 
suggested alternative methods to determine a State's financial ability 
to respond to a disaster, including assessments of its total taxable 
resources. Recently, the President, in his fiscal year 2002 budget 
plan, called on FEMA to develop ``improved guidelines for disaster 
assistance that provide States with meaningful criteria that must be 
met in order to become eligible for Federal disaster assistance.'' What 
is the status of these efforts and review?
    Answer. During fiscal year 2001, a FEMA-State Working Group 
consisting of staff from FEMA headquarters, regions, and selected 
States, including leadership from the National Emergency Management 
Association, conducted a broad review of the disaster declaration 
factors and considered various options for revising them. A 
considerable amount of discussion focused on the specificity of the 
factors--if the factors are very definitive and precise, they are 
perceived as too stringent and inflexible (and possibly too 
complicated), not allowing the agency the discretion to address the 
varying nature of disasters and the range of impacts on States. The 
opposing viewpoint is that factors that are more flexible and open to 
interpretation are seen as too vague and subjective, not defining a 
true baseline for assistance. Though a number of possible revisions to 
the factors were discussed (including using total taxable resources as 
a criterion), the Working Group generally supported the current 
factors, stressing their simplicity and the agency's inherent 
discretion in using the factors to evaluate Governors' requests for 
disaster assistance. One common concern within the Working Group was 
that any effort to revise the factors that would devolve more 
responsibility to the States for responding to and administering 
disasters, would equate to passing on additional costs at a time when 
State budget surpluses were turning into budget deficits.
    As a result of the Working Group's efforts and subsequent 
discussions, FEMA is continuing to use the current disaster declaration 
factors, as they provide general guidelines for the States to use in 
determining whether they are eligible for disaster assistance. For 
example, the factors that provide a baseline for assistance from the 
Public Assistance Program (which represents the majority of FEMA 
disaster assistance expenditures) are generally well understood. For 
example, the factor that focuses on the per capita impact of disaster 
damages on a State, clearly establishes that a figure of $1.09 per 
capita is used as an indicator that the disaster is of such size that 
it could warrant Federal assistance. Other more general factors (such 
as whether other Federal program assistance is available and the amount 
of insurance coverage in force) are also considered, allowing the 
agency to look at the collective impact of all of the factors when 
making a recommendation to the President. This approach considers the 
total impact and specific circumstances of a unique disaster within a 
particular State. Thus, the current declaration process provides an 
appropriate level of executive discretion, as well as flexibility for 
the President and the Governors.
                                 ______
                                 

            Questions Submitted by Senator Pete V. Domenici

    Question. Director Allbaugh, those of us in the west are facing a 
100-year drought by some accounts, and the forest fire season looks to 
be the worst in decades. New Mexico has had its first fires of the 
season, and I was interested to see that FEMA has a role in responding 
to wildland fires under its fire management assistance grant program. 
Could you explain to the Subcommittee what authorities FEMA has in 
responding to wildland fire emergencies? What new activities can FEMA 
undertake in these situations that it couldn't under earlier 
authorities? What actions did FEMA take in assisting New Mexico 
communities in the recent fires? What is the fiscal year 2003 request 
for these grants, and what is FEMA's estimate of the potential need for 
this type of assistance next year? Did FEMA anticipate a significant 
fire season when it developed its fiscal year 2003 budget request?
    Answer. Could you explain to the Subcommittee what authorities FEMA 
has in responding to wildland fire emergencies?
    The Fire Management Assistance Grant Program (FMAGP) is the primary 
vehicle FEMA uses to provide assistance to State and local governments 
for wildland firefighting activities. Section 420 of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), 
42 U.S.C. 5187, as amended by the Disaster Mitigation Act of 2000, 
established FMAGP. Under approved fire management assistance 
declarations, FEMA provides assistance, primarily in the form of 
grants, to any State or local government for the mitigation, 
management, and control of any fire on public or private forest or 
grassland that threatens such destruction as to constitute a major 
disaster.
    Under fire management assistance grants, total eligible costs are 
reimbursed at a 75 percent Federal and 25 percent non-Federal cost 
share. Eligible wildland firefighting activities covered under FMAGP 
may include costs for field camps; equipment use, repair, or 
replacement; tools, materials, and supplies; mobilization and 
demobilization; limited pre-positioning; emergency work; and temporary 
repair of damage caused by firefighting activities.
    In addition to submitting requests to FEMA for fire management 
assistance declarations, States may submit requests to the President 
for emergency or major disaster declarations for wildland fire 
emergencies. If a declaration were warranted, the President would 
authorize FEMA to provide the Federal disaster assistance designated in 
the declarations. It should be noted however, that funds for recovery 
and hazard mitigation can be designated only under a Presidential major 
disaster declaration.
    Question. What new activities can FEMA undertake in these 
situations that it couldn't under earlier authorities?
    Answer. Section 420 of the Stafford Act, Fire Management 
Assistance, expands the scope and level of assistance previously 
available under Section 420 of the Stafford Act, Fire Suppression 
Assistance. Instead of limiting Federal assistance to the 
``suppression'' of forest or grassland fires that threaten such 
destruction as would constitute a major disaster, Section 420, Fire 
Management Assistance, expands the range of eligible activities to 
include the ``mitigation, management, and control'' of such fires. In 
the final rule for FMAGP, ``mitigation, management, and control'' is 
interpreted as a flexible and broad-based provision intended to reduce 
the spread of a fire, reduce associated health and safety threats, 
prevent potential damages by the fire, repair damage caused by the 
firefighting activities, and provide for the limited pre-positioning of 
certain types of wildland firefighting resources.
    Another activity FEMA is authorized to undertake under FMAGP are 
those activities allowable under Section 403 (42 U.S.C. 5170b), 
Essential Assistance, of the Stafford Act necessary to mitigate, 
manage, and control the fire. Section 403 authorizes assistance for 
activities required to meet threats to life and property. Section 403 
activities that may be eligible for funding under FMAGP include police 
barricading and traffic control, evacuations and sheltering, search and 
rescue, arson patrol, and the dissemination of public safety 
information.
    Under FMAGP, FEMA is also authorized to provide funding to State 
and local governments. Previously, we could only provide assistance to 
the State as the sole applicant eligible for assistance.
    Question. What actions did FEMA take in assisting New Mexico 
communities in the recent fires?
    Answer. Between March and August 2002, the State of New Mexico 
submitted and FEMA approved nine requests for fire management 
assistance declarations. The State has a maximum timeframe of up to one 
year from the date of the fire management assistance declarations to 
submit its grant applications to FEMA for review and processing. We 
have already obligated approximately $5 million to the State for one 
fire management assistance declaration and our Regional staff is 
continuing to work with the State and local governments to document 
actual eligible costs so that the State can submit its eight other fire 
management assistance grant applications within the timeframes allowed.
    Question. What is the fiscal year 2003 request for these grants, 
and what is FEMA's estimate of the potential need for this type of 
assistance next year?
    Answer. FMAGP provides reimbursement to State and local governments 
in the form of grant assistance for actual costs incurred in the 
performance of eligible wildland firefighting activities for a declared 
fire. We have not received any requests for fire management assistance 
declarations since October 1, 2002, the beginning of fiscal year 2003. 
It should be noted, however; that as part of the Regulatory Planning 
and Review requirement published as part of the final rule for FMAGP, 
we estimated that in extraordinary years, with severe fire conditions 
and a high level of fire activity, fire management assistance grants 
may total more than $50 million.
    Question. Did FEMA anticipate a significant fire season when it 
developed its fiscal year 2003 budget request?
    Answer. FEMA did not anticipate a significant fire season when it 
developed the fiscal year 2003 budget request due to uncertainties in 
trying to forecast the number and severity of wildland fires that would 
be eligible for assistance under FMAGP.
    Question. Director Allbaugh, I want to thank you for your personal 
attention to the recovery of Los Alamos and surrounding areas from the 
devastating Cerro Grande Fire that occurred in New Mexico just about 
two years ago. This fire consumed almost 48,000 acres of forest, 
destroyed nearly 400 homes and caused damage or injury to 1,000 
families, countless businesses, the county of Los Alamos, the State of 
New Mexico, four Indian pueblos, and Los Alamos National Laboratory. I 
would remind my colleagues that this fire was started by the Federal 
Government when a controlled burn at Bandelier National Monument burned 
out of control. For that reason, the Congress enacted the Cerro Grande 
Fire Claims Assistance Act of 2000, and appropriated $455 million to 
FEMA to establish a claims program to compensate victims of the fire. 
New Mexicans had until August 28 of this year to file claims under the 
Act, and according to recent assessments of the Cerro Grande fire 
claims program, additional appropriations will be needed to pay 
anticipated claims.
    Would you please give the Subcommittee the latest figures on: the 
number and amount of claims filed; the number and amount of claims 
approved; the number and amount of claims paid; the number and amount 
of claims pending; and the number of claims anticipated to be filed by 
August 28.
    Answer. Claims filed: 21,512
    Claims paid: 14,614 ($430 million)
    Claims closed: 19,060 (included in $430 million)
    Number of claims pending: 2,452 ($150 million)
    Question. Under the recent assessment of the program, FEMA 
indicated that additional appropriations will be needed. What is FEMA's 
estimate of the additional appropriations needed to pay anticipated 
claims?
    Answer. We estimate that we will need an additional $150 million to 
pay all claims. The amount is based on estimates of our current 
liabilities. Please see Table below:

                  OCGFC CLAIMS LIABILITY AS OF 10/03/02
------------------------------------------------------------------------
             Category                  Sub-Totals           Totals
------------------------------------------------------------------------
Total Appropriation..............  .................       $455,000,000
Reimbursement from Stafford......         $2,305,601          2,305,601
Total Paid to Date...............  .................       (424,554,223)
Estimated Remaining Liabilities:
    Individual Claims Liability..         23,311,587  ..................
    Business Claims Liability....         18,004,441  ..................
    Government Claims Liability..         16,313,928  ..................
    Pueblo Liability.............          4,984,127  ..................
    Appeals Liability............            100,615  ..................
                                  --------------------------------------
      Sub-total Liabilities......  .................         62,714,698
                                  ======================================
Liabilities Remaining without      .................        -29,963,320
 Subrogation and Unknowns........
Subrogation......................        103,775,814  ..................
Projections for Inestimable
 Liabilities:
    Potential appeals............          2,552,766  ..................
    Potential arbitrations/               10,000,000  ..................
     Federal Court...............
    Mitigation...................          2,910,000  ..................
                                  --------------------------------------
    Sub-total Inestimable........  .................        119,238,580
                                  ======================================
Additional Funds Required........  .................       -149,201,900
------------------------------------------------------------------------
The formula to determine the OCGFC liability will be as follows:
  Appropriation; Plus Reimbursement from Stafford; Less Total Paid to
  Date; Reserves on Individual, Business, Government and Pueblo Claims
  (Open Claims); Open Appeals; Subrogation liability.
Projections for Inestimable Liabilities: Mitigation; Future Appeals;
  Future Arbitrations/Federal Court.
Equals--Additional Funds Required.

    Question. When does FEMA expect to need these funds, and for what 
purpose?
    Answer. The funding will be needed by the end of the first quarter 
to continue processing payments. We continue to hold payments to 
insurance companies, as specified in the Act, until additional funding 
is available. However, we are fast approaching a time when additional 
dollars will be needed in order to continue payments to individuals and 
businesses affected by the fire.
    Question. With these funds, will FEMA be able to keep on schedule 
processing and paying claims?
    Answer. Depending on the amount of funding approved, whether it is 
the full amount or a partial amount, we could continue the processing 
of payments and delay payment of subrogation claims until funding 
becomes available.
    Question. What would be the effect of not receiving these funds in 
the fiscal year 2002 supplemental appropriations bill now before 
Congress?
    Answer. The effect of not receiving the funds would be that 
starting in late November 2002 any additional payments would be 
prioritized. We would continue to pay claims already in process. Those 
that cannot be paid would receive a letter detailing the agreed award 
to be paid contingent upon funding.
    Initially, FEMA would cease making payments to all claimants other 
than individual and business claims received before a financially 
determined cut off date. Individuals and businesses who filed after the 
calculated cut off date would be paid initial awards on a first 
completed basis from remaining funds until funding was depleted. 
Remaining amounts awarded through appeals, mitigation claims, or 
arbitrations would not be awarded until funding was made available.
    Director Allbaugh, I would first like to say that I support 
President Bush and his Administration 100 percent in their efforts 
regarding the war on terrorism. There is nothing more important and no 
higher priority for this country at this time in history. That having 
been said I would like to ask you some questions regarding the shift in 
funding regarding the training of our first responders, an activity 
that, up until this particular Presidential budget request, has been 
administered by the Department of Justice (DOJ).
    Question. Has the entire activity of first responder training been 
transferred to the Federal Emergency Management Agency (FEMA) or does 
DOJ still retain some aspects of this critically important function?
    Answer. The fiscal year 2003 Budget and the President's Department 
of Homeland Security proposal would transfer all functions and 
activities of the Office for Domestic Preparedness (ODP) of the 
Department of Justice to FEMA. FEMA will continue the preparedness 
activities at facilities currently funded by ODP, and will build upon 
and enhance those activities at a greater level. These are not law 
enforcement functions. They include only those activities that have 
long been a part of the FEMA preparedness mission.
    FEMA is not seeking the transfer of a law enforcement function. In 
preparing and responding to a man-made national disaster or emergency, 
FEMA's core mission is to save lives, limit casualties, and minimize 
damage to property. Police officers, firefighters, and emergency 
medical teams are America's front-line responders in the event of both 
natural and man-made disasters, including terrorist attacks. With the 
right training and equipment, these first responders have the greatest 
potential to accomplish the mission of saving lives, limiting 
casualties, and minimizing damage to property. In the same terrorist 
scenario, Justice's core mission is to gather intelligence to prevent 
or mitigate the event, and to conduct the criminal investigation to 
identify and prosecute the perpetrator(s). FEMA has not, nor does it 
intend to train and exercise law enforcement officials with respect to 
these core investigative duties.
    Question. Director Allbaugh, I think we all agree that a shift in 
first responder training responsibilities would require legislative 
authorization by the Congress. You recently mentioned that you were 
working with the Environment and Public Works Committee on such 
legislation. As a new member of that Committee, could you tell me the 
nature of these discussions, and bring me and my staff up to date on 
those discussions?
    Answer. Senator Jeffords introduced S. 2664, the First Responder 
Terrorism Preparedness Act of 2002, in June 2002. This bill would amend 
the Robert T. Stafford Disaster and Emergency Assistance Act to 
establish a program to provide assistance to enhance the ability of 
first responders to respond to incidents of terrorism, including 
incidents involving weapons of mass destruction. To accomplish this 
purpose, the bill would establish the Office of National Preparedness 
within FEMA to coordinate and build viable terrorism preparedness and 
response capability at all levels of government.
    The Committee on Environment and Public Works met to consider S. 
2664 on June 27, 2002. By voice vote, the committee agreed to three 
amendments offered by Senator Clinton. The first amendment, as 
modified, established a program to protect the health and safety of 
first responders. The second amendment required States to use criteria 
established by FEMA to disburse funds to local governments and local 
entities within 45 days and to coordinate with them concerning the use 
of this assistance. The third amendment provided that FEMA will 
coordinate with the Department of Justice in relation to the Community 
Oriented Policing Services program. The committee then agreed to 
favorably report S. 2664, as amended, by voice vote. Report Number 107-
295 was reported by Senator Jeffords on October 1, and the bill, as 
amended, was placed on the Senate Legislative Calendar; Calendar number 
625.
    Under the leadership of Senator Judd Gregg as the then-Chairman of 
the Senate Commerce, Justice, State, and the Judiciary Appropriations 
Subcommittee, the Congress established the first responder training 
program in the Department of Justice, and it has been extremely 
successful in training 80,000 police, fire, and emergency personnel. 
Last May, when the President proposed the transfer of first responder 
training to FEMA, it was a program of about $30 million. For fiscal 
year 2002, the National Domestic Preparedness Consortium received $32.7 
million with an additional $63 million added after the September 11 
attacks. The President proposes to transfer $234.5 million for all 
Department of Justice counter-terrorism funding associated with 
domestic preparedness to FEMA, and the new program is now proposed at 
$3.5 billion!
    Question. The proposed $3.5 billion program is a significant 
expansion of the first responder training program. I asked this same 
question to the Attorney General--would FEMA have the capability of 
implementing a dramatically expanded first responder training program 
in fiscal year 2003 considering that legislation has not yet been 
considered to establish this program?
    Answer. Yes. FEMA believes it has existing authority to implement 
the First Responder Initiative as derived from the Stafford Act as well 
as the Federal Fire Prevention and Control Act. Grant making or other 
financial assistance authority for training is found in a number of 
sections of the Stafford Act. The Stafford Act (42 USC 5196(f)) 
authorizes the Director of FEMA to ``conduct or arrange, by contract or 
otherwise, for training programs for the instruction of emergency 
preparedness officials and other persons in the organization, 
operation, and techniques of emergency preparedness'' as well as 
``conduct or operate schools'' and ``provide instructors and training 
aids as necessary.''
    In addition, the Federal Fire Prevention and Control Act (15 U.S.C. 
2206) authorizes the establishment of the National Fire Academy and 
permits the Superintendent to ``admit to the courses and programs of 
the Academy individuals who are members of the firefighting, rescue, 
and civil defense forces of the Nation and such other individuals [. . 
.] as he determines can benefit from attendance.''
    Question. Is FEMA prepared to implement this program in a fashion 
that will not delay critical first responder training activities while 
it sets up an internal structure to implement this new program 
responsibly? Other significant program expansions are proposed for FEMA 
in the budget that will also place administrative burdens on the 
agency.
    Answer. One of the primary reasons for locating the new 
consolidated program within FEMA is the agency's strong record for 
quickly distributing emergency planning and assistance grants. FEMA has 
extensive experience providing direct assistance to local governments 
through its disaster assistance programs and its Fire Grant program. 
Because First Responder grants will be allocated to States according to 
a formula, FEMA will be able disburse these funds quickly and without 
difficulty. That being said, FEMA intends to monitor the funds closely, 
ensure they are awarded based on risk and need and require that mutual 
aid agreements are in place as a prerequisite to funding.
    The Administration expects that FEMA will begin operating the First 
Responder program immediately following the passage of FEMA's 2003 
appropriations bill. FEMA intends to award grants to the States shortly 
after receiving the appropriation from Congress. FEMA has developed a 
process for the distribution of the fiscal year 2002 supplemental 
grants that will be adapted and used for the fiscal year 2003 First 
Responder grants.
    Question. How would FEMA utilize the current training partners of 
the National Domestic Preparedness Consortium, which includes the New 
Mexico Institute of Mining and Technology, under its proposed first 
responder training program?
    Answer. FEMA intends not only to continue the preparedness 
activities at the New Mexico Institute of Mining and Technology and the 
other facilities currently funded by ODP, but also to build upon and 
enhance those activities at a greater level. Training is a crucial 
component of this countries' ability to prepare and respond to 
terrorism activities. The request for $3.5 billion will ensure that we 
begin providing the enhancements and new efforts necessary to get our 
First Responders on track for the level of preparedness that is 
necessary to deal with any future terrorist or WMD events.
    ODP provides funding for a number of training programs and non-
Federal terrorism centers. In 2003, FEMA will continue to fund those 
activities for which the Administration requested funding in fiscal 
year 2002, including:
  --Center for Domestic Preparedness (Ft. McClellan)--chemical weapon 
        training
  --Texas A&M--Emergency response training
  --Louisiana State University--Bio-preparedness training
  --DOE Nevada Test Site--Large-scale WMD training
  --New Mexico Institute of Mining and Technology--Live explosives 
        training
    Question. How would FEMA make provision to train first responders 
for weapons of mass destruction, including biological, chemical, and 
radiological weapons, which require highly specialized facilities to 
ensure safe exercises?
    Answer. FEMA will continue the preparedness activities currently 
funded by the Office of Domestic Preparedness that offer specialized 
training activities, to include live-agent training and will build upon 
and enhance those activities at a greater level. Training is a crucial 
component of this country's ability to prepare for and respond to 
terrorism activities.
    Question. Assuming that a comprehensive first responder training 
program is developed, it is clear that responding to potential attacks 
using weapons of mass destruction--chemical and biological agents and 
even nuclear devices--requires very specialized training. In your 
opinion, are there necessary trainers available throughout the country 
to carry out a significant first responder training program, 
specifically one that is comprehensive and coordinated to provide a 
seamless response to a disastrous attack?
    Answer. It is critical that a comprehensive, coordinated and 
consolidated terrorism training program be established. This is why the 
President asked FEMA to manage the First Responder Grant Program which 
would provide over $1 billion in training funding alone. It is also why 
I have put all FEMA training under the same directorate, so all first 
responder training could be centrally coordinated and each emergency 
discipline could learn to work as a team with others. FEMA has for many 
years used a robust and coordinated training system that utilizes over 
50 State fire academies and State emergency management training 
programs, there are also robust State and local fire, emergency medical 
services and police academies as well. These systems train hundreds of 
thousands of responders each year and have largely been left out of the 
funding and support from DOD and the Justice Department's programs. 
There are thousands of trainers that can be brought to bear on this 
issue. We are also aggressively working to develop additional train-
the-trainer opportunities to assist first responder training systems 
with the expertise they need. Chemical incidents are not dissimilar 
whether the cause is accidental or terrorism and our nation's hazardous 
materials teams are well suited to respond. We continue to work with 
the Environmental Protection Agency, the Department of Transportation 
and others to strengthen their training. Biological events, while 
having some similarities to chemical incidents, do require additional 
training and we look forward to working with the CDC and the Department 
of Health and Human Services to address these needs. The bottom line is 
that through FEMA, we need to fully utilize the existing robust 
training systems we have in place, that have not yet seen significant 
support, rather than creating new mechanisms that will perpetuate a 
disjointed program of Federal assistance. In that way we can make sure 
that our first responders are well prepared to respond to any attack 
regardless of cause.
    Question. On Sunday April 28, 2002 a tornado touched down in 
Southern Maryland destroying many homes and businesses in Charles and 
Calvert Counties. It also caused an estimated $3.5 million in damages 
to Southern Maryland Electric Cooperatives (SMECO) facilities which 
serves the entire area. Can you give me a time frame as to when SMECO 
can expect reimbursement from FEMA and an approximate percentage of 
recovery?
    Answer. Six Project Worksheets (PW) totaling $1,100,358.09 (75 
percent Federal Share) were approved and obligated for the SMECO on or 
before 5/31/02. The majority of these projects were 100 percent 
completed at the time of the PW preparation and therefore actual 
eligible costs were reimbursed. There are currently no outstanding 
issues related to this applicant.
    Question. Over the past decade FEMA has stepped in and provided 
vital support in helping to rebuild local communities and entire 
regions when natural disasters have occurred. Timely assistance in 
helping homeowners rebuild, small businesses recover from structural 
and economic damages, and providing grant assistance for public and 
cooperatively-owned utilities in order to restore critical 
infrastructure will be essential to Southern Maryland's recovery. Do 
you foresee any delays or problems with the State of Maryland's 
request?
    Answer. The incident occurred on Sunday, April 28, 2002, and was 
declared on Wednesday, May 1, 2002. Tornado damage is normally covered 
by homeowners' insurance. While the majority of applicants received 
insurance settlements, FEMA was able to provide disaster housing 
assistance in the amount of $158,247.60 to 87 eligible applicants. The 
Individual and Family Grant (IFG) Program provided grant awards for 
serious unmet needs in the amount of $175,676.00 to 70 eligible 
applicants. Disaster Unemployment Assistance (DUA) was given to 50 
applicants in the amount of $32,618.00. To date, Crisis Counseling 
grants have been awarded in the amount of $716,617.00. In addition to 
FEMA assistance, the U.S. Small Business Administration (SBA) has given 
106 loans totaling $5,987,600.00 (70 home loans in the amount of 
$3,268,200 and 36 business loans in the amount of $2,719,400.00).
    A total of $1,100,358.09 (75 percent Federal Share) was approved 
and obligated for Southern Maryland Electric Cooperatives to reimburse 
them for emergency costs incurred and to restore their infrastructure. 
All of these funds were obligated by 5/31/02.

                          SUBCOMMITTEE RECESS

    Senator Mikulski. God bless you. God bless America. And 
this hearing stands in recess until next week Wednesday, May 
15, when we will listen to the National Science Foundation and 
the Office of Science and Technology Policy.
    [Whereupon, at 11:10 a.m., Wednesday, May 8, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]



















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

                              ----------                              


                        WEDNESDAY, MAY 15, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:46 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Barbara A. Mikulski (chairman) 
presiding.
    Present: Senators Mikulski, Johnson, Bond, and Domenici.

                      NATIONAL SCIENCE FOUNDATION

STATEMENT OF DR. RITA COLWELL, DIRECTOR
ACCOMPANIED BY:
        DR. WARREN WASHINGTON, CHAIR, NATIONAL SCIENCE BOARD
        TINA BOESZ, INSPECTOR GENERAL

                   EXECUTIVE OFFICE OF THE PRESIDENT

                Office of Science and Technology Policy

STATEMENT OF JOHN H. MARBURGER III, DIRECTOR

            OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

    Senator Mikulski. My colleague, Senator Bond, is on his way 
from a meeting, but I am going to go ahead and start the 
hearing and then he will be able to join in his statement, 
because we have to wrap up as close to 11 o'clock as we can, 
just because of all of the things going on, on the floor.
    So, I want to state that the subcommittee on VA/HUD will 
come to order. And today we are going to take the testimony for 
fiscal year appropriations from Dr. Rita Colwell, the Director 
of the National Science Foundation, who is now approaching her 
fourth year of her term; and we welcome her.
    To Dr. Warren Washington, the new chair of the National 
Science Board. And, Doctor, I understand that you were just 
elected by your peers to be the next chairman of the National 
Science Board, so congratulations and a most warm and cordial 
welcome to you.
    And also we have asked Dr. John Marburger to come, as well. 
He is the Director of the Office of Science and Technology 
Policy, the President's advisor on science. Dr. Marburger, this 
is your second appearance before this subcommittee. You and 
Administrator Whitman, the administrator of EPA, testified last 
year on the Anthrax situation concerning the Hart Building and 
the Brentwood Mail Facility, in which you helped to get the 
post office very important and crucial technical assistance. 
So, we welcome you as well.
    In reviewing this year's appropriations requests from the 
administration, I was really taken aback at what I regard as a 
rather spartan budget for the National Science Foundation. I 
really, in the course of our testimony this morning, will want 
to ask all of you what you think the administration's long-term 
plan is for scientific research.
    Last year--I was disappointed as well in the 
administration's budget, because it actually cut into research. 
And everyone from those who are advocating the United States of 
America maintaining its strategic and competitive edge, to 
those interested in national security and homeland security, we 
are all turning to science and technology, and we are turning 
to scientists to help maximize--to really maximize the human 
capacity we have in our country.
    So looking at this, I was really concerned. Last year, 
Senator Bond and I worked on a bipartisan basis to increase NSF 
by 8 percent. It is well known that Senator Bond and I want to 
double the National Science Foundation. And he and I continue 
to be committed to that on a bipartisan basis.
    And I know he will speak for himself in his usual unabashed 
way; it is the characteristics of who chairs this committee.
    This year's budget sent up by the Administration is a bit 
better. It does contain a 5 percent increase, but one-third of 
the increase is made up from programs from other agencies, 
meaning a transfer of--from NOAA and other agencies. So it is 
really only 3 percent.
    I find this really disturbing in light of: This is the 
beginning and the dawn of the 21st Century and some of the 
great institutions created in the last half of the last century 
are staying--seeing us well.
    And I just point to NATO and the National Science 
Foundation. NATO has helped preserve the peace, bring about the 
end of a Cold War, has protected both this country and its 
allies, and was a very crucial institution in this century.
    The National Science Foundation was created so that we 
could advance science and technology, particularly in the 
civilian sector. Science and technology helped us win World War 
II, and we knew that it would help win the war of the future, 
in terms of economics and national security.
    So we want to make sure, of course, NATO is strong. But I 
want the National Science Foundation to be strong and funding 
the cutting edge research that needs to be done, and bringing 
along the next generation.
    We have to do more than keep up with inflation if we are to 
expect our scientific enterprise to give us the ability to meet 
our national and economic security challenges. And, again, I 
will reiterate that Senator Bond and I want to double this 
budget.
    In order to meet that goal, we would need a 15 percent 
increase in NSF this year, not 3 percent proposed by the 
Administration. So we are going to have a tremendous amount of 
work to do.
    In the areas of research, the Administration is proposing 
transferring three programs from other agencies to NSF. NOAA's 
Sea Grant program--and Dr. Colwell, I know this is one of your 
great areas of interest, because of your previous job heading 
up the Marine Biotech Center at the University of Maryland.
    But really, does Sea Grant belong at NSF, or does it stay 
at NOAA where it has done such an outstanding job over the 
years? Then there is EPA's environmental education program and, 
of course, the Administration wants to transfer the U.S. 
Geological Survey's water quality research program.
    To me this is the illusion of creating an increase; this is 
not an increase. It simply moves the responsibility from one 
area to another. We want to be able to discuss this.
    I do not believe a merger of these programs is warranted--
but I do want to hear the justification of the Administration.
    I am pleased, however, with proposed increases in 
information technology, nano-technology and bitechnology. I 
believe that these are cutting edge, and we will want to 
discuss these further.
    Though in reviewing the basics, which is always the basics, 
I was disappointed with the funding level of basic science, or 
the core sciences, to really see that in areas like physics and 
chemistry that I know you, Dr. Colwell, have said have long 
been neglected, are really again at--they have gone from 
spartan to--I am afraid they are on the verge of skimpy.
    We can see that the investments in science are yielding 
results. My colleague here, Senator Bond, has been a very 
strong advocate of mapping the plant genome. And we see the 
results of this.
    They have completed the genetic map of rice, which, of 
course, could have untold consequences in terms of world food 
supply, disease resistance, all of these things. I mean, this 
is what--you know, this is what we want to be able to help do, 
not only the practical applications, but the basics, so that 
even the private sector can value add. This discovery will be a 
major step, as I said, in preventing world hunger.
    Then we look at things like info-tech. That takes us to 
issues like cyber-security, when just about everything we do 
relies on a computer network, cyber-attacks could make us very 
vulnerable in the United States of America.
    So, we want to discuss the core science programs and what 
really is needed to maintain this.
    In the area of education, of course, I am interested in the 
next generation of science. I know that over 40 percent of our 
PhD's--students studying for PhD's, are from other countries. 
That is not a xenophobic statement on my part.
    But what is happening to our young people? Where are they 
in science and in engineering and so on?
    Well, I know that one of it is that the stipends used were 
really quite modest and we were able to increase that to 
$21,500. And I note that this goes a long way to increasing it 
to $25,000. So in my mind, one of the jobs of NSF is to be 
bringing along the next generation, which if it were medicine, 
it would be interns and residencies and so on.
    And this is what we need to be thinking about here, as well 
as them being attracted to the basic sciences, so we can move 
ahead in other areas of science and technology.
    I am concerned that undergraduate education funding 
declines by 5 percent and that programs for women and 
minorities decline by over 7 percent.
    I think that is very shortsighted. Then there is the issue 
of work force readiness. I think it is well-known that I 
believe, like our Secretary of Labor, Elaine Chao, that we do 
not have a job shortage in this county; we have a skill 
shortage. And then that takes us, again, through this.
    I will be at a press conference shortly after this on the 
issues related to the digital divide. So, we are looking at the 
basics--our basic scientists, our basic research, the future 
scientists of America. Well, we know that science education 
really starts at the K through 12 level and even before that.
    Finally, we go to NSF management. We want to know what NSF 
and the National Science Board have done to improve its project 
and fiscal management of large-scale projects.
    We need to understand how NSF sets priorities, particularly 
among new, major equipment projects and how are they being 
managed. We need to maintain a strong management focus 
particularly as--hopefully as the budget increases. This budget 
proposes a significant increase in salaries and--increases. So, 
we want to hear from you on that.
    Dr. Marburger, also, we welcome you, as we will be asking 
you: What are the administration's over-arching objectives in 
science and technology? What is the role of OSTP when it comes 
to major agency science programs, such as the space station? 
Does it really do cutting edge research? Where are we going in 
areas that have specific strategic interest to the United 
States and, of course, the balance between the life sciences, 
and physical sciences and engineering science?
    We really would like to also know what kind of interagency 
task forces are going on in the area of science and technology 
and particularly in the areas of education.
    And we will have more to go in on this. I note that my 
ranking member has arrived. I want to really thank him for his 
very strong advocacy on the National Science Foundation.
    We have worked on a bipartisan basis on this. And I think 
it is one of the things that we have really enjoyed working 
together. So Senator Bond, let me turn it over to you.

                STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Thank you very much, Madam Chair; I thank you 
for your kind words. I also thank you for your leadership and I 
could just say, ``Amen, I agree with everything you said,'' but 
being this is the United States Senate, I am going to say it 
anyhow. Because this is an area where we both have a deep 
personal interest and concern, I want to share with you some of 
those concerns, some of the optimism, some of the hope.
    I apologize to you, Madam Chair, and to the witnesses. I 
was late. I was on the phone with another friend from the White 
House talking about VA/HUD issues. It is certainly nice to be 
popular. They have our phone numbers and I apologize for the 
delay.
    I join in welcoming Dr. Colwell, Dr. Marburger, and Dr. 
Washington.
    Dr. Washington, in your first appearance as the Committee--
before the Committee as chair of the National Science Board, I 
look forward to working with you. You have very big shoes to 
fill, since Dr. Kelly was very active, very helpful to us and 
played a major role in boosting NSF's budget.
    I also understand that the Inspector General, Dr. Tina 
Boesz, is here. She has done an outstanding job in reviewing 
NSF management practices, especially of the large facility 
project area.
    Also, I add a special commendation for the outstanding work 
of Dr. Bob Eisenstein, who is departing the Foundation at the 
end of the month. Dr. Eisenstein is a native Missourian, who is 
in charge of the math and physical sciences directorate at NSF, 
and leaves a very distinguished record. I wish him the very 
best and thank him for his great service.
    This is our last budget hearing, or at least regularly 
scheduled hearing in this Committee. But it is very important 
to us, because it gives an opportunity to talk about the 
critical role that science and the National Science Foundation, 
OSTP play in the economic and intellectual growth and in the 
well-being of the Nation.
    According to many economists, over the past half century, 
advances in science and engineering have stimulated at least 
half of the Nation's economic growth. Further, investment in 
scientific research has led to innovative developments in the 
high-tech industry, most notably the Internet, lasers, and 
supported notable scientists such as Carl Sagan and John Nash.
    And that is why my colleague, Senator Mikulski, and I have 
led the bipartisan, effort to double NSF's budget. As she has 
said, unfortunately, we have a long way to go. We do not have 
the budget recommendation.
    And while Federal support in life sciences, specifically 
NIH, has increased significantly. The combined share of the 
funding for physical sciences and engineering in the Federal 
research budget total has actually dropped.
    I am very disappointed that the Administration has not 
demonstrated the same level of support for NSF, as we have 
continued to argue for NSF and ask Dr. Marburger to help us 
change the Administration's views about the importance of the 
physical sciences.
    Support for NSF is vital to the research in the bio-medical 
field, as well. And that is what so many doctors have told me 
throughout Missouri and throughout the country.
    They have been alarmed at the disparity in Federal funding 
between life science that NIH supports and the physical 
sciences that NSF mainly supports. Without NSF's supported 
research and the physical sciences, medical advances will 
stagnate.
    Many medical technologies such as magnetic resonance 
imaging, ultrasound, digital mammography, genomic mapping, 
could not have occurred and cannot improve to the next level of 
proficiency without underlying knowledge from NSF supported 
work in biology, physics, chemistry, math, engineering, and 
computer sciences. Simply put, supporting NSF supports the work 
of NIH.
    Now, the Federal Government's drop in support of the 
physical sciences has also alarmed the high-tech industry, 
because of the significant decline in bachelor degrees in 
physical sciences. As the chair pointed out, this decline has 
put our Nation's capabilities for scientific innovation at 
risk; and equally important, at risk of falling behind other 
industrial Nations.
    The high-tech industry is struggling to find qualified 
engineers and scientists and, as noted, becoming much more 
reliant on foreign nationals to fill those positions. That is 
fine if we can encourage those people to come here and stay 
here, but when they go home and take their knowledge with them, 
that is a serious brain drain.
    Many notable researchers in the high-tech industry have 
told me that the shortages of trained American scientists and 
engineers has limited the growth potential of the electronics 
and software industries and allowed foreign competitors to 
catch up to U.S. industry.
    To address the shortage of the tech talent in this country, 
I have joined with Senate colleagues, including Senator 
Mikulski, Senator Lieberman, Senator Frist, and Senator 
Domenici, in introducing legislation to improve undergraduate 
education in math, science, engineering, and technology.
    I appreciate the Administration's support of the program 
and its budget request and hope we can provide more money there 
this year.
    As, again, as the Chair has mentioned, one of my specific 
areas of interest is plant biotechnology. I strongly believe 
that biotechnology, namely the plant genome research, is 
critical in maintaining the long-term sustainability and 
competitiveness of our Nation's agriculture. In particular, 
NSF's plant genome program has generated exciting possibilities 
for improving human health and nutrition.
    It can be a very powerful tool for addressing hunger in 
many third-world countries, as well as improving our own 
environment and our own nutrition values in food.
    Now, while I would prefer to spend more minutes 
highlighting the importance of scientific endeavors, such as 
the plant genome, I need to raise some questions about the 
Foundation's management.
    As you all know, I am a big advocate for the Foundation. 
But my enthusiasm for boosting the NSF's budget runs into 
problems when we have management problems.
    In the inspector general's written testimony submitted for 
this hearing, she found three significant management problems 
related to post-award management, work force planning, and most 
notably, large facility project management. These findings are 
troubling, especially since these issues are not new and are 
not difficult to resolve.
    The most troubling management issue is NSF's management and 
oversight in large research facilities. At my request, the I.G. 
audited NSF's funding and management of major research 
equipment and facilities, and recently issued its final report 
on May 1.
    The I.G. report noted that the Foundation has made some 
effort to improve its management and oversight of large 
facilities; however, the I.G. found that the lack of adequate 
guidance ``have allowed NSF to use multiple appropriation 
accounts to fund the acquisition and construction costs of 
major research and equipment and facilities, and led to 
inconsistency in the types of costs funded through the MRE 
account.''
    Unbeknownst to the science board and Congress, NSF 
practices have resulted in significant cost overruns and 
cannibalization of funds from other worthy research projects. 
For example, the I.G. report found that NSF's contribution to 
the Large Hadron Collider project would exceed its budgeted 
amount by $59 million or 73 percent. According to the I.G.'s 
report, this practice seems to be common in other large 
facility projects.
    This report confirmed my fears about the oversight of NSF's 
large facilities. It appears that once the money is out the 
door, too little follow-up occurs.
    Now, NSF has taken some important steps, such as developing 
a management and oversight plan, but much more needs to be done 
and needs to be done very promptly. I've seen how mismanagement 
often leaves other agencies open to budget cuts and NSF would 
not be immune.
    Related to this issue is my concern about the Foundation's 
process for prioritizing its large facility projects. I have 
recently asked my staff to begin discussions with the National 
Academy of Sciences to see if the Academy could provide us some 
guidance on how NSF can better prioritize its numerous large 
facility projects.
    I plan to pursue this matter and hope that the Science 
Board and the Foundation can work with us and we can develop a 
better plan.
    Lastly, I need to express my concern about the proposed 
national underground science laboratory at the Homestake Mine 
in South Dakota. Since I first became involved with this 
subcommittee, I have defended the peer review system.
    However, despite my remarks--or remarks made by the lab's 
political advocates that the Homestake project will be judged 
solely on the scientific merits, I am skeptical. I fear that 
the peer review system is in danger and that political pressure 
may prevail.
    I have been concerned about the project ever since the 
Homestake Identification Bill was forced through Congress last 
year. I believe that the passage of the indemnification bill 
has tainted what could otherwise be a scientific worthy 
project. The bill has created a dark cloud around the Homestake 
Mine project, due to the dangerous legal, budgetary, and policy 
implications it may create.
    And it could be, unfortunately, a great, big, black hole in 
the ground where we pour research dollars badly needed in other 
areas.
    This very costly program may be largely redundant since 
there are already sophisticated neutrino labs in Canada and 
Europe. I urge NSF and the Science Board to review this project 
carefully and I assure you I intend to monitor it carefully as 
well.
    With that, I thank the Chair for her indulgence. I have a 
lot to say, because this is a very important agency to me.
    Senator Mikulski. Yes, absolutely.
    Senator Johnson, did you want to have an opening statement 
or any remarks?

                    STATEMENT OF SENATOR TIM JOHNSON

    Senator Johnson. Well, Madam Chairman, I will submit an 
opening statement. I want to expedite the opportunity to listen 
to this panel.
    I would make just a very brief observation. One is just 
that I want to express my enthusiasm for Federal science and 
technology investments, despite the fact that my own State of 
South Dakota ranks 52nd in Federal expenditures in research and 
development, dead last behind the District of Columbia and 
Puerto Rico.
    And I share your support for higher education, NSF 
stipends. I benefitted, myself, as a graduate student from an 
NSF grant.
    I want to express strong support for the EPSCoR program, 
which has done a great deal to help small States develop the 
research infrastructure that they need to have at their 
colleges and universities. And lastly, I want to observe that a 
panel of experts convened by the NSF recommended the Home Stake 
Gold Mine as a potential site for a national underground 
science laboratory.
    That assessment was conducted by scientists who evaluated 
the proposals on the merits, and the subsequent proposal is now 
before the NSF for further consideration and peer review.
    I appreciate that the future of the proposal be determined 
by its scientific merit. And I do not believe the South Dakota 
delegation, the bipartisan delegation effort to make sure that 
the Home Stake Mine as an option is inappropriate political 
intervention.
    We have had to work with the Home Stake Mining Company to 
see that they do not flood this unique resource, an 8,000-foot 
shaft, so that it remains an option. But the Congressional 
delegation from South Dakota has no intention of intervening 
and otherwise pressuring or causing the selection process that 
would involve anything other than scientific peer review on its 
merits.
    We have worked on a parallel track to ensure that the 
research opportunities of mining are available, should the NSF 
and the National Science Board recommend proceeding with such 
an initiative. And I want to thank Madam Chairman for her work 
in that regard to allow us to preserve this as an option. But 
that is the extent of the Congressional involvement in this NSF 
project, and it is my hope it will go forward untainted by any 
political concerns, and that the base science in the end wins 
out.
    So thank you, Madam Chairman, and I will submit a more 
complete statement for the record.
    Senator Mikulski. Thank you, Senator Johnson.
    Senator Johnson. Oh, I would observe that, unfortunately, I 
have a conflicting obligation involving a foreign trade 
delegation and I am going to have to leave much sooner than I 
would otherwise like. But I do want to welcome the panel. And I 
appreciate their working with this subcommittee. Thank you
    Senator Mikulski. Let us now turn to our witnesses. And the 
way we would like to proceed is first to Dr. Colwell, then to 
Dr. Washington; and then Dr. Marburger, we are going to ask you 
to be the wrap up.
    I am going to ask unanimous consent that your written 
statements be included in the record. I know you have--each 
have oral statements. And in the interest of time, just presume 
that you have all been introduced and proceed, kind of like you 
are defending your dissertation, okay?
    Dr. Colwell. Thank you, Chairwoman Mikulski, Senator Bond, 
and members of the committee. Thank you for providing the 
opportunity to discuss the President's budget request for the 
National Science Foundation.
    Before I begin, I would just like to say that we are 
thrilled to have Dr. Warren Washington, the newly elected chair 
of the National Science Board here with us. And with your 
permission, I would ask that Dr. Washington be permitted to 
address the committee.
    So, Dr. Washington.

                   STATEMENT OF DR. WARREN WASHINGTON

    Dr. Washington. Thank you. First of all, I would like to 
say, Madam Chair and to Ranking Member Bond, and the members of 
the subcommittee, I appreciate having the opportunity to 
testify before you as chair----
    Senator Mikulski. Dr. Washington, would you pull that 
microphone closer?
    Dr. Washington. Okay.
    Senator Mikulski. Thank you.
    Dr. Washington [continuing]. As chair of the National 
Science Board. I am Warren Washington, senior scientist and 
section head of the climate change research section of the 
National Center for Atmospheric Research.
    On behalf of the science board, I thank the subcommittee 
for its sustained commitment to a broad portfolio of 
investments in science, mathematics, engineering and technology 
research and education. These investments contribute to our 
Nation's long-term security and economic vitality, and to the 
well-being of all Americans.
    The National Science Board has approved and supports the 
National Science Foundation's budget request for fiscal 2003. 
The 5 percent increase in funding will allow NSF to continue to 
nurture people, ideas, and tools needed to generate new 
knowledge and new technologies.
    Among the important initiatives that this budget includes 
are priorities for science and engineering work force, 
mathematical and statistical science research that will advance 
interdisciplinary science and engineering, and research in the 
social, behavioral and economic sciences to explore the complex 
interactions between technology and society.
    The NSF director, Dr. Rita Colwell, will discuss these and 
other specifics of the budget request in her testimony.
    Among the Federal agencies, NSF has the unique mission of 
advancing the Nation's health, prosperity, and welfare by 
supporting basic research and education in all fields of 
science and engineering.
    NSF programs support new discoveries and innovative 
educational programs at all levels. NSF funded research and 
education are critical to sustaining United States strength in 
science and technology, which is a key element of national 
security.
    Revolutionary advances such as those in information 
technology, nano-technology, materials and biotechnology, 
remind us that such breakthroughs with promising benefits to 
the economy, the work force, education, health, and national 
security require long-term, high-risk investments.
    Despite wide-spread recognition of the benefits that flow 
from federally supported research, as a Nation, we are 
seriously under-investing in basic research. In our $10 
trillion gross domestic product, the Federal Government budgets 
$24 billion to basic research, which represents one-fourth of 1 
percent of the gross domestic product.
    Of the $24 billion, NSF receives $3 billion to support 
cutting edge science. It is estimated that the NSF proposals, 
representing another $5 billion, are worthy of investment if 
funds were available.
    Achieving a balanced portfolio in the basic sciences is as 
important as the quality and quantity of the research funded. 
For example, as Congressional leaders and others have pointed 
out, the success of the National Institutes of Health's efforts 
to find cures for deadly diseases depends heavily on the 
underpinning of basic research supported by NSF.
    In addition to providing oversight to NSF, the board 
provides advice to the President and Congress on matters of 
science and engineering policy. I would like to mention some of 
our current activities related to major issues affecting the 
health of the science and engineering enterprise.
    The level of Federal investment is crucial to the health of 
the science and engineering enterprise. Equally crucial is how 
effectively that investment is made. The growing opportunities 
for discovery and the inevitable limits on Federal spending 
mean that hard choices must be made and priorities set.
    In its recent report, ``Federal Research Priorities, A 
Process for Setting Priorities,'' the board offers its 
recommendations for a more effective budget process, including 
an improved information base and a process for allocating 
Federal funding to research.
    The conduct and the communication and the use of science 
are intrinsically global. The collaborations and international 
partnerships contribute to addressing a broad range of 
international problems and help build more stable relations 
among Nations.
    In its recent report ``Towards A More Effective Role for 
the U.S. Government in International Science and Engineering,'' 
the board recommends that the Federal Government increase the 
effectiveness of its coordination activities, increase 
international cooperation, especially with developing countries 
and by younger scientists, and improve the use of science and 
engineering information in dealing with global issues.
    An area of constant concern for the NSF and the board is 
the quality and the adequacy of infrastructure to enable 
scientific discoveries in the future. The rapidly changing 
environment of new knowledge, new tools, and new information 
capabilities has created a demand for more complex and more 
costly facilities for scientific research. A board task force 
is assessing the changing needs and strategies to ensure that 
the Nation will have the infrastructure to sustain cutting-edge 
science and engineering research.
    We expect to receive the task force's preliminary findings 
this summer.
    For the U.S. leadership in science and engineering, there 
is no more important an issue than the development of a skilled 
technical work force. As a Nation, we are not attracting the 
number of science and engineering students our Nation needs to 
sustain its leadership, nor are we successfully tapping all of 
our domestic resources, especially the under-represented 
minorities and women.
    A board task force is considering policy options for 
ensuring an adequate science and engineering work force for the 
future. We anticipate receiving the task force's report by the 
end of the year.
    Madam Chair, at this point I would like to close my formal 
remarks. I thank the subcommittee for its long-time support of 
science--for the science community, especially the National 
Science Foundation, and for allowing me to comment on 
significant national policy concerns, as well as on the 
foundation's budget. Thank you.
    [The statement follows:]

              Prepared Statement of Dr. Warren Washington

    Madame Chair, Ranking Member Bond, and members of the Subcommittee, 
I appreciate having the opportunity to testify before you as Chair of 
the National Science Board. I am Warren Washington, Senior Scientist 
and Section Head of the Climate Change Research Section at the National 
Center for Atmospheric Research.
    On behalf of the National Science Board, I thank the Subcommittee 
for its sustained commitment to a broad portfolio of investments in 
science, mathematics, engineering, and technology research and 
education. These investments contribute to our Nation's long-term 
security and economic vitality and to the well being of all Americans.
The National Science Foundation's Budget Request
    The National Science Board has approved and supports the National 
Science Foundation's budget request for fiscal year 2003. The 5 percent 
increase in funding will allow NSF to continue to nurture the people, 
ideas, and tools needed to generate new knowledge and new technologies. 
Among the important initiatives that this budget includes are 
priorities for the science and engineering workforce; mathematical and 
statistical science research that will advance interdisciplinary 
science and engineering; and research in the social, behavioral, and 
economic sciences to explore the complex interactions between 
technology and society. The budget continues support for the Math and 
Science Partnership program; increases funding for the Foundation's six 
priority areas, which have the potential of enormous payoff for the 
Nation; and provides a much-needed increase in annual stipends for 
graduate fellows in a critical investment, the future U.S. science and 
engineering workforce. The NSF Director, Dr. Rita Colwell, will discuss 
these and other specifics of the budget request in her testimony.
    As this Committee recognizes, NSF is a major contributor both to 
scientific research and science education. Federal investments in the 
basic sciences through NSF have produced new discoveries and new 
technologies essential to our national security and economic 
prosperity. In addition, NSF supports innovative education programs 
from pre-kindergarten through graduate school, preparing the next 
generation of scientists and engineers and contributing to a more 
scientifically literate workforce and society.
    Each year NSF evaluates, primarily through external peer review, 
32,000 proposals from 2,000 colleges, universities, and institutions. 
The value of the proposals is approximately $16 billion. NSF annually 
makes 10,000 awards, totaling nearly $3 billion, in a highly 
competitive merit review process. It is estimated that NSF proposals 
representing an additional $5 billion are worthy of investment if the 
funds were available.
The Health of the Science and Engineering Enterprise
    The new knowledge and technologies emerging today are a tribute to 
Federal research investments made years ago in a spirit of 
bipartisanship. When those investments began, no one could foresee 
their future impact. Revolutionary advances such as those in 
information technology, nanotechnology, materials, and biotechnology 
remind us that such breakthroughs with promising benefits to the 
economy, the workforce, our educational systems, and national security 
require long-term, high-risk investments. Among Federal agencies, NSF 
has the unique mission of advancing the Nation's health, prosperity, 
and welfare by supporting research and education in all fields of 
science and engineering. NSF plays a critical role in supporting new 
discoveries and knowledge as well as innovative educational programs at 
all levels. NSF-funded research and education are critical to 
sustaining U.S. strength in science and technology, a key element of 
national security.
    Despite widespread recognition of the benefits that result from 
federally supported scientific research, as a Nation, we are seriously 
under-investing in basic research. In our $10 trillion Gross Domestic 
Product, the Federal Government budgets $24 billion to basic research, 
which represents one-fourth of 1 percent of the Nation's Gross Domestic 
Product. Of the $24 billion, NSF receives $3 billion to support 
cutting-edge science and the search for new knowledge.
    Achieving a balanced portfolio in the basic sciences is as 
important as the quality and quantity of research funded. For example, 
as Congressional leaders and others have pointed out, the success of 
the National Institutes of Health's efforts to find cures for deadly 
diseases depends heavily on the underpinning of basic research 
supported by the National Science Foundation.
National Science Board Policy Studies
    In addition to providing oversight to NSF, the Board provides 
advice to the President and the Congress on matters of science and 
engineering policy. I would like to mention some of our current 
activities related to major issues affecting the health of the science 
and engineering enterprise.
             federal investment in science and engineering
    The level of Federal investment is crucial to the health of the 
science and engineering enterprise. Equally crucial is how effectively 
that investment is made. The growing opportunities for discovery and 
the inevitable limits on Federal spending mean that hard choices must 
be made and priorities set.
    In its recent report, Federal Research Resources: A Process for 
Setting Priorities, the Board offers its recommendations for a more 
effective budget process, including an improved information base and a 
decision-making process for allocating Federal funding to research. The 
Board's conclusions are based on reviews of the literature on budget 
coordination and priority setting for public research and invited 
presentations from and discussions with representatives of the Office 
of Management and Budget, the Office of Science and Technology Policy, 
the Federal research and development agencies, congressional staff, 
high-level science officials from foreign governments, experts on data 
and methodologies, and spokespersons from industry, the National 
Academies, research communities, science policy community, and academe.
     u.s. government role in international science and engineering
    In the 21st century, advances in science and engineering will to a 
large measure determine economic growth, quality of life, and the 
health and security of our planet. The conduct, communication, and use 
of science are intrinsically global. New ideas and discoveries are 
emerging all over the world and the balance of expertise is shifting 
among countries. Collaborations and international partnerships 
contribute to addressing a broad range of international problems. They 
also contribute to building more stable relations among nations by 
creating a universal language and culture based on commonly accepted 
values of objectivity, sharing, integrity, and free inquiry. The 
Federal Government plays a significant role in promoting international 
science and engineering activities and supporting research with 
international dimensions.
    In its recent report entitled Toward a More Effective Role for the 
U.S. Government in International Science and Engineering, the Board 
concludes that new approaches to the management and coordination of 
U.S. international science and engineering activities are needed if the 
United States is to maintain the long-term vitality of its science and 
engineering enterprise and the vitality of its economy. The Board 
recommends that the Federal Government (1) increase the effectiveness 
of its coordination of international science and engineering 
activities, (2) increase international cooperation in fundamental 
research and education, particularly with developing countries and by 
younger scientists and engineers; and (3) improve the use of science 
and engineering information in foreign policy deliberations and in 
dealing with global issues and problems.
              u.s. science and engineering infrastructure
    An area of constant concern for NSF and the Board is the quality 
and adequacy of infrastructure to enable scientific discoveries in the 
future. The rapidly changing environment of new knowledge, new tools, 
and new information capabilities has created a demand for more complex 
and more costly facilities for scientific research.
    A Board task force is assessing the current status, changing needs, 
and strategies needed to ensure that the Nation will have the 
infrastructure to sustain cutting-edge science and engineering 
research. We expect to receive the task force's preliminary findings 
this summer.
        national workforce policies for science and engineering
    For U.S. leadership in science and engineering, there is no more 
important issue than the development of a skilled technical workforce. 
As a Nation, we are not attracting the numbers of science and 
engineering students our Nation needs to sustain its leadership. Nor 
are we successfully tapping all our domestic resources, especially 
under-represented minorities and women. The pool of potential science 
and engineering students will increasingly reflect the growing 
diversity in the American workforce and society.
    A Board task force on workforce policies for science and 
engineering is reviewing U.S. workforce needs, the role of foreign 
students and workers, and policy options for ensuring an adequate 
science and engineering workforce for the future. We anticipate 
receiving the task force's report by the end of this year.
    Madame Chair, at this point I would like to close my formal 
remarks. I thank the Subcommittee for its long-time support of the 
science community, especially the National Science Foundation, and for 
allowing me to comment on significant national policy concerns, as well 
as on the Foundation's budget request.

    Senator Mikulski. Thank you very much, Dr. Washington.
    Dr. Colwell.

                     STATEMENT OF DR. RITA COLWELL

    Dr. Colwell. I would--will continue, Madam Chair. Every 
year, the foundation's optimal use of limited public funds has 
relied on two conditions. One is ensuring that our research and 
education investments are aimed and continuously re-aimed at 
the frontiers of understanding, and then certifying every 
dollar goes to competitive merit reviewed and time limited 
awards with clear criteria for success.
    NSF has been proactive in implementing the President's 
management agenda, and we welcome--and we will apply input from 
many sources to continuously improve the way we manage programs 
at NSF.
    As an aside, I would say that NSF is, by far, the leading 
agency in the world and looked to by other countries in 
following the procedures that we have developed.
    When these conditions are met, our Nation gets the most 
intellectual and economic leverage from its research and 
education investment. The National Science Foundation is 
requesting $5.036 billion for fiscal year 2003, $240 million or 
5 percent more than the previous year.
    For the United States to stay on the leading edge of 
discovery and innovation, we cannot do less. Before providing a 
few highlights of the budget, let me stress that the priority 
setting process at NSF results from continual consultation with 
the research community.
    New programs are added or enhanced only after seeking the 
combined expertise and the experience of the science and 
engineering community, the Director, the Deputy Director and 
the National Science Board.
    Programs are initiated or enlarged based on consideration 
of their intellectual merit, the broader impacts of the 
research that is done, the importance to science and 
engineering for the United States and balance across fields and 
disciplines, as well as synergy with research and other 
agencies and other Nations.
    NSF coordinates its research with our sister research 
agencies informally by program officers being actively informed 
of other agencies' programs and formally through interagency 
agreements that spell out the various agency roles in research 
activities.
    Moreover, through our committee of visitors process, there 
is continuous evaluation. There is feedback of information on 
how the NSF programs are performing. One of the highlights of 
the budget of this year is the second installment of $200 
million for the national 5-year, $1 billion Math and Science 
Partnership Program, the President's program, which we heartily 
and thoroughly endorse.
    The program links local schools with colleges and 
universities to improve pre-K to 12 math and science education, 
trains teachers, and to create innovative ways to raise the 
performance of all students and schools.
    An investment of approximately $37 million will increase 
the annual stipends for graduate fellows to $25,000, to attract 
more of the Nation's most promising students in science and 
engineering. I would like to thank the Chair and Senator Bond 
for your support of graduate student fellowships.
    The budget also includes funding for six priority areas, 
including $221 million for nano-technology research, 
fundamental and important for our country; $286 million for 
information technology research; and $60 million as part of the 
new priority area in mathematical and statistical sciences 
research that will ultimately advance interdisciplinary science 
and engineering.
    We will direct $185 million to the NSF's Learning for the 
21st Century Work Force priority area, including $20 million to 
fund three or four new multi-disciplinary, multi-institutional 
Science of Learning Centers to enhance our understanding of how 
we learn, how the brain stores information, and how we can best 
use the new information technology to promote learning in our 
classrooms.
    We are also requesting $10 million to seed a new priority 
area in the social, behavioral, and economic sciences to 
explore the complex interactions between new technology and 
society, so that we can better anticipate and prepare for their 
consequences.
    Finally, the budget requests $79 million for research on 
bio-complexity and the environment. Now, this builds on the 
past investments to study the remarkable, the dynamic web of 
interrelationships that arise when living things at all levels 
interact with their environment. Research in two new areas this 
year as part of bio-complexity are the microbial genome 
sequencing and the ecology of infectious diseases that will 
help us develop strategies to assess and manage the risks of 
infectious diseases, invasive species, and biological weapons.
    I should add that as part of the Administration's new 
multi-agency Climate Change Research Initiative, we will 
implement a $15 million research program to advance 
understanding in highly focused areas of climate science to 
reduce uncertainty and facilitate policy decisions.
    Our budget also includes $76 million for programs slated to 
be transferred to NSF from NOAA, EPA, and the USGS. I want to 
assure the committee that NSF has been working closely with 
these agencies to develop plans for implementing these 
transfers, should they be approved by Congress.
    In large facilities, we will continue support for the next 
phase of construction for the Atacama Large Millimeter Array, 
ALMA. New construction projects in fiscal year 2003 include two 
prototype sites for the National Ecological Observatory 
Network, NEON, at a cost of $12 million to analyze data to 
detect abrupt changes or long-term trends in the environment.
    The budget also requests $35 million for EarthScope to 
detect and investigate earthquakes, volcanic eruptions, and 
landslides on the North American continent.
    The events following September 11 demonstrated our 
capacity--the National Science Foundation's capacity to engage 
the research community in ways that are immediately responsive 
to national needs. We owe this flexibility to a highly trained 
scientific and engineering work force that's capable of 
selecting the most interesting, the most challenging problems 
for their research.
    It is this flexibility, enabled by the merit review system, 
that makes ours a model of scientific support that is clearly 
the envy of the world. Madam Chair, I thank you for allowing me 
to include a copy of the NSF budget summary as part of my 
testimony and I will be pleased to respond to any questions 
that the committee may have. Thank you.
    [The statements follow:]

               Prepared Statement of Dr. Rita R. Colwell

    Chairwoman Mikulski, Senator Bond, and Members of the Committee, 
thank you for providing this opportunity to discuss the President's 
budget request for the National Science Foundation.
    Every year, the Foundation's optimal use of limited public funds 
has relied on two conditions: Ensuring that our research and education 
investments are aimed--and continuously re-aimed--at the frontiers of 
understanding; and certifying that every dollar goes to competitive, 
merit-reviewed, and time-limited awards with clear criteria for 
success.
    When these two conditions are met, our nation gets the most 
intellectual and economic leverage from its research and education 
investments.
    The National Science Foundation is requesting $5.036 billion for 
fiscal year 2003, $240 million or 5 percent more than the previous 
fiscal year. For the United States to stay on the leading edge of 
discovery and innovation, we cannot do less.
    Before providing a few highlights of the budget, let me stress that 
the priority setting process at NSF results from continual consultation 
with the research community. New programs are added or enhanced only 
after seeking the combined expertise and experience of the science and 
engineering community, the Director and Deputy, and the National 
Science Board. Programs are initiated or enlarged based on 
considerations of their intellectual merit, broader impacts of the 
research, the importance to science and engineering, balance across 
fields and disciplines, and synergy with research in other agencies and 
Nations. NSF coordinates it its research with our sister research 
agencies both informally--through the active monitoring by program 
officers of other agencies' programs--and formally, through more than 
150 MOUs and Interagency Agreements that spell out the various agency 
roles in research activities.
    One of the highlights of the budget is a second installment of $200 
million for the national 5-year, $1 billion Math and Science 
Partnership Program. The program links local schools with colleges and 
universities to improve pre-K-12 math and science education, train 
teachers, and create innovative ways to raise the performance of all 
students and schools.
    An investment of approximately $37 million will increase annual 
stipends for graduate fellows to $25,000 to attract more of the 
Nation's most promising students to science and engineering.
    The budget also includes funding for six priority areas, including 
$221 million for nanotechnology research, $286 million for information 
technology research, and $60 million as part of a new priority area in 
mathematical and statistical sciences research that will ultimately 
advance interdisciplinary science and engineering. $185 million is 
directed toward NSF's Learning for the 21st Century Workforce priority 
area--including $20 million to fund three to four new multi-
disciplinary, multi-institutional Science of Learning Centers to 
enhance our understanding of how we learn, how the brain stores 
information, and how we can best use new information technology to 
promote learning.
    We are also requesting $10 million to seed a new priority area in 
the social, behavioral, and economic sciences to explore the complex 
interactions between new technology and society so that we can better 
anticipate and prepare for their consequences.
    Finally, the budget requests $79 million for research on 
biocomplexity in the environment. This builds upon past investments to 
study the remarkable and dynamic web of interrelationships that arise 
when living things at all levels interact with their environment. 
Research in two new areas this year--microbial genome sequencing and 
ecology of infectious diseases--will help develop strategies to assess 
and manage the risks of infectious diseases, invasive species, modified 
organisms, and biological weapons.
    I should add that as part of the Administration's new multi-agency 
Climate Change Research Initiative, we will implement a $15 million 
research program to advance understanding in highly focused areas of 
climate science, to reduce uncertainty and facilitate policy decisions. 
Our budget also includes $76 million for programs slated to be 
transferred to NSF from NOAA, EPA, and the USGS. I want to assure the 
Committee that NSF has been working closely with these agencies to 
develop plans for implementing these transfers should they be approved 
by Congress.
    In large facilities, we will continue support for the next phase of 
construction of the Atacama Large Millimeter Array (ALMA). New 
construction projects in the fiscal year 2003 budget include two 
prototype sites of the National Ecological Observatory Network (NEON) 
at a cost of $12 million to analyze data to detect abrupt changes or 
long-term trends in the environment. The budget also requests $35 
million for EarthScope to detect and investigate earthquakes, volcanic 
eruptions, and landslides on the North American continent.
    Madam Chair, if there are no objections, I would like to include a 
copy of the NSF budget summary as part of my testimony, and I would be 
pleased to respond to any questions that the committee may have.
                                 ______
                                 

              Prepared Statement of Dr. Christine C. Boesz

    Madam Chair, Senator Bond, and distinguished members of the 
Subcommittee, I am Dr. Christine Boesz, Inspector General at the 
National Science Foundation (NSF). I appreciate the opportunity to 
appear before you today. As you know, NSF continues to be an innovative 
agency dedicated to maintaining American leadership in the discovery 
and development of new technologies across the frontiers of scientific 
and engineering research and education. NSF has had an extraordinary 
impact on scientific and engineering knowledge, laying the groundwork 
for technological advances that have shaped our society and fostered 
the progress needed to secure the Nation's future. Because the 
scientific enterprise and its underlying basic research are 
everchanging, NSF continuously faces new challenges. Consequently, my 
office is working closely with NSF management to identify and address 
issues that are important to the success of the Agency. Today I would 
like to provide an update on the status of NSF's progress in three 
areas critical to its success: post-award management, workforce 
planning, and large facilities management.
                         post-award management
    NSF's primary mission is to fund extramural research and education 
activities that will advance science and engineering. Over 95 percent 
of NSF's fiscal year 2002 budget is in support of these activities, 
which are funded primarily through grants and cooperative agreements. 
The Agency's scientific directorates and offices have a shared 
responsibility with the Office of Budget, Finance, and Award Management 
to oversee the financial and programmatic management of these awards. 
Because of its enormous impact on NSF's daily operations, for the past 
2 years I have identified award administration as one of NSF's top ten 
management challenges.\1\
---------------------------------------------------------------------------
    \1\ Memorandum from Christine C. Boesz, Inspector General, National 
Science Foundation, to Eamon M. Kelly, Chairman, National Science 
Board, and Rita R. Colwell, Director, National Science Foundation 
(January 30, 2002) (on file with the National Science Foundation Office 
of Inspector General) [hereinafter 2001 Management Challenges]; Letter 
from Christine C. Boesz, Inspector General, National Science 
Foundation, to Senator Fred Thompson, Chairman, Senate Committee on 
Governmental Affairs (Nov. 30, 2000) (on file with the National Science 
Foundation Office of Inspector General) [hereinafter 2000 Management 
Challenges].
---------------------------------------------------------------------------
    In addition, during the most recent annual audit of NSF's financial 
statements, our external auditors identified, as a reportable 
condition, weaknesses in NSF's internal controls over the financial 
aspects of post-award management.\2\
---------------------------------------------------------------------------
    \2\ Auditor's Report, fiscal year 2001 National Science Foundation 
Financial Statement Audit, (January 18, 2002).
---------------------------------------------------------------------------
    The auditors found that, while NSF has a robust system of award 
management over its pre-award and award phases, it needs to develop a 
more rigorous, risk-based monitoring program for the post-award phase. 
In addition, NSF needs to significantly improve its current policies 
and procedures for the valuation and tracking of its assets, including 
facilities and equipment held and maintained by other entities.
    NSF management agrees that award administration is one of NSF's top 
management challenges, but disagrees that it should be classified as a 
reportable condition for the purposes of financial statement reporting. 
Nevertheless, NSF is working to continuously improve its business 
processes by refining its award management procedures to include a more 
structured, risk-based monitoring element. Further, NSF is taking steps 
to improve its oversight of assets for which it holds title.
    In support of these efforts, my office is currently conducting a 
review of best practices in grant award administration to assist NSF in 
addressing this audit finding and meeting its management challenge. We 
are looking at organizations in both the public and private sectors 
that dispense and administer financial assistance awards, and we plan 
to issue our report by the end of the year. In addition, we will 
continue to assess NSF's overall progress in developing a more 
effective post-award management system.
                           workforce planning
    Despite an increasing workload and a budget that has grown from $1 
billion to $5 billion over the past 20 years, the number of full-time 
equivalent positions (FTEs) at NSF has remained relatively static.\3\ 
In addition, NSF, like much of government, is vulnerable to a wave of 
retirements in key areas. Because of these concerns, I identified 
workforce planning and training as another management challenge for 
NSF.\4\
---------------------------------------------------------------------------
    \3\ Compare NSF's fiscal year 1983 Budget Request to Congress with 
NSF's fiscal year 2001 Budget Request to Congress. Between 1983 and 
2001, FTEs increased by less than 2 percent, from 1200 to 1220.
    \4\ 2001 Management Challenges and 2000 Management Challenges, 
supra note 1.
---------------------------------------------------------------------------
    The strategic management of human capital is a major component of 
the President's Management Agenda \5\ and has been identified by the 
Government Accounting Office (GAO) as posing a significant risk 
government-wide.\6\ Last year, this Subcommittee requested that my 
office analyze the adequacy of the agency's staffing and management 
plans in light of the efforts to expand NSF's budget over the next 5 
years.\7\ In response to that request, my office has performed a review 
of NSF's workforce planning activities.
---------------------------------------------------------------------------
    \5\ Executive Office of the President of the United States, the 
President's Management Agenda: Fiscal Year 2002 (Aug. 2001).
    \6\ High-Risk Series: An Update, GAO-01-263 (2001); Human Capital: 
Meeting the Government-wide High-Risk Challenge, GAO-01-357T (2001).
    \7\ S. REP. NO. 107-43 (2001).
---------------------------------------------------------------------------
    NSF's workforce planning to date, like that of most Federal 
agencies, has largely been confined to stating broad goals and 
standards. It falls short of an actionable plan, which requires 
specific objectives, clearly assigned responsibilities, well-defined 
milestones for discrete actions, and practical measures of 
effectiveness for accountability. However, NSF is in the process of 
contracting for a multi-year business analysis of its operations that 
will include a human capital management plan component identifying its 
future workforce requirements.\8\
---------------------------------------------------------------------------
    \8\ NSF has issued a Request for Quotations for a multi-year 
business analysis of its operations, including a comprehensive human 
capital management plan. NSF expects to award this contract, which is 
estimated at $15 million over a 3 to 4 year period, next month. RFQ 
Number CPO 020027.
---------------------------------------------------------------------------
    While it may be premature to attempt a meaningful assessment of 
future workforce planning at NSF, due to the imminent launch of the 
Agency's ambitious business analysis initiative, I can offer some 
preliminary conclusions. I believe that the Agency's proposed business 
analysis, if diligently conducted by the contractor and properly 
overseen by NSF, represents a comprehensive and rigorous approach to 
reviewing NSF's primary operations and the human resources needed to 
staff them. It has the potential to generate an actionable plan that 
will help NSF identify and meet its current and future workforce needs, 
as well as plan ways to head off future problems. The ultimate value of 
the initiative, of course, will be determined by the validity of the 
findings of the business analysis and the actions that NSF takes 
pursuant to them. Given NSF's investment in time and resources, I look 
forward to substantial, concrete results that will improve the agency's 
business processes, including workforce planning and management.
                    large facilities management plan
    NSF's management of large facility projects is another issue that I 
have identified as one of the Agency's top ten management 
challenges.\9\ In response to the President's Budget Blueprint,\10\ 
increased scrutiny from the Office of Management and Budget (OMB) and 
the Congress, and recommendations from my office, NSF developed a 
Facilities Management and Oversight Plan (Plan) last fall.\11\
---------------------------------------------------------------------------
    \9\ 2001 Management Challenges and 2000 Management Challenges, 
supra note 1.
    \10\ Executive Office of the President of the United States, A 
Blueprint for New Beginnings: A Responsible Budget for America's 
Priorities 161 (Feb. 2001).
    \11\ National Science Foundation, Large Facility Projects 
Management & Oversight Plan NSB-01-153 (Sept. 2001).
---------------------------------------------------------------------------
    As part of its implementation, the Plan calls for significantly 
upgrading the current procedures and guidelines for oversight and 
management of large facility projects. The implementation has been 
slower than originally anticipated, and recruitment of a new Deputy 
Director for Large Facility Projects is now expected to be completed 
this summer. However, despite the delay, I am encouraged by recent 
progress. Last month, members of the team charged with drafting the new 
guidelines and procedures briefed my office on their progress, and I am 
pleased to see NSF is on track for full implementation later this year.
    To assist NSF in carrying out this plan, we have identified 
additional ways that NSF can enhance its policies and procedures to 
provide a more robust facilities management system.
    During our audit of the Major Research Equipment (MRE) 
appropriation account, which was requested by this Subcommittee, we 
found several areas that NSF needs to address to continue improving its 
management and oversight for large projects and facilities. My office 
issued a report responding to your request earlier this month.\12\ We 
found that questionable practices discovered during our audit of the 
Gemini project \13\ have occurred in other MRE-funded projects as well. 
NSF's existing policies and procedures have led the Agency to apply 
funding sources inconsistently among these projects and fail to account 
for each project's total cost.
---------------------------------------------------------------------------
    \12\ Office of Inspector General, National Science Foundation, 
Audit of Funding for Major Research Equipment and Facilities, Report 
No. 02-2007 (May 1, 2002).
    \13\ Office of Inspector General, National Science Foundation, 
Audit of the Financial Management of the Gemini Project, Report No. 01-
2001 (Dec. 15, 2000).
---------------------------------------------------------------------------
    As a result of these findings, we have recommended that NSF revise 
its financial management policies and procedures to ensure that it 
identifies the full cost of major research equipment and facilities and 
improves its administration of MRE accounts.
    NSF should be able to incorporate these improvements into its 
current efforts to implement the large facilities Plan.
    Finally, the MRE account provides funding for two distinctly 
different types of projects: those that invest in state-of-the-art, 
scientific tools for research and the development of new knowledge and 
ideas; and those that support the investment in mission critical 
property, plant, and equipment (PP&E) owned by NSF. The latter provide 
the facilities and logistical means for a broad range of science 
endeavors, primarily in NSF's Polar Programs. Both types of projects 
require effective management, i.e., planning, budgeting, construction 
oversight, and risk management, to ensure that these multimillion-
dollar projects proceed on schedule, stay within budget, and perform as 
expected. Both also require full-cost accounting in accordance with 
Federal accounting standards.
    But funding these types of projects from a single appropriation 
account creates a situation where the replacement, renovation, and 
upkeep of assets critical to the safety and health of researchers and 
their support personnel could potentially compete with new scientific 
tools for limited funding. In updating its large facilities policies 
and procedures, therefore, NSF should (1) plan and prioritize the 
mission critical PP&E projects separately from the development and 
construction of research tools and (2) distinguish their different 
funding sources, to avoid possible negative impact on the broad range 
of programs these assets support. More specific accounting will reduce 
confusion about how funds are being allocated, improve the accuracy of 
budget planning, and allow more effective monitoring of the use of 
funds.
    I am pleased to see NSF addressing large facility management 
through the development of this Plan. As the guidelines and procedures 
are fully developed and implemented, my office will continue to assess 
this critical area and recommend further enhancements where necessary. 
We share the same goal--efficient and effective management of these 
large and complex projects--and I look forward to assisting NSF in 
realizing this goal.
    Madam Chair, this concludes my statement. I would be happy to 
answer any questions you or other members of the subcommittee may have, 
or to elaborate on any of the issues that I have addressed today.
                          contact information
    For information about this statement, please contact Dr. Christine 
C. Boesz at 703-292-7100 or [email protected].

    Senator Mikulski. Thank you very much, Dr. Colwell.
    Dr. Marburger, please.

                   STATEMENT OF JOHN H. MARBURGER III

    Dr. Marburger. Madam Chairman and members of the 
subcommittee, I am pleased to appear before you today. And I 
ask that my written testimony, which described OSTP's budget 
and highlights of the Administration's fiscal year 2003 R&D 
budget request, be included for the record.
    Senator Mikulski. So ordered.
    Dr. Marburger. As you well know, the terrorist attacks on 
September 11th dramatically changed the context for this 
budget. The attacks laid bare vulnerabilities in our physical 
security and exacerbated weaknesses in our economy.
    The priorities of the Nation drastically changed in a 
matter of a few hours. And this budget reflects the change in 
priorities and three primary goals, winning the war on 
terrorism, protecting the homeland, and reviving our economy.
    Recognizing that science must play a role in these 
priorities, the President provides for an unprecedented level 
of investment in Federal R&D, marking the first time in history 
that a President has requested an R&D budget greater than $100 
billion. It is $111.8 billion, up eight points--8 percent 
overall from the previous fiscal year. This is the largest 
requested increase for R&D in over a decade.
    I cannot emphasize enough how dedicated the Administration 
is to working with you to see this R&D budget enacted.
    Madam Chairman, I believe you and I share a commitment to 
keeping America the world's leader in science and technology, 
and I hope you agree that OSTP plays a vital role in leveraging 
the government's science and technology investments for broad 
national goals.
    Our small staff advises the President on fast breaking 
science and technology developments. We coordinate the work of 
the R&D agencies to ensure that we get the biggest bang for our 
science and technology bucks, and we promote strategic 
partnerships among science and technology stake holders 
including State and local government, industry, the academic 
sector, and various international players as well.
    We bring real value added to the national science and 
technology enterprise, and I have two examples in my oral 
testimony that I would like to give that provide a sense of 
breadth of our scope.
    The two examples are the Administration's initiative on 
nano-technology, an interagency committee, and our efforts to 
improve mail security in response to the anthrax contamination, 
a relatively new type of function for our office.
    As you know, Madam Chairman, OSTP was deeply involved in 
the formation of the multi-agency, national nano-technology 
initiative. And your help was key to its implementation. OSTP, 
through the auspices of the National Science and Technology 
Counsel, convened an interagency working group to look into the 
feasibility of a nano-technology initiative for fiscal year 
2001.
    This subcommittee continues to provide the important 
interagency coordination and long-range planning for Federal 
research and nano-scales science and engineering and 
technology. These ongoing efforts have culminated this year in 
providing the nano-technology initiative with a 17 percent 
increase in funding, bringing the total effort to $679 million 
distributed among nine Federal agencies.
    This $100 million increase over last year's budget will 
accelerate long-term research in the manipulation of matter 
down to the atomic and molecular levels, increasing our 
understanding of fundamental building blocks for both material 
and microscopic devices. Research at the nano-scale promises 
revolutionary advances in pharmaceuticals, more efficient 
manufacturing, higher performance materials, faster computers 
and networks, and a cleaner environment.
    Priority research areas for this year will range from 
research to enable efficient nano-scale manufacturing to 
innovative nano-technology solutions for the detection of and 
protection from bio, chemical, and radiological explosive 
agents.
    Roughly 70 percent of the funding proposed under the 
initiative continues to go to university-based research. These 
investments will help provide the education and training of a 
new generation of workers for future industries and 
partnerships to enhance industrial participation in the nano-
technology revolution.
    Another quite different example of the diverse work of OSTP 
is our response to the anthrax contamination last fall. As I 
previously testified to, the office of homeland security 
requested that our office help resolve this issue. We assembled 
an irradiation technical team on short notice, which performed 
experiments at the U.S. Postal Service irradiation facilities 
to optimize the proper configuration of mail and to ensure the 
proper dose of sterilizing radiation is delivered.
    This team, which is still in existence, updates OSTP 
bimonthly and offers recommendations to the postal service to 
refine the irradiation process. We have added experts for the--
from the Centers for Disease Control and Prevention on--to 
conduct ongoing experiments that have helped to eliminate some 
of the negative effects of irradiation.
    The ability of OSTP to coordinate rapidly the many Federal 
agencies involved in these issues allowed the generation of 
scientific data from which recommendations were made to the 
postal service within 1 month of the original contamination.
    While irradiation of the letters and flat mail solves one 
set of problems, irradiation may not be the answer for parcels 
and packages due to irregularities in thickness and density.
    OSTP has formed an ethylene-oxide technical team, with 
support from the Department of Justice, experts from FDA, EPA, 
AFRE, CIA, OSHA, U.S. Postal Service, have designed and are 
conducting experiments to test the ability of this ethylene to 
oxide gas to sterilize packages.
    The recommendations from this technical team will be 
presented to the postal service, and will include guidelines 
and parameters, by which to document the sterility of the 
packages and protect critical contacts from harm.
    While our work on nano-technology and mail irradiation are 
just two examples of the outstanding work that OSTP does for 
the Nation, over the past year, we have also played a critical 
role in developing coordinated interagency budgets and policies 
in the areas of the homeland security, plant genome, food 
safety, networking and information technology, educational 
research, as well as others.
    I ask today for your continued support of OSTP's role in 
coordinating science and technology policy for the executive 
branch for our Nation at large. Our budget request of $5.37 
million and 40 FTE's for the fiscal year 2003 represents no 
increase in the FTE level and a slight increase in budget 
authority of less than 2 percent.
    These additional resources are essential to continue to 
provide the highest quality of work across our broad spectrum 
of responsibilities.
    Madam Chairman and members of the subcommittee, I hope that 
this brief overview, combined with my written statement, convey 
to you the extent of this Administration's commitment to 
advancing science and technology in the national interest and 
the importance of OSTP's role in that enterprise. I ask, of 
course, not only for your support for our budget for OSTP, but 
also want to express my appreciation for the longstanding, 
bipartisan support of this committee for the Office of Science 
and Technology Policy and for the Science and Technology 
Research Enterprise.
    Madam Chairman, you mentioned a large number of issues and 
questions in your opening statement. I would be glad to respond 
to these now, as time permits, and would respond to others in 
writing, if that is necessary. Thank you.
    [The statement follows:]

              Prepared Statement of John H. Marburger III

    Madam Chairman, Members of the Subcommittee, I am pleased to appear 
before you today to discuss the Office of Science and Technology 
Policy's (OSTP) budget request for fiscal year 2003.
    When I testified before the House Committee on Science prior to my 
confirmation by the Senate last October, I expressed my desire to 
``form a close and productive relationship with Congress, which has 
long provided bipartisan and enduring support of our world-leading 
science and engineering enterprise. The counsel and support of Members 
of Congress is an essential element of continued U.S. leadership across 
the frontiers of scientific knowledge.'' I look forward to working with 
you, Madam Chairman, and your Subcommittee, to demonstrate this 
commitment to science and engineering excellence once again this year. 
President Bush has set forth an agenda for science funding in the 
forthcoming fiscal year that takes advantage of important opportunities 
for discovery and development and sustains the basic machinery of 
research and development that is necessary for continued national 
leadership in science and technology.
    Last October I also referred to the fact that we must make 
important choices together because we have neither unlimited resources 
nor a monopoly of the world's scientific talent. I continue to believe 
that wise choices among the multitudes of possible research programs 
are necessary and that we must decide which programs to launch, 
encourage, and enhance and which ones to modify, reevaluate, or 
redirect in keeping with our national needs and capabilities. The 
President's fiscal year 2003 Budget includes principles that will 
improve the management of the Nation's science and technology 
enterprise, taking advantage of best practices, and emphasizing the 
importance of good planning, execution, reinforcement of good 
performance, and changing poor performance. I look forward to working 
with Congress to ensure that the Federal Government's significant 
investment, now over $100 billion, in science and technology is 
deployed to optimal effect.
President Bush's fiscal year 2003 R&D budget
    Shortly after I was confirmed the Director of OSTP at the end of 
October, the Director of the Office of Management and Budget invited me 
to attend and participate in internal OMB decision-making sessions 
involving science programs. This series of meetings gave me a greater 
appreciation for the issues and an opportunity to represent the science 
perspective on important aspects of the forthcoming budget, such as 
increased accountability and performance measures for R&D agencies. 
Following these meetings, my office has continued to work closely with 
OMB to share information and develop mutual understanding of the 
complex issues involved in establishing the Nation's science and 
technology budgets.
    As you well know, agency budget proposals are submitted to OMB in 
mid-September for their review. The terrorist attacks on September 11 
dramatically changed the context for this budget. The attacks laid bare 
vulnerabilities in our physical security and exacerbated weaknesses in 
our economy. The priorities of the Nation drastically changed in a 
matter of hours.
    The budget reflects the change in priorities by focusing on three 
primary goals:
  --Winning the war on terrorism;
  --Protecting the homeland;
  --Reviving our economy.
    Recognizing that science must play a role in these priorities, the 
President provides for an unprecedented level of investment in Federal 
R&D, marking the first time in history that a President has requested 
an R&D budget greater than $100 billion. The precise figure is $111.8 
billion, up 8 percent overall from last year--the largest requested 
increase for R&D in over a decade.
    In addition to the R&D budget, another compilation, the Federal 
Science and Technology Budget, was originally proposed by the National 
Academy of Sciences to highlight the Federal investment in research 
programs central to the creation of new knowledge. In this ''FS&T'' 
portfolio, the President's budget is up 9 percent. The FS&T activities 
account for nearly all of Federal basic research, over 80 percent of 
Federal applied research, and about half of civilian development.
    Madam Chairman, this is a good budget for science, and I look 
forward to working with Congress to see it successfully enacted.
    These science and technology investments will enable the 
Administration to:
  --Enhance homeland defense, national security, and global stability;
  --Promote long-term economic growth that creates high-wage jobs;
  --Sustain a healthy, educated citizenry;
  --Harness information technology;
  --Improve environmental quality; and
  --Maintain world leadership in science, engineering, and mathematics. 
        Now let me direct your attention to some specifics within this 
        budget.
            Interagency Initiatives
    The budget increases funding for a number of priority research 
areas that require multi-agency efforts. Information technology, 
nanotechnology, and health research continue to be high priorities for 
our Nation. The past year also has seen an increase in priority for 
climate change R&D. After the events of September 11, antiterrorism 
efforts naturally lead the list.
  --Antiterrorism--our success in preventing, detecting, and responding 
        to terrorist activities over the long term will depend on 
        technology. The President's fiscal year 2003 Budget continues 
        the Administration's strong support of research and development 
        to counter emerging terrorist threats by increasing R&D funding 
        for homeland security and combating terrorism (including 
        protecting critical infrastructure) from nearly $1 billion in 
        2002 to an estimated $3 billion in 2003.
  --The National Nanotechnology Initiative will increase by 17 percent 
        over last year. This $679 million multi-agency initiative 
        focuses on long-term research on the manipulation of matter at 
        the atomic and molecular levels, giving us unprecedented 
        opportunities for new classes of devices as small as molecules 
        and machines as small as human cells.
  --Networking and Information Technology R&D will increase by 3 
        percent. This brings the overall investment to $1.9 billion in 
        this mature, but still critically important area. It provides 
        the base technologies necessary for the U.S. to maintain its 
        dominant position in the application of information technology 
        to critical national defense and national security needs, as 
        well as to scientific research, education, and economic 
        innovation.
  --Improving human health depends on health research that draws on the 
        capabilities of many agencies. During the Presidential 
        campaign, the President promised to double the budget of NIH by 
        2003 from its 1998 levels. That commitment is met in this 
        budget, which includes the final installment, a $3.9 billion 
        increase, paving the way toward better diagnostics, treatments, 
        and cures that affect the lives of all Americans.
  --Climate Change research has become an important driver for the 
        Nation's research agenda. The President created two new 
        initiatives in this budget. The Climate Change Research 
        Initiative will share $40 million among five agencies, and the 
        National Climate Change Technology Initiative will receive $40 
        million within the DOE budget. The ongoing U.S. Global Change 
        Research Program will receive $1.7 billion, a $44 million (3 
        percent) increase.
            Highlights of Agency FS&T Budgets
    The following examples provide a snapshot of the Administration's 
S&T request within the agencies under the jurisdiction of the 
Subcommittee.
  --National Aeronautics and Space Administration (NASA). The budget 
        provides $8.7 billion (an 8 percent increase) for NASA's 
        programs in the FS&T budget, including $3.4 billion for Space 
        Science (a 13 percent increase) and $2.9 billion for Aerospace 
        Technology. The latter includes planned funding increases for 
        NASA's Space Launch Initiative ($759 million), which will lead 
        to safer and lower cost commercial launch vehicles to replace 
        the Space Shuttle.
  --National Science Foundation (NSF). The budget provides a $241 
        million increase (5 percent) for NSF. This increase will 
        provide $678 million for NSF's lead role in the Networking and 
        Information Technology R&D program, and $221 million for NSF's 
        lead role in the National Nanotechnology Initiative. The 
        President's Math and Science Partnerships Initiative, aimed at 
        increasing the quality of math and science education in Grades 
        K-12, will increase by $40 million to $200 million. The budget 
        also raises graduate level stipends from $21,500 to $25,000 
        annually, in order to further attract and retain the most 
        promising U.S. students into graduate level science and 
        engineering. NSF is very effective at managing competitive 
        research programs, and the budget proposes transferring to NSF 
        programs that will benefit from their effective management. 
        These programs include Sea Grants from the National Oceanic and 
        Atmospheric Administration, Water Quality Research from the 
        U.S. Geological Survey, and Environmental Education from the 
        Environmental Protection Agency.
  --Environmental Protection Agency (EPA). The budget provides $797 
        million (a 6 percent increase) for EPA's programs in the FS&T 
        budget. The EPA budget funds research that provides a sound 
        scientific and technical foundation for environmental policy 
        and regulatory decision-making. The budget includes $75 million 
        for R&D in technologies and procedures to cope with future 
        biological or chemical incidents.
    In addition to the agencies that fall within your Subcommittee's 
jurisdiction Madam Chairman, the Department of Defense R&D efforts 
increase $5.4 billion (an 11 percent increase) to $54.5 billion and the 
National Institutes of Health budget increases by $3.9 billion (a 17 
percent increase) to $27.3 billion.
            The President's Management Agenda
    In addition to funding these priority areas, the budget places 
emphasis on spending dollars effectively. The budget includes a 
scorecard to rate agency performance and progress in five important 
management areas. I am pleased to point out that the only agency to 
achieve a green light in any category is the National Science 
Foundation. The President's Management Agenda is as relevant to science 
missions as to other agency operations, and I look forward to working 
with OMB to make its provisions a more useful tool for all the 
agencies.
    Among the other provisions of the President's Management Agenda are 
investment criteria for R&D programs, pilot-tested at DOE this past 
year. In consultation with agencies, industry, and academia, OMB and 
OSTP will broaden the design of the criteria to all R&D and apply them 
to other R&D agencies in the preparation of the 2004 budget.
The OSTP mission
    In support of our Nation's science and technology priorities, OSTP 
has two primary responsibilities: advising the President on S&T and 
providing leadership and coordination for our government's role in the 
national S&T enterprise.
    In the 1950's, in response to Soviet advances, highlighted by the 
launch of Sputnik, President Eisenhower saw the need for expert S&T 
counsel, and he invited James Killian, then president of MIT, to 
Washington to serve as the head of the first President's Science 
Advisory Committee, an OSTP predecessor. Since then our Nation's 
Presidents have drawn on the expertise of our office for S&T policy 
advice, and I see this as a contribution that will continue to grow in 
value as the challenges we face become increasingly complex.
    Within our agency, a small staff of professionals analyzes 
developments at the frontiers of scientific knowledge and aids the 
President in shaping policy. OSTP also provides scientific and 
technical information and recommendations to the Vice President, the 
White House Offices, the Executive Branch Agencies, and Congress.
    A second responsibility of OSTP is to provide leadership and 
coordination across the Administration. OSTP plays this role for a 
range of Administration priorities, including national security and 
global stability, environment, science, and technology. The National 
Science and Technology Council has been an invaluable partner with OSTP 
in developing interagency evaluations and forging consensus on many 
crucial S&T issues.
            OSTP Budget Request
    I ask today for your continued support of OSTP's role in 
coordinating S&T policy for the Executive Branch and for our Nation at 
large. OSTP's budget request of $5,368,000 and 40 full-time equivalent 
positions in fiscal year 2003 represents a net increase of $101,000, or 
1.9 percent, over our fiscal year 2002 enacted budget. The number of 
full-time equivalent positions remains unchanged.
    The requested amount would allow OSTP to fulfill its 
responsibilities in a White House committed to an increased role for 
science and technology in achieving national goals, including 
strengthening the economy, creating high quality jobs, winning the war 
against terrorism, defending the homeland, protecting the environment, 
and improving health care.
    The requested fiscal year 2003 budget will support the Director and 
two Associate Directors plus a staff of seasoned professionals with 
diverse training and experience. Our requested increase is essential to 
continue to provide quality support to the President and information to 
the Congress. Since personnel costs constitute the largest portion of 
OSTP's budget, our fiscal year 2003 budget request reflects our 
commitment to operate more efficiently and cost-effectively without 
compromising the essential element of a top caliber science and 
technology agency--high quality personnel.
            National Science and Technology Council
    To meet the Administration's priority S&T goals, we must combine 
the efforts and the expertise of multiple agencies. OSTP personnel 
support the work of the NSTC, a Cabinet-level Council that sponsors 
interagency initiatives to advance key S&T objectives.
    Our distributed system of research funding also places a premium on 
coordination among complementary agency programs. The NSTC improves 
such coordination.
    NSTC membership includes Cabinet Secretaries, heads of science and 
technology agencies, and key White House officials with significant S&T 
responsibilities. In the process of generating specific budgetary and 
policy recommendations, NSTC routinely reaches beyond the Federal 
Government to seek input from a wide spectrum of stakeholders in the 
public and private sectors.
    An important objective of the NSTC is to guide individual agency 
budget priorities for R&D and orient the S&T spending of each Federal 
mission agency toward achieving national goals. To this end, in late 
2001 the NSTC established an interagency Task Force on Antiterrorism 
Research and Development with several working groups to address broad 
categories of issues. The four working groups focus on:
  --Biological and Chemical Preparedness
  --Radiological and Nuclear Detection and Response
  --Protection of Vulnerable Systems
  --Social, Behavioral, and Education Sciences A fifth working group--a 
        rapid-response team--serves as an action-oriented team to 
        grapple with emergencies that may arise.
    Other standing NSTC committees, along with ad hoc working groups 
within the NSTC, provide an effective forum to resolve crosscutting 
issues such as nanoscale science, engineering, and technology, 
information technology R&D, and plant genome research.
            The President's Council of Advisors on Science and 
                    Technology
    As Director of the Office of Science and Technology Policy, I co-
chair the President's Council of Advisors on Science and Technology 
with Floyd Kvamme. The PCAST, which consists of distinguished 
individuals from industry, education, research institutions, and other 
non-governmental organizations, serves as the highest level private 
sector advisory group for the President and the NSTC.
    President George Bush originally established PCAST in 1990 as a 
means to gain advice from the private sector and academic community on 
technology, scientific research priorities, and math and science 
education. The organization follows a tradition of Presidential 
advisory panels on science and technology dating back to Presidents 
Eisenhower and Truman.
    Madam Chairman and Members of the Subcommittee, I hope that this 
overview has conveyed to you the extent of this Administration's 
commitment to advancing science and technology in the national 
interest. I look forward to achieving bipartisan support for a national 
S&T strategy that will combine the resources of industry, academia, 
non-profit organizations, and all levels of government to protect our 
citizens, advance knowledge, promote education, strengthen 
institutions, and develop human potential.
    I ask not only for your support of OSTP's fiscal year 2003 budget 
request, but I also want you to know how much I appreciate the long-
standing bipartisan support of the Subcommittee for the Office of 
Science and Technology Policy and for the science and technology 
enterprise. I would be pleased to answer any questions.

                      TRANSFERRED PROGRAMS TO NSF

    Senator Mikulski. Thank you all very much for your 
testimony. And each one of the aspects presented could be the 
subject of a hearing unto itself and so--but let me go right to 
the core of this hearing, which is an appropriations hearing.
    As I said in my opening statement, there is an apparent 5 
percent increase in the funding for the National Science 
Foundation, but one-third of it comes from the transfer of 
three programs. I would like to raise the issues around those 
three programs and these questions are really for you, Dr. 
Colwell.
    Why is the Administration proposing to transfer the Sea 
Grant program from NOAA to the National Science Foundation and 
what is it that we are trying to fix by doing this? The 
authorizers strongly object to the transfer of these three 
programs.
    Dr. Colwell. Let me say that the Administration views the 
management of the NSF, of which we are very proud, to be very 
strong and the merit review process to be consistent with the 
President's management agenda. The Administration believes that 
increased use of competitive merit-based processes will improve 
the performance and the effectiveness of the investments.
    But NSF, since the Sea Grant program originated at the 
National Science Foundation, will operate the program as a 
competitive merit-based research, education and outreach 
program.
    Senator Mikulski. It is not being operated that way at 
NOAA?
    Dr. Colwell. I am sure it is being operated effectively. 
Should it be transferred, we would continue the processes.
    Senator Mikulski. So what is the reason for moving it 
though, because you started it there?
    Dr. Colwell. It is a matter of merit-based review and the 
integration of the management with the National Science 
Foundation.
    Senator Mikulski. Well, Dr. Colwell----
    Dr. Colwell. This is not----
    Senator Mikulski. I am not going to debate this with you, 
because you did not make the decision, but the transfer so it 
could be merit based and peer reviewed and all that, we 
presumed that is going on at NOAA.
    And if it is not going on at NOAA, that needs to be done 
through the authorizing and appropriations, not a transfer to 
you.
    With all due respect. So I do not want to debate that 
point.
    Why are they moving the Environment Education Program? One 
of my concerns is that EPA graduate fellowship programs would 
have no funding.
    Dr. Colwell. Let me just point out that the overhead costs 
at NOAA are higher. They are lower at the National Science 
Foundation. That is not the sole justification, but is a point 
I would like to make.
    With the Environment Protection Agency transfer, we will 
work out the process with the EPA. And, again, it is the 
management process that fits with the President's agenda.
    The research grants program fits with the current 
educational program we have underway at NSF. And, again, I 
would have to say, this is not my highest priority.

             PROPOSED NSF FISCAL YEAR 2003 BUDGET INCREASE

    Senator Mikulski. Well, as you know, there are very serious 
objections to these three transfers. It gives the illusion that 
the NSF has increased. You really are only getting a 3 percent 
increase here.
    Dr. Colwell. I have to agree that it is----
    Senator Mikulski. That is pretty spartan.
    Dr. Colwell. Three fourths percent increase.

                             CORE SCIENCES

    Senator Mikulski. Which takes me, though, to the core 
sciences. And I know you have been so passionate--you and Dr. 
Kelly and I know Dr. Washington have been, ``We have got to do 
the core sciences.''
    Do you remember when you came over with your charts on how 
the funding has gone up for life science, but everything else 
was flat? Young people were being discouraged that there was no 
money either in stipends or the opportunity for research. And 
then zip, it is being cut here.
    Why are the core science programs being cut? And what do 
you think are the consequences of this?
    Dr. Colwell. Well, let me point out that the core areas 
benefit from the priority areas. In other words, each of the 
directorates participates in the information technology 
priority, similarly in nano-technology, so that if one adds the 
components of those initiatives that involve mathematics, 
chemistry, and physics, you will find that it is more like 
level funding for these disciplines.
    I agree that we need to invest in the future, very heavily 
in these areas. We are doing this in a planned step-wise 
process, working with OSTP and the Office of Management and 
Budget.
    The budget that has been given us addresses our priorities 
and it is a budget that can advance science and engineering.
    Senator Mikulski. Well, you know, we are looking at also a 
decade of decline. And we are hoping that through our doubling, 
which we are committed to, that these would be the areas of 
increase, which would be in the core sciences.
    Do you remember when I proposed my strategic research 
initiative and scientists all over America jumped all over me, 
and you and Dr. Brody and Dr. Vest, helped sort all of that 
out.
    Well, I am ready to fund the core, while we also look at 
those things that do maintain homeland security, competitive 
edge and all that. But this is the core.
    Dr. Colwell. Senator, I am married to a physicist. He 
reminds me daily of the necessity of funding physics, 
chemistry, and mathematics. I agree with you, Senator; I do.
    Senator Mikulski. I am going to turn to Senator Bond, but 
there has been a 3 percent cut in chemistry and a 3 percent cut 
in physics. And----
    Dr. Colwell. When one takes into account the participation 
I am not arguing. I am simply saying that when one takes into 
account IT and nano-tech, it is about level.
    Senator Mikulski. Senator Bond.

                          FEDERAL R&D SUPPORT

    Senator Bond. Thank you, Madam Chair.
    While we are on a roll, I thought I would turn to Dr. 
Marburger and continue this line of questioning.
    According to the National Research Council report on trends 
and Federal support of research and graduate education, there 
is ``cause for concern about the allocation of funding among 
fields, in the Federal research portfolio in particular, with 
respect to most of the physical sciences and engineering, whose 
funding in contrast with the biomedical sciences has, with few 
exceptions, stagnated or declined.''
    Dr. Marburger, would you agree with the Research Council's 
view on that?
    Dr. Marburger. Well, far be it from me to disagree with the 
National Research Council. The fact is that the balance issue, 
the issues that are assembled under the phrase balance are 
important issues. And we believe that it is necessary to tune 
the mechanism of science, so that it can move forward 
effectively.
    We do not believe that the right way to do that is to fix 
on arbitrary formulas of doubling or tripling, but rather to 
identify those areas that need funding and address them and 
fund them--give them priority and over a period of years bring 
back the necessary balance if there is an imbalance.
    In this budget for fiscal year 2003, the President has 
identified a priority for science spending and funded it quite 
substantially in the life sciences. And I believe that 
subsequent years will see an addressing of the balance issues 
that are being identified at this time.
    Senator Bond. I think I heard what you said, but I am not 
sure that I got an answer to my question. You said that 
arbitrary doubling or something like that, yes, well the Chair 
and I are pushing for an arbitrary doubling, because we started 
out with the NIH budget and the NSF budget here. And everybody 
agreed on the arbitrary doubling of NIH. And it has now so far 
outstripped NSF that we are absolutely falling behind.
    Do you agree that advances in biomedical science depend 
upon things like fundamental research and physics, chemistry, 
electrical engineering, chemical engineering, and the other 
things?
    Dr. Marburger. I do, indeed. It is interesting to note that 
in the accounting of the budget for fiscal year 2002, the 
current year, the annual study that is made by the American 
Association for the Advancement of Science, takes a look at 
each of these areas of science, life sciences, physical 
sciences, engineering, and so forth.
    And in that accounting, they show that NIH, for example, 
owns about 15 percent of the funding in the physical sciences; 
whereas NSF owns only 12 percent of the funding for physical 
sciences. The major player in the physical sciences game is the 
Department of Energy, then NASA, but actually NIH is quite 
substantially supporting the physical sciences, so that it is 
not the case that funding--increased funding for NIH 
necessarily means that there is not increased funding for the 
physical sciences as well, through their allocations.
    Through an interagency effort that was sponsored by my 
predecessor in the Office of Science and Technology Policy, we 
arranged for NIH to provide very substantial support in basic 
energy sciences through the Department of Energy, supporting 
beam lines at--synchrotron light sources around the country, 
which are heavily used by biological science researchers.
    So, the--my point is, and the point of the Administration 
is, that the balance issue is a complicated issue. Many 
agencies are involved; many fields of science are involved. And 
we would like to go at it in a sort of a rifle-shot approach, 
establishing priorities and funding them systematically. And I 
believe that--that is what is going to happen.

                       FUNDING PHYSICAL SCIENCES

    Senator Bond. Well, Dr. Marburger, as I understand it, what 
little I know about the NIH physical science, that is more 
applied science. We are talking about the need for basic 
science that only comes through NSF.
    And the White House has taken great pride in doubling the 
NIH budget.
    Can you sit here and tell me, as a scientist who is looking 
over the whole area, that there is not an imbalance between 
what we are putting in NIH and what we are putting in the basic 
physical sciences?
    Dr. Marburger. I would like to see more money in all of 
them. It is hard for me to tell----
    Senator Bond. No, no, no, no; that is not the question.
    Dr. Marburger. There is no doubt that priorities have been 
identified and that some areas are funded more than others, and 
there is no question that life sciences has received more 
support.
    Senator Bond. Thank you.
    Dr. Marburger. That was done intentionally.
    Senator Bond. I give up, Madam Chair, here.
    I turn the questions back to you.

                  UNDERGRADUATE AND MINORITY PROGRAMS

    Senator Mikulski. Well, I see I agree with that line of 
questioning, but let me also turn--first of all, in the areas 
of nano-technology, info technology and your bio-complexity. I 
think we are on the right track. We would like to pursue those, 
but, again, I am under very difficult time constraints this 
morning.
    I am going to go to the attraction of undergraduate 
students into science. Dr. Colwell, I am going to ask--and Dr. 
Washington, I would like you both to be able to respond.
    We are committed to K through 12, and the funding of 
informal science education. And, again, we could talk about 
those, but our undergraduates are now looking at business. They 
are looking at marketing. They are looking at areas other than 
science and technology.
    And I am not--I mean, everybody has got to follow their 
dream and their passion. But today, the foreign students do 
comprise 40 percent of our PhD's. You cannot go for a PhD 
unless you have an undergraduate major.
    Yet, this budget cuts undergraduate programs by over $10 
million. The community college program declines, which is also 
a way particularly for first generation people to go to college 
to get into it and maybe pursue the night school programs at 
wonderful places like University of Maryland and Hopkins. The 
the new undergraduate ``tech talent'' program declines by 60 
percent.
    My question is: What are the resources that are needed to 
truly fund undergraduate science programs in--I mean, really to 
be able to, again, attract more undergraduate students into 
science, and also the whole issue of recruiting the entire 
American community, which is women and minorities, who are 
often discouraged now because of the issue around money, 
particularly the minority students? And I am thinking of the 
Latino community, first generation, moving in.
    Dr. Colwell. Senator, you touch on one of the most 
perplexing, and one of the most difficult, international 
problems.
    I have just returned from a G-8 meeting of the heads of 
research councils. This problem is universal.
    In fact, in Japan, where the meeting was held, we learned 
that even though the Japanese students performed better in math 
and science, after they get to a university, they deflect off 
into business and other areas.
    Senator Mikulski. Just talk to me about our own country 
today----
    Dr. Colwell. Yes, I will.
    Senator Mikulski [continuing]. With all due respect.
    Dr. Colwell. I just wanted to point out that it is an 
international problem.
    Having said that, we are focusing on women and minorities, 
bringing them into science and engineering. Because, as you 
have pointed out, it is the human resources, that are going to 
make the difference if we have decreased participation in 
foreign students.
    We have taken a different approach--or we are beginning to 
take a different approach, at the National Science Foundation 
in integrating horizontally all of our efforts that address 
students, from K-12 through continuing education, and are 
focusing on undergraduate education, as well. And that is to 
link our programs and to link our efforts with those of other 
agencies.
    If you look only at the specific programs addressing women 
and minorities, it appears to be a decrease. In fact, we have 
programs within the directorates that are addressing bringing 
women and minorities, for example, into mathematics, physics 
and bio-sciences directorates, so that we have, in fact, a 
greater effort financially----

                   ADDITIONAL FISCAL YEAR 2003 FUNDS

    Senator Mikulski. So, you are talking about leveraging and 
synergistic effects of the money you have?
    Dr. Colwell. Yes.
    Senator Mikulski. Could you use more money in this area?
    Dr. Colwell. We can always use more money and, this is an 
area----
    Senator Mikulski. And I am not always talking about 
``always use more money.'' Could you use more money in this 
area?
    Dr. Colwell. Let me answer by saying that this is the most 
important problem we address as a Nation. And I would quote the 
Hart-Rudman report, which says that second only to an invasion 
or an attack on one of our major cities, losing leadership in 
science and math and in science and math education.
    Senator Mikulski. Well, Dr. Colwell, I--again, not to cut 
you short. I am going to turn to Dr. Washington, because here 
is where I am. First of all, I agree it is a national problem. 
I believe it is an international problem. But my responsibility 
is to the United States of America, and then to the world.
    I have got to know what we really need here. Now, I know 
that you are a good soldier and you have to work under OMB and 
everything done as vetted and checked to see who has been 
naughty and who has been nice, but I really must know, and I 
know my colleague, here----
    Dr. Colwell. Yes.
    Senator Mikulski [continuing]. We believe in the farm team. 
You know, if sports can have a farm team, certainly science 
should.
    Dr. Colwell. So do I.
    Senator Mikulski. We spend more money on our academic 
institutions being a farm team for the NFL than for the Nobel 
prize. Now, I think we've got to get our priorities straight as 
a country, and I am ready to use whatever money muscle I have 
here to do that.
    Dr. Washington, how do you think we ought to do it?
    Dr. Washington. Well, first of all, let me say that the----
    Senator Mikulski. What would be required?
    Dr. Washington. I think I would actually like to sort of 
list several things. One is that the National Science Board 
regards education as one of our key priorities for the Nation 
and for the National Science Foundation.
    We are now in the process of preparing a report on the work 
force and that will be ready sometime in the summer or the 
fall.
    At the board meeting last week--we issued a diversity 
statement that deals with women and minorities, and it 
reaffirms a very strong commitment of the National Science 
Board to this issue and with regard to additional funds. There 
is a--the board feels very strongly that we can make very wise 
use of increased funding in the area of education.
    There are proposals out there that are very high merit 
and--however, with limited funding, we cannot fund them all. 
And I think that we could actually make----

                          NSB RECOMMENDATIONS

    Senator Mikulski. Well, Dr. Washington, I am going to turn 
to the board as we ponder how we are going to do this year's 
appropriations. We would like to hear from the board what their 
specific recommendations would be, particularly on this, what 
we consider, crisis issue. I view this as a crisis issue.
    And while we want to fund the research, we have got to fund 
the people who are going to do the research. And we believe 
that this excellent board of which you are a chair--I think you 
will continue the great tradition--we really would like to have 
like five ideas on what you think it would take to really keep 
the momentum going.
    I think Dr. Colwell, I know has had a great commitment, but 
we would like to really turn to the board to be able to do 
that, as well as, of course, you, Doctor. But you are shackled 
in a lot of ways for what you can ask for. So----
    Dr. Washington. I think that the board can----
    Senator Mikulski [continuing]. I am going to turn to the 
unfettered----
    Dr. Washington [continuing]. Easily--I should not say 
easily, but the board would--will be very happy to respond.
    Senator Mikulski. Thank you very much, Dr. Washington. I 
look forward to getting better acquainted.
    [The information follows:]

National Science Board Activities on Science and Engineering Education 
                             and Workforce

    It is the National Science Board's position that ``there is no 
greater challenge and no more fundamental a need than the assurance of 
a skilled, highly educated, and diverse workforce (for science and 
engineering) and of a public that is not just well disposed toward 
science, but one that is also able to use its knowledge of science and 
mathematics for individual and collective improvement.'' \1\ Education 
and the development of our human resource base and workforce for 
science and technology is the most important science policy issue 
confronting the Nation today. Consistent with this view, the Board has 
been examining education and workforce issues from a number of 
perspectives, from K-12 through the graduate and postdoctoral levels.
---------------------------------------------------------------------------
    \1\ National Science Board. National Science Board Strategic Plan, 
p.11.
---------------------------------------------------------------------------
    The Board has made numerous statements addressing all levels of 
education within the last several years alone, and has developed a 
range of recommendations on nurturing the S&E workforce. A few of the 
most important include:
    (1) Preparing Our Children on K-16 education in science, 
mathematics, engineering, and technology, March 1999. The report 
focuses on the need for partnerships across sectors at the State and 
local levels to achieve a continuum of excellence in K-16 education, 
and recommends active participation of individual scientists and 
engineers and their institutions in creating a seamless K-16 system for 
science, mathematics, engineering and technology education (http://
www.nsf.gov/pubsys/ods/getpub.cfm?nsb9931a);
    (2) The Federal Role in Science and Engineering Graduate and 
Postdoctoral Education (NSB 97-235), 1997, offers recommendations for a 
more productive Federal/university partnership in graduate and 
postdoctoral education (http://www.nsfgov/pubsys/ods/
getpub.cfm?nsb97235);
    (3) Resolution NSB 01-167, October 2001, affirming the importance 
of Criterion Two for evaluating proposals for funding in the Merit 
Review process. Criterion Two addresses broader impacts of proposed 
research and education activities, including impacts on the workforce; 
\2\ and
---------------------------------------------------------------------------
    \2\ ``The National Science Board affirms the significance of both 
the intellectual merit and the broader impacts of projects supported by 
NSF, and endorses actions to raise awareness of the importance of both 
merit review criteria. These actions should include wide dissemination 
of generic examples of activities that address the broader impacts 
criterion, and amendments to policies and procedures for proposers, 
reviewers and NSF Program Managers on the use of both criteria in the 
proposal and award process.''
---------------------------------------------------------------------------
    (4) ``National Science Board Statement Concerning NSF's Continuing 
Role in Promoting Diversity in Science, Technology, Engineering and 
Mathematics'' (NSB-02-75) \3\ in May 2002, focusing on the importance 
of broad participation of U.S. citizens in the science and engineering 
workforce.
---------------------------------------------------------------------------
    \3\ ``The National Science Foundation (NSF) invests public 
resources to realize ``a diverse, internationally competitive and 
globally-engaged workforce of scientists, engineers and well prepared 
citizens"(NSF GPRA Strategic Plan for fiscal year 2001-2006, p.3). This 
goal, encompassing a variety of strategies, supports NSF's mission to 
strengthen scientific and engineering research and education and their 
integration. In this context, the National Science Board believes such 
a diverse science and engineering workforce is necessary to ensure the 
Nation's health, prosperity, and security.
    As Congress declared in the Science and Engineering Equal 
Opportunities Act of 1980, 42 U.S.C. 1885, ``the highest quality 
science and engineering over the long-term requires substantial 
support, from currently available research and educational funds, for 
increased participation in science and engineering by women and 
minorities.'' The National Science Board recognizes that an integral 
part of accomplishing NSF's strategic goals requires engaging all those 
who are under represented in the Nation's science and engineering 
enterprise. Therefore, the Board strongly supports the Foundation's 
commitment to developing and strengthening all of its programs for this 
purpose, ensuring broader individual and institutional participation 
across all research and education programs.''
---------------------------------------------------------------------------
    The National Science Board, primarily through its standing 
Committee on Education and Human Resources, \4\ exercises oversight of 
the National Science Foundation programs and activities to support the 
development of human resources for science and engineering and 
scientific and mathematical literacy for the general public. The Board 
fully supports the objectives of the new Math and Science Partnership 
initiative funded through the National Science Foundation, which is in 
accord with the work the Board has undertaken on K-16 math and science 
education policy and with the long-term NSF investment in State, rural, 
and urban systemic initiatives to reform math and science education at 
the K-12 level.
---------------------------------------------------------------------------
    \4\ Charge to Education and Human Resources Committee: http://
www.nsfaov/nsb/committees/ehrcharve.htm; ``EHR Committee Workplan'' 
(NSB 99-179): http://www.nsf.gov/pubsys/ods/getpub.cfin?nsb99179
---------------------------------------------------------------------------
    The Board's ongoing national policy efforts that concern the 
science and engineering workforce include the establishment in October 
2000 of a special Task Force on National Workforce Policies (NWP), \5\ 
reporting to the Education and Human Resources Committee. The Task 
Force is charged with examining workforce development issues in a 
systemic framework that incorporates various levels of the educational 
process, industry roles and requirements, and national policies related 
to education and immigration. This is one of two current Task Forces 
charged by the Board to undertake special studies. The second is the 
Task Force on Science and Engineering Infrastructure, \6\ reporting to 
the Committee on Programs and Plans, which is charged to assess the 
quality and adequacy of the infrastructure for U.S. fundamental science 
and engineering.
---------------------------------------------------------------------------
    \5\ Charge to the Task Force on National Workforce Policies (NSB 
00-192) http://www.nsf.gov/nsb/committees/nwpcharge.htm.
    \6\ Charge to the Committee on Programs and Plans Task Force on 
Science and Engineering Infrastructure (NSB 00181): http://www.nsfgov/
nsb/committees/infcharge.htm.
---------------------------------------------------------------------------
    In addition to the work of the NWP Task Force, the Education and 
Human Resources Committee is now focusing its attention on policies for 
undergraduate education in science, technology, engineering, and 
mathematics (STEM). I will be happy to keep you informed on our 
progress in ongoing policy activities related to the workforce, 
especially the recommendations of the Board pursuant to the completion 
of the work of the Task Force on National Workforce Policies, expected 
by the end of this year.

    Senator Bond.
    Senator Bond. Senator, if I could----
    Senator Mikulski. Okay.
    Senator Bond. All right.
    Senator Mikulski. I am going to turn the gavel over to 
Senator Bond. I have to be somewhere really on the topic of the 
digital divide with my colleague, Senator Cleland, our civil 
rights organizations. I know that Senator Bond--well, first of 
all, we--you know, we are like the Amen chorus here.
    Why do I not turn it to you, Senator Bond? I know you have 
management issues, and then would you please make sure that 
Senator Domenici has all rights for the committee?
    Thank you very much. And we look forward to further 
conversation on this.

                             NSF IG REPORT

    Senator Bond [presiding]. Thank you.
    Might I invite the inspector general, Dr. Boesz, to come up 
please?
    I want to follow up on some of these questions I raised in 
my opening statement, particularly the audit of the NSF's major 
research equipment and facilities. Can you summarize for us, 
please, because I want to hear your side, and also I want to 
hear the Foundation's response and comments on it? I would like 
to get it out here in the open.
    Can you summarize your audit findings and illustrate those 
findings with some--perhaps some examples? And based on your 
observations, do you believe the NSF has the ability to provide 
a full cost accounting of each of its large facilities?
    Dr. Boesz. Good morning, Senator. I will be happy to 
respond to that. My name is Tina Boesz, I am the Inspector 
General.
    And we did do an audit of the large facility projects at 
NSF and we do recognize that in the past year, NSF has made a 
concerted effort to improve the general management and 
oversight of these projects. However, it still needs to do a 
lot of work on improving the financial management of the 
projects.
    NSF's current policies and practices do not yet provide 
adequate guidance to program managers to oversee and manage the 
financial aspects of the major research equipment and 
facilities projects.
    The current policies have allowed NSF to use multiple 
appropriation accounts to fund the acquisition, construction, 
and development cost of major research equipment and 
facilities. This has led to inconsistencies in the types of 
costs funded through the MRE account.
    And in addition, NSF's current practice is to track only 
those costs funded from the MRE account, and not the full costs 
of the projects. As a result, NSF today cannot ensure that it 
stays within the authorized funding limits that have been 
approved by Congress or by the National Science Board for any 
one particular project.
    This makes it impossible without having the total costs of 
a project--it is impossible for decision makers to monitor how 
well the projects are going. For example, in the report, I 
mention the large Hadron Collider as one project which the 
National Science Board approved, the construction of two 
detectors at an amount approximately of $81 million.
    We know that NSF has already spent $2 million from the R&RA 
research and related activities, account to develop software. 
We also have identified approximately $57 million that NSF 
intends to fund from the research and research affiliated 
account to fund additional software development--this is 
software that is necessary for the detectors to work. They 
also--this money would go for implementing or putting the 
detectors into the collider and also the commissioning costs.
    So it does not really--the $81 million does not get at a 
full functioning detector operating in a collider. That is one 
example.
    And I--so I think that the issue basically is how is NSF 
going to get at the issue of total project costs. At the 
present time, their systems are not able to do that.
    We are told by the end of the summer, they intend to have 
these policies and procedures in effect. We have reviewed some 
of the drafts. They are making progress. They intend to have a 
large facilities manager, a deputy to the CFO in place. And we 
think that by the end of the summer, we are hopeful that many 
of these items will be addressed.

                       NSF RESPONSE TO IG REPORT

    Senator Bond. Dr. Colwell, I raised this question 
previously and I had hoped to have it resolved. I would like to 
hear your comments on it.
    Dr. Colwell. Yes.
    Senator Bond. And where you think--what can be done and 
when?
    Dr. Colwell. Well, first, Senator, I genuinely want to say 
to you and Senator Mikulski that I deeply appreciate your 
commitment to the foundation.
    NSF believes in continued improvement of our financial 
management and policies. The recommendation of the inspector 
general is sound. The recommendations, in fact, endorse many of 
the changes we already are implementing as part of the new plan 
for management in oversight of the large facility projects.
    I would like to emphasize that it is vital to retain the 
flexibility that allows these projects to realize their full 
potential to the Nation, like encouraging participation by 
EPSCoR States and institutions.
    What we have done is complete our guidelines and 
procedures. We are instituting internal controls to prevent 
mixing of R&RA with MRE funds. We are revising our criteria for 
prioritizing large projects. We are hiring staff and providing 
travel funds for increased oversight of large facilities, and 
we are providing management reviews of each of the MRE projects 
to the committee of programs and plants of the National Science 
Board.
    I would say that the draft audit report of the I.G. does 
set forth several recommendations, but in part some are 
characterizations that do not fully and accurately describe our 
processes of the specific projects mentioned. And we will have 
a full report of our response no later than June 15, which we 
would be very pleased to provide you, Senator Bond, because I 
know you are keenly interested.
    Finally, let me say that the agency is recognized as one of 
the best managed in the entire Federal Government, if not the 
best managed. We are very proud of that.
    We can always do better. We are already taking these 
recommendations into account and changing processes 
accordingly.

                       NSB RESPONSE TO IG REPORT

    Senator Bond. Dr. Washington, any comments on this before 
we turn to Senator Domenici?
    Dr. Washington. No.
    Senator Bond. Okay. Well, that solves that. Well, thank 
you. Senator Mikulski and I are going to be the best friends of 
NSF. We are going to continue to fight. It looks like we have 
to fight some on our own team to get the resources. We want to 
make sure that we have solved all the management problems; and 
the accounting problem is a troubling one that needs to be 
resolved.
    With that, let me turn to Senator Domenici.
    Senator Domenici. Thank you very much, Senator.
    Dr. Colwell, how are you? It is nice to see you again.
    Dr. Colwell. Thank you, Senator. It is a pleasure to see 
you.

                  HOMESTAKE MINE AND NEUTRINO RESEARCH

    Senator Domenici. Last year when we met in June for this 
hearing, I had just been in Carlsbad, New Mexico, with the 
National Science Foundation Committee that was reviewing the 
potential for a new underground science facilit7 in the United 
States.
    In New Mexico, the waste isolation pilot project, commonly 
known as WIPP, was being looked at and evaluated. The NSF--the 
committee eventually came up with the Home Stake Mine in South 
Dakota as the best alternative, based on the advantages of a 
very deep facility for neutrino studies.
    I still am doubtful about that choice, but things have to 
move along. Certainly evident in the discussions at WIPP was 
that many experiments that benefit from an underground facility 
do not need an ultra-deep site.
    In fact, for many experiments, scientists have told me that 
the extremely low background radiation and very dry conditions 
of WIPP lend themselves to better experiments than relatively 
high radiation backgrounds and better experiments can take 
place.
    What is the current plan for the Home Stake Mine and the 
neutrino research?
    Dr. Colwell. Senator, we are in the process of reviewing 
scientifically, the proposal that has come to the NSF. There 
has been no decision. We are also awaiting, in concert with the 
Office of Science and Technology Policy, Dr. Marburger, a 
report from the National Academy of Sciences, which will 
convene a work shop, with participation by the physics 
community, to determine priorities for neutrino research.
    I do think since, to my right is an expert in physics, that 
I will ask Dr. Marburger also to comment.
    Senator Bond. Dr. Marburger.
    Dr. Marburger. There is no--thank you very much, Mr. 
Senator. There--the--there is no question that neutrino 
research is a very interesting area of fundamental science, and 
that there are a number of experiments ongoing in other 
countries, as well as in the United States.
    It--I believe that the choices among the different options 
available to us have to be made by the science community in the 
context of a considered review of all the factors. I am not 
prepared or--nor am I technically capable, despite my 
colleagues' confidence in my expertise, to make a statement 
about that at this time.
    I think it is going through the right process. We are 
asking the right people and I am certain that this decision 
will be made on the basis of good science.
    Senator Domenici. Doctor, while I have you. Why do I not 
just go through a couple of questions with you?
    First, it is nice to have you up here, too, and to visit 
with you.
    Dr. Marburger. It is a pleasure.

                FEDERAL COORDINATION OF NANO-TECHNOLOGY

    Senator Domenici. One of the more recent scientific watch 
words is nano-technology. The DOE's Office of Science has a 
significant nano-technology program; and three centers are 
being constructed, including one center for integrated nano-
technology, called CINT, which is a combination of Sandia 
National Laboratory at Los Alamos National Laboratory, and NSF.
    The NSF's budget includes $221 million for nano-science and 
engineering, and other departments of the government seem to be 
finding that nano-science fits them also. Do you think that the 
many different approaches to nano-technology by various 
agencies are coordinated and integrated to avoid duplication 
and to present our country with the maximum productivity?
    Dr. Marburger. Yes, I do, Mr. Senator. The National Nano-
technology Initiative is coordinated through my office. There 
is an interagency working group that meets frequently and tries 
to understand the scope of the nano-technology field.
    As you probably know, nano-technology encompasses much of 
chemistry and the whole promise of being able to make materials 
and make what I call functional materials from scratch, atom by 
atom.
    Senator Domenici. Correct.
    Dr. Marburger. And the capabilities are--for doing this are 
distributed throughout a number of different agencies. And we 
believe that request in the 2003 budget accurately reflects the 
capabilities as they are distributed throughout the agencies.
    There is an 11 percent increase in this program in NSF. 
There is a 53 percent increase in the DOE program to address 
the centers that you described in your question.

                         VERY LARGE ARRAY (VLA)

    Senator Domenici. Dr. Colwell, this is my last question. 
Last year, the NSF included funding in its budget for the 
expansion and modernization of the Very Large Array, commonly 
known as the VLA.
    Dr. Colwell. Yes, sir.
    Senator Domenici. It is a world class center, in radio-
astronomy, near Socorro, New Mexico. The project has been 
reviewed and approved by the National Science Board and also 
approved as a second priority for ground-based astronomy by the 
Decadal survey. It is my understanding that the budget request 
is $5.3 million short of providing the resources that are 
needed to operate the National Radio Astronomy Observatories 
and to continue with the plan and the VLA expansion. Is that 
number correct?
    Dr. Colwell. I am not sure about the exact number, but I 
must say that we do have a crunch in the major research 
equipment and that certainly is one of our priorities.
    As part of the ongoing project management, there has been a 
management peer review completed on the upgrade. The report is 
to be released in about 2 months.
    The upgrade presently is adhering to the projected time 
schedules and budgets, so we are on time and on budget for that 
particular project, Senator.
    Senator Domenici. Well, the same thing is happening with 
the National Solar Observatory at Sacramento, Peak, New Mexico. 
The way the monies are being applied be NSF there is not going 
to be enough for what it needs. I will just give you that 
question in writing and you can answer it.
    Dr. Colwell. Yes. Yes, sir. Thank you, Senator.
    Senator Bond. If you have--if you want to go ahead, you 
may.

                       PHYSICAL SCIENCES SUPPORT

    Senator Domenici. That is fine. Mr. Chairman, let me just 
say that I know you and the chairperson have already spoken to 
the fact that we have our national funding a little bit out of 
balance, in terms of the physical sciences versus the more 
readily supportable NIH.
    Some of us are trying to get the natural sciences back into 
a rhythm where they can be doubled within a given period of 
time, if that is what it takes around here to make progress.
    To me, we are doing a very big disservice by not pushing 
funding for the physical sciences up, as we let NIH go very, 
very alive with new ventures. I think one is going to stop the 
other. I think you are going to need more of the physical 
science break throughs to keep the NIH programs going, as we 
hope they will.
    We are going to continue in this subcommittee and elsewhere 
to do what we can to see that the National Science Foundation 
is funded.
    It is the one Agency that we know. It is not exactly like 
the Department of Energy, which runs the programs themselves. 
It is a different model. I believe it is very, very imperative. 
I would ask you, Doctor--many people are showing great respect 
for you when they ask you for your opinions.
    On the same token, you work for the President, and he 
produced the budget. We are all his friends. I mean, at least 
the two of us are his good friends.
    If it is not going to affect anybody out there, could--you 
tell me whether I am on the right track that we better put some 
more funding into the physical sciences.
    Dr. Marburger. I think the track is good. The fact that is 
balance is important and that the machinery of science--the 
pieces of the machinery have to work together.
    The issue that we have, this Administration has, with the 
concept of doubling is its lack of specificity, its lack of 
prioritization, and recognizing the differentiation among 
different areas of science.
    And there are certain things that need to be funded, 
probably deserve more money, and we will get it. We are getting 
the attention, and there may be other things in that mix of 
activities that we call science or even physical sciences, that 
are perfectly healthy and do not require the additional 
funding.
    So as I pointed out in response to Senator Bond's question, 
I believe, yes, that physical sciences are, in fact, supported 
by a number of different agencies. And they--it encompasses a 
very wide range of sciences.
    I think it is important for us to be--to have an 
intelligent approach that makes distinctions, establishes 
priorities and funds--pulls out the things that need funding 
and fund them.
    It includes nano-science, instrumentation. It includes 
basic computer sciences. We need all of these things to keep 
the machinery of science going.
    And many of these have been identified as priorities in the 
President's 2003 budget request and signal the intention to 
continue to tune up the funding in future years.
    Senator Domenici. Well, let me just close my comments and 
say to Senator Bond, and I am sure I am speaking to the 
chairperson just in the same manner, but I think it really 
behooves us to pursue funding of NSF to a larger extent than 
our President is able to do, and where we can to boost the 
physical sciences.
    And I close today by inviting you, Doctor, at some point in 
time to come out and see Sandia's Nano-Research Facility. Right 
now, they are in some old barracks from whence some of the best 
nano-science has evolved. And micro-engineering is going full 
blast there too in some broken-down buildings. But they will 
soon be the beneficiary of a very major $400 million facility, 
which would put them apparently at the cutting edge for most 
Americans who are interested in nano-science and micro-
engineering.
    I thank you for your great work.
    Dr. Marburger. Thank you.
    Dr. Colwell. Senator, I would like to express my 
appreciation to you for your commitment and support of the 
National Science Foundation. We really very much appreciate it. 
Thank you, Senator Domenici.
    Senator Domenici. Thank you very much, Doctor.

               ADDITIONAL NSF FUNDING IN FISCAL YEAR 2003

    Dr. Washington, I did not have any questions for you, but I 
do not want you to feel that is neglecting you.
    Dr. Washington. Well, I do want to just comment on one 
thing. In my oral presentation, I did mention that there are 
many unfunded proposals that are very high in their merit 
rating, but due to the lack of funds, we are not able to fund 
those. And I think that additional resources would help.

                     LARGE FACILITY PRIORITIZATION

    Senator Bond. Thank you very much, Senator Domenici. I like 
Senator Domenici's question and Dr. Washington's answer, and I 
think we will put those two together.
    I do not think there is any question and I do not have a 
science degree or a science background, but I do not think 
there is any problem finding very useful, fruitful investments 
that the NSF could make if we were able to get the dollars 
there, and I believe I speak for--on a bipartisan basis for 
this whole committee.
    But having said that, let me--let me get back to the 
questioning and one of the things that I thought we would go 
into is the priority setting for the large research projects. 
We have heard complaints about the Foundation's process for 
ranking and prioritizing large facility proposals. Some have 
said to us that it appears to be subjective and ad hoc.
    Now, I understand the House Science Committee's re-
authorization bill requires NSF to submit a report to Congress, 
ranks the project, describes how each project was prioritized. 
It sounds like a good idea and, as I indicated, I wanted to ask 
the National Academy of Science to work with you to ascertain 
whether there is adequate criteria, what criteria should be 
used to rank and prioritize large research facilities.
    Dr. Colwell, I would like to hear your views on that. And 
what do you think about the House Science Committee's action?
    Dr. Colwell. I think that it is very, very important to 
note that priority setting is an integral part of the NSF 
budget and planning process. It is based really on a very 
rigorous internal review by NSF senior management.
    That is a project that comes out of the NSF to the Board to 
be considered can really usually take years.
    Senator Bond. Yes.
    Dr. Colwell. In the case of ALMA, there was about 8 years 
of really very careful review and analysis.
    The ultimate decision has to be made by the director with 
the OMB guidance. The dominant factors are readiness, 
timeliness, and appropriateness for funding in a given fiscal 
year.
    We have to take into account balance, including 
disciplinary balance. It is really critical that there be 
flexibility in order for us to address all of these factors.
    Having said that, we do have a priority that ongoing 
projects have the highest priority to ensure that they get 
completed, in order to be fiscally well managed and sound. Then 
to simply rank numerically, one, two, three, four, does not 
take into account the need to balance disciplines and the need 
to be flexible.
    Now, again, it means that the priority setting process that 
includes the community, the NSF, the director, senior 
management, the science board, and OMB, is complicated. I do 
believe it has served the Nation well for the past 50 years.

                      NATIONAL ACADEMY OF SCIENCES

    Senator Bond. Well, you have outlined things that may be 
legitimate criteria that go beyond the strict science ranking, 
but I think perhaps a problem may be that the--that it is not 
sufficiently transparent, because there is a sentiment that 
there is not an understanding of how it is done.
    You say, ``Okay. We have to have--we have to spread it out 
over disciplines to utilize for other reasons.'' I would like 
to see you work with the National Academy of Science. We would 
like to talk with you about that, to make sure that when you 
are applying the scientific criteria, it is readily 
understandable and the scientific community knows how you are 
going to rank them.
    Dr. Washington, any question--any comment on that?
    Dr. Washington. Well, I just want to point out that we have 
a standing committee of the board, a committee on programs and 
plans, and they do a very thorough review of each of these 
projects, and we have to explicitly approve them.
    And we have a set of guidelines for how the projects are 
approved inside of the Science Board processes.
    Dr. Colwell. Let me add, Senator, that we do indeed call on 
the National Academy of Sciences. A case in point is the Home 
Stake Mine issue.
    Neutrinos, I should say, to put it more appropriately, the 
neutrino research. There is, for example, a neutrino experiment 
in Japan. There is one in Italy. There is one in Sudbury, 
Canada. There is one in Antarctica, underway and to be 
extended, Ice Cube, for example.
    The question is how do we prioritize and how many neutrino 
experiments does the world need?
    Senator Bond. Yes.
    Dr. Colwell. We have called on the National Academy, so I 
agree with your suggestion.

                              NSB MEETINGS

    Senator Bond. Yes. Well, I have a view on that one, too; 
but I will let the scientists reach that conclusion.
    Dr. Washington, you have only been on board a few days, so 
I want to ask you this question. You are coming in fresh. And I 
have--again, we have received complaints that the board holds 
most of its meetings, including committee meetings, where much 
of the board's work is done behind closed doors with a single 
session open to the public at the meetings' end.
    Do you think this is the right way to do its business? The 
House Science Committee apparently included something about 
opening up the meetings. What does your view on letting the 
public, but primarily the scientific community, which you 
serve, hear the debates and the discussions and the 
deliberations of the board?
    Dr. Washington. I think philosophically I agree that we 
should do as much of the business as we can in the--in public 
open meetings.
    I wonder if I could get back to you on this, because I 
think this will be one of the issues that I need to have a 
little bit more time to look into.

                              PLANT GENOME

    Senator Bond. I think that would be a good idea, because 
this one may become a problem. If it can be dealt with, let us 
save the heartburn and not go down that path.
    Dr. Colwell, I want to thank you for holding the work shop 
at the Plant Science Center in St. Louis on the new math and 
science partnership program. From all accounts, it was very 
well received.
    How is the planning going for the program? What is your--
what do you see the goals this year?
    Dr. Colwell. Senator, if I may, I would like to say that 
the Plant Science Genome Program is spectacular, and that we 
have had great success in completing the arabidopsis genome.
    We are in the process now also of establishing a microbial 
genomes program, because we need to look at plant pathogens----
    Senator Bond. Yes.
    Dr. Colwell.--As well as the plant genome itself. And that 
is a very rich area exploit what we know about the plant genome 
to determine how best to deal with resistance to disease and 
infection.
    It is going splendidly and I would be very happy to provide 
any additional information you would like.

                        MAIZE SEQUENCING PROJECT

    Senator Bond. The--of course, the sequencing grant--and we 
appropriated an initial $10 million for the plant genome 
program and for economically important crops such as maize, 
wheat, and barley. Is the sequencing project for maize still 
under consideration, and how are you using the additional funds 
and supporting the sequencing projects?
    Dr. Colwell. The maize project is continuing and it is my 
understanding that it is doing very well. I do not know of any 
difficulties and it is very exciting.
    The rice genome project has gone extremely well; that has 
been international. It is extremely useful to have partnerships 
with other countries and to have this be an open process, with 
the data shared in order to benefit all of humankind.
    Senator Bond. Well, thank you very much, Dr. Colwell, Dr. 
Marburger, Dr. Washington. We will have some additional 
questions for the record and I assume that maybe some other 
members of the committee will as well.

                         CONCLUSION OF HEARINGS

    I believe the Chair had said she would do it. And we thank 
you very much for your participation. And with that, the 
hearing is recessed.
    [Whereupon, at 11:25 a.m., Wednesday, May 15, the hearings 
were concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]















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

                              ----------                              

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

                       NONDEPARTMENTAL WITNESSES

    [Clerk's note.--The following testimonies were received by 
the Subcommittee on VA, HUD, and Independent Agencies for 
inclusion in the record. The submitted materials relate to the 
fiscal year 2003 budget request.
    The subcommittee requested that public witnesses provide 
written testimony because, given the Senate schedule and the 
number of subcommittee hearings with Department witnesses, 
there was not enough time to schedule hearings for 
nondepartmental witnesses.

             Prepared Statement of Alachua County, Florida

    Mr. Chairman: Thank you for allowing the Alachua County Board of 
County Commissioners to submit this written testimony before your 
Subcommittee regarding two innovative initiatives the County has 
undertaken: (1) Partners for a Productive Community Enhancement 
Initiative and (2) the Emerald Necklace Land Conservation Initiative.
       partners for a productive community enhancement initiative
    Alachua County seeks $2.3 million in federal funds to assist in the 
expansion of its award winning neighborhood revitalization program. 
This public/private program has been designed, developed and 
implemented to stabilize, revitalize and sustain specific at risk 
communities in Alachua County. Funding is being sought as an Economic 
Development Initiative (EDI) through the Department of Housing and 
Urban Development (HUD).
    In response to a spiraling crime rate in southwest Alachua County, 
the Alachua County Sheriff's Office requested help from the Board of 
County Commissioners in 1993. Specifically, the Sheriff reported that 
57 percent of its 911 calls came from an area that had only 3.2 percent 
of the County's population. The County Commission responded by 
providing $38,000 in funding for a Program Manager to staff the 
Partners for a Productive Community (PPC) Program in fiscal year 1994.
    The PPC was launched as a strategic planning effort with three 
goals: the establishment of neighborhood-based services, the 
development of public/private partnerships and a focus on crime 
prevention. The success of this project depends upon the coordinated 
efforts of the Alachua County Sheriff's Office, the Courts and the 
Alachua County Department of Community Support Services. The goal of 
the Sheriff's Office was to reduce the number of calls from the area, 
and to develop a relationship of trust with the area's residents. The 
goal of the Courts was to help with the swift prosecution of cases, and 
to increase personnel in key areas. Finally, the goal of the County's 
Department of Community Support Services was to develop and implement a 
neighborhood needs assessment process that would determine the social 
service needs in the targeted area. The Community Support Services 
Department was also responsible for developing public/private community 
partnerships, and community based organizations comprised of tenants, 
property owners and managers. Thus, this project represents a multi-
agency strategy to stabilize, revitalize and sustain five specific 
neighborhoods of Alachua County.
    In addition to improving the area's basic infrastructure, federal 
funding is also being requested to provide community recreational 
programs for the area's youth. These activities will provide positive 
alternatives to crime, and allow youth to participate first hand in 
community improvement programs. In doing so, these programs will build 
and encourage positive self-esteem, leadership skills and academic 
achievement. To complement these programs, additional improvements will 
be made in the community Safe Havens.
    Finally, the requested funding will also allow the PPC to expand 
this successful demonstration program into other at-risk Alachua County 
communities such as Archer, Florida. Specifically, the PPC will develop 
a partnership strategy to address the unmet needs of health care, 
education, training, employment, youth recreation and transportation 
for the residents of Archer. This request for federal funding is 
justified by the tremendous improvements and accomplishments that have 
been made in the five targeted southwest neighborhoods since 1995. 
These achievements include: free community day care for 75 children, 30 
community day care slots, 24 in-home day care slots, the creation of 30 
new jobs by the Early Progress Center, the reduction in 911 calls from 
57 percent to 14 percent of total calls in the area, and substantial 
increases in the property values for four of the five neighborhoods.
    Furthermore, the implementation of seasonal recreation programs in 
the targeted Communities by the Y.M.C.A. has been instrumental in 
providing positive, character-building activities for children, 
teenagers and adults. Day camps are provided during the summer months, 
and backyard sports are provided at the end of the school day during 
the school year. In addition, two 4-H Clubs serving 60 neighborhood 
children were established along with after school and community 
designed teen programs. Adult literacy and GED classes were made 
available at a nearby school campus. Finally, other programs have been 
established for the purpose of creating a sustainable neighborhood.
    These programs include quarterly informational forums concerning 
small business development, educational opportunities, self-help 
seminars, budget management and landlord/tenant issues. With respect to 
community-wide improvement programs, a total of nine neighborhood 
cleanups were completed this year. With the active involvement of the 
residents of the neighborhoods, the Alachua County Office of Codes 
Enforcement has been able to reduce from twenty to two the number of 
abandoned and vandalized buildings. Furthermore, a new Waste Collection 
Ordinance, which was supported by the PPC, permits the efficient and 
timely citation of violators.
    The sustaining factor within this program is the formally organized 
Partners for a Productive Community Council. The Council is the guiding 
force that deals with issues and determines unmet needs. For example, a 
block captain organization was started this year with the assistance of 
the PPC Council, and the Alachua County Sheriff's Office. This group 
monitors and manages crime prevention programs block by block. In 
recognition of the numerous accomplishments described above, the PPC 
received the National Association of Counties' Achievement Award in 
1996 for distinguished and innovative contributions to improving county 
government.
    The League of Women Voters presented the County with a similar 
award for out-standing community service. Additionally, in December 
1999, Alachua County received Official Recognition from the Executive 
Office of Weed and Seed for two of the neighborhoods being served by 
the Partners for a Productive Community Program. Pursuant to this 
recognition, these communities have been awarded a $175,000 Weed and 
Seed Grant for prevention and intervention strategies focusing on Cedar 
Ridge and Linton Oaks neighborhoods. This grant will further strengthen 
the long-term efforts to improve the quality of life in these 
neighborhoods. As previously indicated, the federal funding requested 
will also be used to expand the successful Partners Initiative into the 
rural community of Archer. Incorporated in 1858, Archer is located in 
the southwestern portion of Alachua County. Archer and the rural areas 
surrounding it have a population of 16,348, of which 16 percent fall 
below the poverty level. The Town of Archer has one elementary school. 
Emergency rescue, fire and police services are contracted from 
Gainesville and Alachua County. There are also two public housing 
communities, and a small obsolete community center that is used as a 
congregate meal site for senior citizens. Consequently, many of 
Archer's residents travel to Gainesville for employment, social 
services, recreational activities, adult and continuing education and 
health care.
    Recently, the University of Florida School of Nursing received 
$200,000 from the Florida Legislature to provide primary health care 
through a clinic based in Archer. This minimal funding does not provide 
adequate funding for the primary health care needs for this area. Thus, 
a portion of the federal funding in this request could be channeled 
through the Alachua County Health Department in our continuing effort 
to develop partnerships, maximize resources and expand services to the 
citizens of Alachua County through our rural service initiative.
    Employment opportunities, recreation for teens and outreach social 
services continue to be a challenge for the community of Archer. 
According to the Alachua County Sheriff's Office, Archer's crime rate 
is disproportionately high for a community its size. In 2000, the 
Alachua County Sheriff's Office received 2,657 calls for service. Of 
the dispatched calls, 30 were assaults and batteries, and 5 were for 
sexual battery. The largest number of dispatched calls (869) concerned 
burglary and theft.
    In conclusion, Alachua County requests $2.3 million in federal 
funding to continue it's highly successful and award winning 
neighborhood revitalization programs; and to expand these successful 
model programs to other neighborhoods, including the Town of Archer, 
Florida.
             emerald necklace land conservation initiative
    Alacua County is also seeking funding for its Emerald Necklace Land 
Conservation Initiative. This intergovernmental land conservation 
initiative will provide a publicly accessible, connected, and protected 
network of trails, greenways, open spaces and waterfronts surrounding 
the Gainesville urban area. The County is seeking $10 million to 
directly provide for multiple public uses and benefits, including 
passive recreation opportunities, protection of drinking water sources, 
watershed restoration, and preservation of diminishing fish and 
wildlife habitats.
    On November 7, 2000, a large turnout of Alachua County voters 
overwhelmingly endorsed passage of a local land acquisition bond 
referendum that provides up to $29 million in local funds to acquire 
and preserve environmentally significant lands. This local initiative 
received broad public support, with endorsements from diverse community 
interests including business, environmental and community 
organizations.
    Alachua County is seeking state and federal matching funds to 
leverage this substantial local commitment to land conservation. 
Property acquisitions are proposed to link existing conservation lands 
to provide for connected areas of protected water quality and wildlife 
habitat, as well as resource-based recreational opportunities. Federal 
matching funds will be critical to the success of this project. Alachua 
County is committed to responsible land use practices and conservation 
policies that encourage future growth to occur in areas of lesser 
environmental sensitivity with adequate infrastructure.
    Alachua County has five large-scale land acquisition projects 
(5,000+ acres) on Florida's Conservation and Recreation Lands (CARL) 
acquisition list.
  --Paynes Prairie Additions (a large freshwater wetland and watershed, 
        managed as a state preserve)
  --San Felasco Hammock Additions (a mature hammock and sandhill 
        forest, with ravines and unique sinkhole drainage features)
  --Watermelon Pond (an upland sandhill and scrub forest community with 
        important ephemeral wetlands surrounding a relatively pristine 
        lake)
  --Newnan's Lake (a diverse flatwoods forest surrounding a major 
        community fishing lake with declining water quality)
  --Lochloosa Forest (a pine flatwoods forest, largely in commercial 
        timber production surrounding two large fishing lakes)
    These tracts are under substantial land development pressures that, 
if left unchecked, will further fragment and diminish their 
environmental, water resource, and recreational values.
    A major portion of the larger tracts proposed for acquisition are 
currently timberlands. Timber production, where conducted in 
conformance with best management practices to avoid soil erosion and 
water quality degradation, is a land use considered to be generally 
compatible with Alachua County's land conservation goals. In these 
areas, the purchase of development rights and conservation easements, 
as opposed to fee simple acquisition, are proposed as key components of 
the Emerald Necklace acquisition strategy. These conservation 
alternatives, which stretch the available acquisition dollars, allow 
the properties to continue to be used for lower impact, more compatible 
land use activities while remaining under private ownership and 
management.
    In addition to these five larger tracts, acquisitions are proposed 
for smaller, but environmentally significant properties that will 
preserve vital connections between the larger tracts, creating the 
``Emerald Necklace.'' These smaller, linking parcels, often overlooked 
by state and federal land acquisition programs, are easier to manage by 
a local land conservation program such as that established by Alachua 
County.
    Although most of the properties proposed to be included in this 
project are relatively undisturbed, an important objective of the 
Emerald Necklace initiative is to accomplish several critical 
restoration projects. Alachua County in consultation with the City of 
Gainesville has identified four priority restoration areas:
    Newnan's Lake; a large lake in a relatively natural setting with 
spectacular recreational, scenic, and wildlife resources that is being 
adversely affected by water quality degradation and sedimentation. 
Specific projects requiring federal assistance include: investigations 
to determine the source of water quality problems and appropriate 
remedies, mechanical removal of muck and sedimentation, land 
acquisition for surrounding properties, a multi-use trail system 
circling the lake and connecting two existing rail-trails, and the 
designation and enhancement of a canoe trail connecting Newnan's and 
Orange Lake via Prairie Creek and the River Styx. The St. Johns River 
Water Management District is another willing partner for this 
restoration project, having made substantial commitments in the past 
and demonstrating an interest to expand land conservation and water 
resources protection in the area while enhancing public access.
    Sweetwater Branch watershed restoration to improve water quality, 
reduce sedimentation, and to prevent adverse impacts on Paynes Prairie 
State Preserve (a designated National Natural Landmark) and the 
underlying Floridan Aquifer, the region's primary source of drinking 
water. Prior to draining into the drinking water aquifer via Alachua 
Sink on Paynes Prairie, this urban creek in eastern Gainesville is 
severely impacted by untreated stormwater runoff and further eroded by 
a major discharge of treated municipal waste-water.
    Tumblin Creek watershed restoration to improve water quality, 
reduce sedimentation and toxicity to fish, and to prevent adverse 
impacts to Paynes Prairie State Preserve and the Floridan Aquifer. This 
severely degraded urban creek flows through a minority neighbor-hood 
and a public school campus prior to transporting untreated stormwater 
and potentially toxic sediments into Bivens Arm Lake. This lake, a 
state-designated wildlife sanctuary, provides an increasingly rare 
opportunity for subsistence and recreational bank fishing for low 
income and unemployed residents.
    The restoration of Hogtown Creek, which drains the largest 
watershed in Gainesville. The City of Gainesville has acquired $3.0 
million in properties to establish the Hogtown Creek Greenway. Federal 
funding assistance is needed for the development of recreational trails 
and for water quality improvements.
    The Emerald Necklace initiative, with federal assistance, can serve 
as a model land conservation program, demonstrating a successful local, 
state, and federal environmental partnership as well as effective 
conservation alternatives to fee simple acquisition.
    We hope that the Subcommittee will look favorably upon these 
worthwhile and innovative projects as the appropriations process moves 
forward.
    Thanks you for your consideration.
                                 ______
                                 

           Prepared Statement of the Alliance to Save Energy

                              introduction
    My name is David Nemtzow. I am the President of the Alliance to 
Save Energy, a bi-partisan, non-profit coalition of business, 
government, environmental, and consumer leaders dedicated to improving 
the efficiency with which our economy uses energy. Senators Charles 
Percy and Hubert Humphrey founded the Alliance in 1977. The leadership 
of the Alliance is also a partnership between the private sector and 
government chaired by Senator Byron Dorgan (D-ND) and co-chaired by 
Dean Langford the former CEO of Osram Sylvania. Over seventy companies 
currently participate in the Alliance's Associates program and with 
your permission Mr. Chairman, I would like to include for the record a 
complete list of the Alliance's Board of Directors and Associates. This 
list includes the nation's leading energy efficiency firms, electric 
and gas utilities, and other companies committed to promoting sound 
energy use.
    Thank you for the opportunity to testify regarding the energy-
related components of the Environmental Protection Agency's fiscal year 
2003 budget request. Specifically, I respectfully urge you to 
significantly increase your support for Energy Star, a program of the 
Environmental Protection Agency (EPA) which uses energy efficiency to 
deliver significant environmental benefits to the nation while yielding 
significant economic benefits for businesses, state and local 
government institutions such as colleges and universities, public 
schools, and hospitals, and of course to millions of consumers who 
purchase Energy Star-labeled products.
    The Alliance has a long history of advocating for as well as 
researching and evaluating the effectiveness of federal efforts to 
promote energy efficiency. While many of these include laws passed by 
this Congress and federal regulations and standards issued pursuant to 
those laws, we especially applaud those that rely not on government 
mandates, but on cooperative partnerships between government and 
business and between the federal and state governments. The EPA Energy 
Star program is a shining example of these voluntary partnerships. 
President Bush and Vice President Cheney have referred to Energy Star 
for furthering national goals of broad-based economic growth, 
environmental protection, energy security and economic competitiveness 
simultaneously. The Climate Protection Division at EPA works closely 
with private sector manufacturers, retailers, building owners, and 
energy service providers, as well as state and local governments, non-
profits, and other organizations to promote energy efficient products 
and buildings. And they do it extremely well for every tax dollar spent 
by the Energy Star program, 75 dollars worth of energy savings is 
returned.
Energy Star Improves Energy Reliability
    Mr. Chairman, last year our nation faced emergencies in energy 
reliability. This could happen again. The dire situation surrounding 
electricity supply in California and the West brought renewed concern 
about America's energy needs. President Bush took a large step in 
issuing conservation orders for federal agencies in the midst of the 
crisis, yet this could do little to address demand. It was the help of 
Americans who stood up to the crisis and reduced their demand that 
helped prevent a further strain on supply. While this winter was mild, 
last year Americans staggered under massive increases in natural gas 
for their heating needs.
    Energy Star has an important role to play in reliability. By 
promoting energy-efficient buildings, appliances, and other products 
Energy Star is helping reduce peak demand for electricity in homes, 
businesses, hospitals, and government buildings. By giving consumers 
guidance on heating and cooling equipment, Energy Star is helping those 
homeowners take back control of their home finances.
Energy Efficiency as a Potent Energy Resource
    Mr. Chairman, the debate over energy policy is in full swing on the 
Senate floor. Much of that debate can be boiled down to the simple 
elements of supply and demand. There are those who are focusing on the 
supply end, calling for increasing the supply of our energy resources 
through expanded drilling, power plant licensing, and through other 
avenues. Then, there are those Senators who have turned their backs to 
supply to focus on demand. While we at the Alliance to Save Energy 
applaud that endeavor we realize that we cannot save our way our out of 
our dependence on fossil and nuclear fuels. An effective energy policy 
must include a combination of measures that provides electricity, 
heating fuel, and motor fuel to Americans. But to do that we must first 
go after the resource that is cheapest, can be delivered most quickly, 
and can stand up to all environmental scrutiny that resource is energy 
efficiency.
    Energy efficiency isn't just a marginal activity by which we can 
chip a little bit off of our consumption and save a few bucks around 
the edges. Energy efficiency measures are powerful and dynamic policy 
tools through which prices, supply, and emissions can be radically 
changed. It seems that every year technological developments bring more 
and better measures at our disposal to reduce electricity demand, make 
homes more energy-efficient, and go further on less gasoline. But Mr. 
Chairman, a strategy to maximize these resources must begin with 
reasoned analysis of our energy situation, not a predisposition to one 
course or another.
Energy Star Capitalize on this Resource
    Mr. Chairman, EPA's Energy Star has proven to be an extremely 
effective way for this nation to capitalize on the untapped potential 
of energy efficiency as a resource. In fact, Energy Star proves that 
environmental protection can not only be achieved without harming the 
economy, but also that such protections can act to boost consumer 
savings and economic growth.
    Energy Star is composed entirely of voluntary partnerships, and 
they have grown since the early 1990s to include thousands of 
partnerships with product manufacturers, private and public building 
owners and operators, homebuilders, small businesses, utilities, and 
retailers. The sheer number of these partnerships is a testament to the 
fact that energy efficiency delivers ``pollution prevention at a 
profit.''
    Recently, the Alliance to Save Energy asked many of Energy Star's 
partners if they would support our request for a significant increase 
in funding for these important programs. The response was remarkable. 
Hundreds of businesses, from large manufacturers like Canon USA in New 
York to smaller businesses like Mayer Electrical Supply Co. in Alabama, 
have pledged their company's support for these important programs. Each 
member of the Subcommittee with receive a copy of this letter with the 
list of businesses.
    Energy Star serves broad constituencies across every state in the 
country. Energy Star includes over 1,600 manufacturing partners of over 
30 different product types, who make and market over 11,000 different 
models of Energy Star compliant products. Energy Star assists over 
2,800 small businesses with their efforts to maximize the energy 
efficiency of their facilities. Energy Star's work with partners 
further advances the education of energy efficiency and the reduction 
in energy consumption. For example, by working with builders, Energy 
Star helps the customers of those builders make smart decisions 
decisions that will save the consumer money and the country pollution 
for as long as the home is standing. Energy Star counts more than 1,600 
builder partners and partners who supply products and services for 
energy-efficient home construction. To date, more than 25,000 Energy 
Star labeled homes have been built, locking in financial savings for 
homeowners of more than $7.5 million annually. Energy Star Buildings 
participants now include over 15 percent of the nation's total 
commercial, public, and industrial market, resulting in more than 25 
billion kilowatt hours of energy saved.
Energy Efficiency Investments Pay Back for Years
    Energy efficiency improvements achieved through Energy Star are 
like ``the gift that keeps on giving.'' There are not only the 
immediate environmental and economic benefits, but also those that are 
achieved through the long term investments.
    While consumers who purchase Energy Star labeled products save 
through the life of the product, product manufacturers get the economic 
boost and incentives from the purchases of these products. EPA predicts 
expenditures on energy-efficient technology of almost $13 billion 
through 2010. In addition, EPA predicts cumulative net energy bill 
savings for consumer and businesses of $70 billion through 2010 an 
average net savings of more than $5 billion per year.
    Pollution savings are as dramatic as the financial savings. In 2001 
alone, reductions in greenhouse gas emissions totaled 38 million metric 
tons of carbon equivalent (MMTCE) that's similar to taking more than 25 
million cars off the road. Last year, emissions of 140,000 tons of 
nitrogen oxides (NOX) were also prevented. Because many of 
the investments in energy-efficient technology promoted by Energy Star 
offer a life of ten years or more, these investments will continue to 
deliver economic and environmental benefits through 2010 and beyond. 
EPA estimates that emissions reductions averaging more than 35 MMTCE 
per year between now and 2010 were locked in last year based on actions 
already taken by Energy Star partners.
    In considering the environmental value of the purchasing decisions 
that Energy Star helps consumers make more wisely, it is important to 
realize that over 50 percent of U.S. greenhouse gas emissions in 2010 
will be coming from products and capital equipment not yet purchased. 
The Energy Star program seeks to influence those capital investment 
decisions in a way that helps individual purchasers save money while 
simultaneously helping the nation meet its clean air and greenhouse gas 
emissions-reduction goals.
    All of this through voluntary participation in Energy Star, and the 
voluntary, market-based choices made by thousands of partners and 
millions of American consumers. No regulations, no government mandates.
Energy Efficiency Enhances Electric System Reliability
    Mr. Chairman, Energy Star, and energy efficiency in general, also 
enhance the security of our energy supply in another very significant, 
but largely unappreciated, way. I am referring to the reliability of 
our electric system. As every member of Congress is aware, the nation 
is in the midst of a transition in the structure of our electric 
utility industry from a system of regulated monopolies to a competitive 
market for electricity generation and retail sales. While true 
competition should be a boon for efficiency on the generation side, 
this transition brings with it many uncertainties. Under regulation, 
utilities planned for and built power plants to meet a predetermined 
reserve generation capacity, and were assured of recovering costs plus 
a profit margin through the regulatory rate-setting process. Under 
competition, markets composed of electric generating businesses, 
investors, and consumers will decide which supplies will be needed and 
economical. The ability of markets to accurately forecast future demand 
and potential revenues and translate those into timely investments in 
supply capability remains to be seen.
    Compounding this problem, impending restructuring has put a chill 
on utilities' interest in helping their customers to use energy more 
efficiently. Since 1993, utilities have slashed spending on their 
``demand-side management'' programs, the largest component of which is 
usually energy efficiency, by 45 percent. The reason for this is 
simple: in a competitive environment, electricity generators no longer 
have an interest in helping their customers reduce the consumption of 
their product. The foregone energy savings and peak demand reductions 
from energy efficiency programs have been substantial, and they have 
exacerbated the steady growth in demand for electricity created by our 
strong economy. Many summers have brought ``capacity crunches'' in 
various regions of the country; shortages of either electric supply or 
transmission and distribution capacity needed to deal with peak demand 
on hot summer days.
    Energy efficiency, by reducing demand, unquestionably contributes 
to system reliability. Quite simply, energy efficiency reduces both the 
base load, the amount of energy required to be supplied to an area or 
region, as well as the peak power demand. Different technologies may 
contribute primarily to one or the other, for example: lighting and 
refrigeration efficiencies reduce base load, while air conditioner 
efficiency improvements reduce summertime peak load. (Of course, any 
reduction in base load also reduces the ``height'' of peak loads.) 
Thus, energy efficiency in the aggregate helps maintain adequate 
margins of generation supply, and by reducing the load and stress on 
various points in the power distribution network, also enhances the 
security of the system. Energy Star, with its broad reach, covers all 
the bases. In fact, EPA works with more than 100 utilities and state 
energy efficiency providers that serve approximately 50 percent of the 
households in the United States in promoting energy efficiency with 
Energy Star.
    The Bush Administration's energy policy released last year also 
touted the benefits of the Energy Star program and called for an 
expansion of this important initiative. In their report to the 
President, the National Energy Policy Development Group recommended 
that: ``the President direct the EPA Administrator to develop and 
implement a strategy to increase public awareness of the sizable 
savings that energy efficiency offers to homeowners across the country. 
Typical homeowners can save about 30 percent (about $400) a year on 
their home energy bill by using Energy Star labeled products.'' The 
report further complimented the program. Noting not only that 
``Conservation and energy efficiency are important elements of a sound 
energy policy'' but also that ``The federal government can also promote 
energy efficiency through programs like the Energy Star program, and 
search for more innovative technologies that improve efficiency and 
conservation through research and development.''
The Need, and the Answer, Are Clear
    The need for energy efficiency to contribute even more strongly to 
our nation's economic growth and energy security is clear. The 
potential for energy efficiency programs like Energy Star to meet that 
need is just as clear, and just as strong. At the end of its first 
decade, Energy Star is now achieving widespread recognition. EPA's 
latest market research shows that not only do most American's recognize 
the unique Energy Star label, but it also is highly influential in 
influencing their purchases. Each year, Energy Star recognizes 
companies and organizations that go above and beyond to advance energy 
efficiency, and these honors speak volumes about the program itself.
    Corporations such as Maytag, located in Newton, Iowa, are being 
recognized this year for their products and public education efforts 
that demonstrate that, working with businesses, Energy Star can 
leverage private sector dollars to advance marketing efforts for 
efficient products. Maytag now offers 68 Energy Star qualified 
appliance models, which is almost 100 percent increase over last year. 
In 2001, Maytag concluded a concert tour with educational messages 
about energy and water savings and their ``Mother Earth'' float in the 
Macy's Day Parade displayed the Energy Star logo reaching millions of 
consumers around the country with messages of energy saving.
    In addition to marketing efforts with Energy Star partners, the 
Energy Star program participates in research and is always on the 
lookout for new and innovative ways to reduce energy use. This year, a 
West Virginia company will receive one of the special recognition 
awards for technical innovation. Royal Venders, Inc. located in 
Kearneysville, West Virginia has developed a new vending machine 
technology; Royal Vendors' customers use approximately 50 percent less 
energy. The technology consists of a more energy efficient T8 lighting 
package, cooling unit, GE evaporator fan, and software to further 
reduce consumption during non-peak hours. All new 2002 Royal Vendors 
machines are available with the optional energy efficiency package, 
which saves energy, money, and maintenance/service calls. With 
approximately one million Royal Vendors machines in place in the United 
States, upgrading the existing stock of machines will bring energy 
savings for years to come. Recognition of the technology is another way 
that Energy Star helps push energy efficiency advancements into more 
common use.
Much Has Been Accomplished, but Huge Potential Remains Untapped
    The questions are often asked: ``If energy efficiency is so great, 
why don't consumers and businesses just do it on their own? Why do we 
need a government program to promote it and incent people to do it?'' 
Well, we know that for reasons sometimes hard to understand, people 
often don't do what is in their own interest. For example, people 
should save for their retirement, right? It's certainly in their long-
term self-interest. Yet, the government goes to great lengths, and 
great expense, to goad people into saving for their retirement, through 
tax breaks for 401(k)s and other retirement plans, IRA's etc. How about 
home ownership? It's the American dream to own your own home for peace 
of mind, long-term security, etc. yet Congress long ago enacted the 
home mortgage-interest tax deduction, to convince people to buy their 
home and help them afford it. Compared to things like these, the 
federal funds spent on Energy Star are a pittance.
    There are no tax breaks or subsidies in these programs. 
Appropriations go directly to fund the underlying research, program 
implementation, and technical assistance to partners. These funds are 
hugely leveraged through EPA's thousands of voluntary partnerships with 
product manufacturers, home builders, state and local government 
institutions, commercial building owners, and small businesses. For 
every federal dollar spent on these programs, EPA can show an average 
of $75 in utility bill savings to someone, $15 in private sector 
investment in energy efficient technology, reductions in greenhouse gas 
emissions of 1.0 MMTCE, and an addition of over $60 to the economy.
Conclusion
    Over the past decade, the Energy Star programs have demonstrated 
their effectiveness by achieving great savings in the nation's 
collective energy bill and in energy-related pollution. But, as 
successful as these programs have been, much more could be accomplished 
with increased funding. It is estimated that if all consumers chose 
only Energy Star-labeled products over the next decade or so, the 
nation's energy bill would be reduced by about $100 billion, while 
avoiding 300 MMTCE in greenhouse gas emissions. If all commercial 
building owners took advantage of the cost-effective efficiency-
improvement opportunities, they could achieve another $130 billion in 
energy savings and 350 MMTCE in emissions reductions over the next 10 
years.
    These programs are wildly successful by any measure. They are well-
run, they are cost-effective, they have consistently exceeded their 
goals, and they have the support, even explicit endorsement of 
businesses across the country. Unfortunately, these important programs 
have received a virtual level funding request for the past 2 years, 
even as the number of products and manufacturers in the Labeling 
program has greatly expanded, the number of partners in the Buildings, 
Homes, and Small Business programs have soared, and both President Bush 
and Vice President Cheney have publicly touted the benefits of Energy 
Star and promoted voluntary pollution reduction.
    Energy Star's effectiveness in terms of national energy bill 
savings and pollution reduction are truly impressive. While there are 
many demands on the countries financial resources, I respectfully urge 
greater support to what works. Energy Star has proven tremendously 
cost-effective and it can deliver even greater benefits to the nation 
with increased funding resources.
    Thank you again for the opportunity to testify.
                                 ______
                                 

        Prepared Statement of the American Astronomical Society

                           executive summary
            astronomy and astrophysics in the new millennium
    In the first decade of the new millennium, we are poised to take a 
giant step forward in understanding the universe and our place within 
it. The decade of the 1990s saw an enormous number of exciting 
discoveries in astronomy and astrophysics. For example, humanity's 
centuries-long quest for evidence of the existence of planets around 
other stars resulted in the discovery of extrasolar planets, and the 
number of planets known continues to grow. Astronomers peered far back 
in time, to only a few hundred thousand years after the Big Bang, and 
found the seeds from which all galaxies, such as our own Milky Way, 
were formed. At the end of the decade came evidence for a new form of 
energy that may pervade the universe. Nearby galaxies were found to 
harbor extremely massive black holes in their centers. Distant galaxies 
were discovered near the edge of the visible universe. In our own solar 
system, the discovery of Kuiper Belt objects--some of which lie beyond 
the orbit of Pluto--opens a new window onto the history of the solar 
system. This report presents a comprehensive and prioritized plan for 
the new decade that builds on these and other discoveries to pursue the 
goal of understanding the universe, a goal that unites astronomers and 
astrophysicists with scientists from many other disciplines.
    The Astronomy and Astrophysics Survey Committee was charged with 
surveying both ground- and space-based astronomy and recommending 
priorities for new initiatives in the decade 2000 to 2010. In addition, 
the committee was asked to consider the effective implementation of 
both the proposed initiatives and the existing programs. The 
committee's charge excludes in situ studies of Earth and the planets, 
which are covered by other National Research Council committees: the 
Committee on Planetary and Lunar Exploration and the Committee on Solar 
and Space Physics. To carry out its mandate, the committee established 
nine panels with more than 100 distinguished members of the 
astronomical community. Broad input was sought through the panels, in 
forums held by the American Astronomical Society, and in meetings with 
representatives of the international astronomical community. The 
committee's recommendations build on those of four previous decadal 
surveys (NRC, 1964, 1972, 1982, 1991), in particular the report of the 
1991 Astronomy and Astrophysics Survey Committee, The Decade of 
Discovery in Astronomy and Astrophysics (referred to in this report as 
the 1991 survey; also known as the Bahcall report).
    The fundamental goal of astronomy and astrophysics is to understand 
how the universe and its constituent galaxies, stars, and planets 
formed, how they evolved, and what their destiny will be. To achieve 
this goal, researchers must pursue a strategy with several elements:
  --Survey the universe and its constituents, including galaxies as 
        they evolve through cosmic time, stars and planets as they form 
        out of collapsing interstellar clouds in our galaxy, 
        interstellar and intergalactic gas as it accumulates the 
        elements created in stars and supernovae, and the mysterious 
        dark matter and perhaps dark energy that so strongly influence 
        the large-scale structure and dynamics of the universe.
  --Use the universe as a unique laboratory for probing the laws of 
        physics in regimes not accessible on Earth, such as the very 
        early universe or near the event horizon of a black hole.
  --Search for life beyond Earth, and if it is found, determine its 
        nature and its distribution.
  --Develop a conceptual framework that accounts for all that 
        astronomers have observed.
    Several key problems are particularly ripe for advances in this 
decade:
  --Determine the large-scale properties of the universe: the amount, 
        distribution, and nature of its matter and energy, its age, and 
        the history of its expansion.
  --Study the dawn of the modern universe, when the first stars and 
        galaxies formed.
  --Understand the formation and evolution of black holes of all sizes.
  --Study the formation of stars and their planetary systems, and the 
        birth and evolution of giant and terrestrial planets.
  --Understand how the astronomical environment affects Earth.
    These scientific themes, all of which now appear to offer 
particular promise for immediate progress, are only part of the much 
larger tapestry that is modern astronomy and astrophysics. For example, 
scientists cannot hope to understand the formation of black holes 
without understanding the late stages of stellar evolution, and the 
full significance of observations of the galaxies in the very early 
universe will not be clear until it is clear how these galaxies have 
evolved since that time. Although the new initiatives that the 
committee recommends will advance knowledge in many other areas as 
well, they were selected explicitly to address one or more of the 
important themes listed above.
    In addition, the committee believes that astronomers can make 
important contributions to education. Building on widespread interest 
in astronomical discoveries, astronomers should:
  --Use astronomy as a gateway to enhance the public's understanding of 
        science and as a catalyst to improve teachers' education in 
        science and to advance interdisciplinary training of the 
        technical work force.
   optimizing the return on the nation's investment in astronomy and 
                              astrophysics
    The United States has been generous in its support of astronomy and 
astrophysics and as a result enjoys a leading role in almost all areas 
of astronomy and astrophysics. So that the nation can continue to 
obtain maximum scientific return on its investment, the committee makes 
several recommendations to optimize the system of support for 
astronomical research.
Balancing New Initiatives with the Ongoing Program
    An effective program of astronomy and astrophysics research must 
balance the need for initiatives to address new opportunities with 
completion of projects accorded high scientific priority in previous 
surveys.
  --The committee reaffirms the recommendations of the 1991 Astronomy 
        and Astrophysics Survey Committee (NRC, 1991) by endorsing the 
        completion of the Space Infrared Telescope Facility (SIRTF), 
        the Millimeter Array (MMA; now part of the Atacama Large 
        Millimeter Array, or ALMA), the Stratospheric Observatory for 
        Infrared Astronomy (SOFIA), and the Astrometric Interferometry 
        Mission (now called the Space Interferometry Mission, or SIM). 
        Consistent with the recommendations of the Task Group on Space 
        Astronomy and Astrophysics (NRC, 1997), the committee stresses 
        the importance of studying the cosmic microwave background with 
        the Microwave Anisotropy Probe (MAP) mission, the European 
        Planck Surveyor mission, and ground-based and balloon programs.
    The committee endorses U.S. participation in the European Far 
Infrared Space Telescope (FIRST), and it endorses the planned 
continuation of the operation of the Hubble Space Telescope (HST) at a 
reduced cost until the end of the decade.
  --To achieve the full scientific potential of a new facility, it is 
        essential that, prior to construction, funds be identified for 
        operation of the facility, for renewal of its instrumentation, 
        and for grants for data analysis and the development of 
        associated theory.
    NASA already follows this recommendation in large part by including 
Mission Operations and Data Analysis (MO&DA) in its budgeting for new 
missions. The committee recommends that funds for associated theory be 
included in MO&DA as well. It recommends further that the National 
Science Foundation include funds for facility operation, renewal of 
instrumentation, and grants for data analysis and theory along with the 
construction costs in the budgets for all new federally funded, ground-
based facilities. These recommendations are consistent with those of 
the 1991 survey. For the purpose of total project budget estimation, 
the committee adopted a model in which operation amounts to 7 percent 
of the capital cost per year and instrumentation amounts to 3 percent 
per year for the first 5 years of operation. The committee recommends 
that total project budgets provide for grants for data analysis and 
associated theory at the rate of 3 percent of the capital cost per year 
for major facilities and 5 percent per year for moderate ones. On the 
basis of this model, the committee has included funds for operations, 
instrumentation, and grants for a period of 5 years in the cost 
estimates provided in this report for most ground-based initiatives.
  --Adequate funding for unrestricted grants that provide broad support 
        for research, students, and postdoctoral associates is required 
        to ensure the future vitality of the field; therefore new 
        initiatives should not be undertaken at the expense of the 
        unrestricted grants program.
    Grants not tied to a facility or program--unrestricted grants--
often drive the future directions of astronomy.
Strengthening Ground-Based Astronomy and Astrophysics
    The committee addresses several structural issues in ground-based 
astronomy and astrophysics.
  --U.S. ground-based optical and infrared facilities, radio 
        facilities, and solar facilities should each be viewed by the 
        National Science Foundation (NSF) and the astronomical 
        community as a single integrated system drawing on both federal 
        and nonfederal funding sources. Effective national 
        organizations are essential to coordinate, and to ensure the 
        success and efficiency of, these systems. Universities and 
        independent observatories should work with the national 
        organizations to ensure the success of these systems.
  --Cross-disciplinary competitive reviews should be held about every 5 
        years for all NSF astronomy facilities. In these reviews, it 
        should be standard policy to set priorities and consider 
        possible closure or privatization.
    The National Radio Astronomy Observatory (NRAO) and the National 
Astronomy and Ionosphere Center (NAIC) currently serve as effective 
national organizations for radio astronomy, and the National Solar 
Observatory (NSO) does so for solar physics. The National Optical 
Astronomy Observatories (NOAO) as currently functioning and overseen 
does not fulfill this role for ground-based optical and infrared 
astronomy. A plan for the transition of NOAO to an effective national 
organization for ground-based optical and infrared astronomy should be 
developed, and a high-level external review, based on appropriate, 
explicit criteria, should be initiated.
    The Department of Energy (DOE) supports a broad range of programs 
in particle and nuclear astrophysics and in cosmology. The scientific 
payoff of this effort would be even stronger with a clearly articulated 
strategic plan for DOE's programs that involve astrophysics.
  --Given the increasing involvement of the Department of Energy in 
        projects that involve astrophysics, the committee recommends 
        that DOE develop a strategic plan for astrophysics that would 
        lend programmatic coherence and facilitate coordination and 
        cooperation with other agencies on science of mutual interest.
Ensuring the Diversity of NASA Missions
    NASA's Great Observatories have revolutionized understanding of the 
cosmos, while the extremely successful Explorer program provides 
targeted small-mission opportunities for advances in many areas of 
astronomy and astrophysics. The committee endorses the continuation of 
a vigorous Explorer program. There are now fewer opportunities for 
missions of moderate size, however, despite the enormous role such 
missions have played in the past.
  --NASA should continue to encourage the development of a diverse 
        range of mission sizes, including small, moderate, and major, 
        to ensure the most effective returns from the U.S. space 
        program.
Integrating Theory Challenges into the New Initiatives
    The new initiatives recommended below are motivated in large part 
by theory, which is also key to interpreting the results. Adequate 
support for theory, including numerical simulation, is a cost-effective 
means for maximizing the impact of the nation's capital investment in 
science facilities. The committee therefore recommends that
  --To encourage theorists to contribute to the planning of missions 
        and facilities and to the interpretation and understanding of 
        the results, one or more explicitly funded theory challenges 
        should be integrated with most moderate or major new 
        initiatives.
Coordinating Programs among Federal Agencies
    Because of the enormous scale of contemporary astronomical projects 
and the need for investigations that cross wavelength and discipline 
boundaries, cooperation among the federal agencies that support 
astronomical research often has benefits. To determine when interagency 
collaboration would be fruitful, each agency should have in place a 
strategic plan for astronomy and astrophysics and should also have 
cross-disciplinary committees (such as DOE and NSF's Scientific 
Assessment Group for Experiments in Non-Accelerator Physics [SAGENAP] 
and NASA's Space Science Advisory Committee [SSAC]) available to 
evaluate proposed collaborations. The Office of Science and Technology 
Policy could play a useful role in facilitating such interagency 
cooperation.
Collaborating with International Partners
    International collaboration enables projects that are too costly 
for the United States alone and enhances the scientific return on 
projects by bringing in the scientific and technical expertise of 
international partners. In many cases, international collaboration 
provides opportunities for U.S. astronomers to participate in major 
international projects for a fraction of the total cost, as in the case 
of the European Solar and Heliospheric Observatory (SOHO), XMM-Newton, 
Planck Surveyor, and FIRST missions, and the Japanese Advanced 
Satellite for Cosmology and Astrophysics mission. Valuable 
opportunities for international collaboration exist for smaller 
missions as well. Collaborations on major projects require the full 
support of the participating scientific communities, which can be 
ensured if the projects are among the very highest priorities of the 
participants, as is the case with ALMA.
    The committee affirms the value of international collaboration for 
ground- and space-based projects of all sizes. International 
collaboration plays a crucial role in a number of this committee's 
recommended initiatives, including the Next Generation Space Telescope, 
the Expanded Very Large Array, the Gamma-ray Large Area Space 
Telescope, the Laser Interferometer Space Antenna, the Advanced Solar 
Telescope, and the Square Kilometer Array technology development, and 
it could play a significant role in other recommended initiatives as 
well.
             new investments in astronomy and astrophysics
    Many mysteries confront us in the quest to understand our place in 
the universe. How did the universe begin? What is the nature of the 
dark matter and the dark energy that pervade the universe? How did the 
first stars and galaxies form? Researchers infer the existence of 
stellar mass black holes in our galaxy and supermassive ones in the 
nuclei of galaxies. How did they form? The discovery of extrasolar 
planets has opened an entirely new chapter in astronomy, bringing a 
host of unresolved questions. How do planetary systems form and evolve? 
Are planetary systems like our solar system common in the universe? Do 
any extrasolar planetary systems harbor life? Even a familiar object 
like the Sun poses many mysteries. What causes the small variations in 
the Sun's luminosity that can affect Earth's climate? What is the 
origin of the eruptions on the solar surface that cause ``space 
weather''?
    To seek the answers to these questions and many others described in 
this report, the committee recommends a set of new initiatives for this 
decade that will substantially advance the frontiers of human 
knowledge. Table ES.1 presents these initiatives, combined for both 
ground- and space-based astronomy, in order of priority. The committee 
set the priorities primarily on the basis of scientific merit, but it 
also considered technical readiness, cost-effectiveness, impact on 
education and public outreach, and the relation to other projects. The 
initiatives were divided into three categories--major, moderate, and 
small--that were defined separately for ground- and space-based 
projects based on estimated cost (see Chapter 1). The estimated cost of 
the recommended program for the decade 2000 to 2010 is $4.7 billion in 
fiscal year 2000 dollars, about 20 percent greater than the $3.9 
billion inflation-adjusted cost of the recommendations of the 1991 
survey. Two of the recommended projects, the Terrestrial Planet Finder 
(TPF) and the Single Aperture Far Infrared (SAFIR) Observatory, could 
start near the end of this decade or at the beginning of the next. The 
committee has assumed that about 15 percent of the total estimated cost 
for these two projects will fall in this decade.
Major initiatives
    The Next Generation Space Telescope (NGST), the committee's top-
priority recommendation, is designed to detect light from the first 
stars and to trace the evolution of galaxies from their formation to 
the present. It will revolutionize understanding of how stars and 
planets form in our galaxy today. NGST is an 8-mclass infrared space 
telescope with 100 times the sensitivity and 10 times the image 
sharpness of the Hubble Space Telescope in the infrared. Having NGST's 
sensitivity extend to 27 m would add significantly to its 
scientific return. Technology development for this program is well 
under way. The European Space Agency and the Canadian Space Agency plan 
to make substantial contributions to the instrumentation for NGST.
    The Giant Segmented Mirror Telescope (GSMT), the committee's top 
ground-based recommendation and second priority overall, is a 30-m-
class ground-based telescope that will be a powerful complement to NGST 
in tracing the evolution of galaxies and the formation of stars and 
planets. It will have unique capabilities in studying the evolution of 
the intergalactic medium and the history of star formation in our 
galaxy and its nearest neighbors. GSMT will use adaptive optics to 
achieve diffraction-limited imaging in the atmospheric windows between 
1 and 25 m and unprecedented light-gathering power between 0.3 
and 1 m. The committee recommends that the technology 
development for GSMT begin immediately and that construction start 
within the decade. Half the total cost should come from private and/or 
international partners. Open access to GSMT by the U.S. astronomical 
community should be directly proportional to the investment by the NSF.
    The Constellation-X Observatory is a suite of four powerful x-ray 
telescopes in space that will become the premier instrument for 
studying the formation and evolution of black holes of all sizes. Each 
telescope will have high spectral resolution over a broad energy range, 
enabling it to study quasars near the edge of the visible universe and 
to trace the evolution of the chemical elements. The technology issues 
are well in hand for a start in the middle of this decade.
    The Expanded Very Large Array (EVLA)--the revitalization of the 
VLA, the world's foremost centimeter-wave radio telescope--will take 
advantage of modern technology to attain unprecedented image quality 
with 10 times the sensitivity and 1,000 times the spectroscopic 
capability of the existing VLA. The addition of eight new antennas will 
provide an order-of-magnitude increase in angular resolution. With 
resolution comparable to that of ALMA and NGST, but operating at much 
longer wavelengths, the EVLA will be a powerful complement to these 
instruments for studying the formation of protoplanetary disks and the 
earliest stages of galaxy formation.
    The Large-aperture Synoptic Survey Telescope (LSST) is a 6.5-m-
class optical telescope designed to survey the visible sky every week 
down to a much fainter level than that reached by existing surveys. It 
will catalog 90 percent of the near-Earth objects larger than 300 m and 
assess the threat they pose to life on Earth. It will find some 10,000 
primitive objects in the Kuiper Belt, which contains a fossil record of 
the formation of the solar system. It will also contribute to the study 
of the structure of the universe by observing thousands of supernovae, 
both nearby and at large redshift, and by measuring the distribution of 
dark matter through gravitational lensing. All the data will be 
available through the National Virtual Observatory (see below under 
``Small Initiatives''), providing access for astronomers and the public 
to very deep images of the changing night sky.
    The Terrestrial Planet Finder (TPF) is the most ambitious science 
mission ever attempted by NASA. It is currently envisaged as a free-
flying infrared interferometer designed to study terrestrial planets 
around nearby stars--to find them, characterize their atmospheres, and 
search for evidence of life--and to obtain images of star-forming 
regions and distant galaxies with unprecedented resolution. The 
committee's recommendation of this mission is predicated on the 
assumptions that TPF will revolutionize major areas of both planetary 
and nonplanetary science and that, prior to the start of TPF, ground- 
and space-based searches will confirm the expectation that terrestrial 
planets are common around solar-type stars. Both NGST and SIM lie on 
the technology path necessary to achieve TPF.
    The Single Aperture Far Infrared (SAFIR) Observatory is an 8-m-
class space-based telescope that will study the important and 
relatively unexplored spectral region between 30 and 300 m. It 
will enable the study of galaxy formation and the earliest stage of 
star formation by revealing regions too enshrouded by dust to be 
studied by NGST, and too warm to be studied effectively with ALMA. As a 
follow-on to NGST, SAFIR could start toward the end of the decade, and 
it could form the basis for developing a far-infrared interferometer in 
the succeeding decade.
Moderate Initiatives
    Ground-Based Programs.--The committee's recommended highest-
priority moderate initiative overall is the Telescope System 
Instrumentation Program (TSIP), which would substantially increase NSF 
funding for instrumentation at large telescopes owned by independent 
observatories and provide new observing opportunities for the entire 
U.S. astronomical community. Its second priority among ground-based 
initiatives is the Advanced Solar Telescope (AST), which offers the 
prospect of revolutionizing understanding of magnetic phenomena in the 
Sun and in the rest of the universe. The committee's next 
recommendation is that a program be established to plan and develop 
technology for the Square Kilometer Array, an international centimeter-
wave radio telescope for the second decade of the century. In order of 
priority, the other recommended moderate initiatives are the following: 
The Combined Array for Research in Millimeter-wave Astronomy (CARMA) 
will be a powerful millimeter-wave array in the Northern Hemisphere. 
The study of very-high-energy gamma rays will take a major step forward 
with the construction of the Very Energetic Radiation Imaging Telescope 
Array System (VERITAS). The Frequency Agile Solar Radio telescope 
(FASR) will apply modern technology to provide unique data on the Sun 
at radio wavelengths. The South Pole Submillimeter-wave Telescope 
(SPST) will take advantage of the extremely low opacity of the 
Antarctic atmosphere to carry out surveys at submillimeter wavelengths 
that are possible nowhere else on Earth.
    Space-Based Programs.--The committee's top recommendation for a 
moderate space-based mission is the Gamma-ray Large Area Space 
Telescope (GLAST). This joint NASA-DOE mission will provide 
observations of gamma rays from 10 MeV to 300 GeV with six times the 
effective area, six times the field of view, and substantially better 
angular resolution than the Energetic Gamma Ray Experiment aboard the 
Compton Gamma Ray Observatory. The committee's second-priority space-
based project is the Laser Interferometer Space Antenna (LISA), which 
will be able to detect gravity waves from merging supermassive black 
holes throughout the visible universe and from close binary stars 
throughout our galaxy. The committee has assumed that LISA's cost will 
be shared with the European Space Agency. Four additional space-based 
missions have priority. The Solar Dynamics Observer (SDO), a successor 
to the path-breaking SOHO mission, will study the outer convective zone 
of the Sun and the structure of the solar corona. The highly variable 
hard-x-ray sky will be mapped by the Energetic X-ray Imaging Survey 
Telescope (EXIST), which will be attached to the International Space 
Station. The Advanced Radio Interferometry between Space and Earth 
(ARISE) mission is an orbiting antenna that will combine with the 
ground-based VLBA to provide an order-of-magnitude increase in 
resolution for studying the regions near supermassive black holes in 
active galactic nuclei.
Small Initiatives
    Several small initiatives recommended by the committee span both 
ground and space. The first among them--the National Virtual 
Observatory (NVO)--is the committee's top priority among the small 
initiatives. The NVO will provide a ``virtual sky'' based on the 
enormous data sets being created now and the even larger ones proposed 
for the future. It will enable a new mode of research for professional 
astronomers and will provide to the public an unparalleled opportunity 
for education and discovery.
    The remaining recommendations for small initiatives are not 
prioritized. The committee recommends establishing a laboratory 
astrophysics program and a national astrophysical theory postdoctoral 
program for both ground- and space-based endeavors. Augmentation of 
NASA's Astrophysics Theory Program will help restore a balance between 
the acquisition of data and the theory needed to interpret it. 
Ultralong-duration balloon flights offer the prospect of carrying out 
small space-based experiments at a small fraction of the cost of 
satellites. The Low Frequency Array (LOFAR), a joint Dutch-U.S. 
initiative, will dramatically increase knowledge of the universe at 
radio wavelengths longer than 2 m. The Advanced Cosmic-ray Composition 
Experiment for the Space Station (ACCESS) will address fundamental 
questions about the origin of cosmic rays. Expansion of the Synoptic 
Optical Long-term Investigation of the Sun (SOLIS) will permit 
investigation of the solar magnetic field over an entire solar cycle.
Technology
    Technological innovation has often enabled astronomical discovery. 
Advances in technology in this decade are a prerequisite for many of 
the initiatives recommended in this report as well as for initiatives 
in the next decade. For the recommended space-based initiatives, 
technology investment as specified in the existing NASA technology road 
map is an assumed prerequisite for the cost estimates given in Table 
ES.1. It is essential to maintain funding for these initiatives if NASA 
is to keep these missions on schedule and within budget. The committee 
endorses NASA's policy of completing a mission's technological 
development before starting the mission. The committee similarly 
endorses such a policy as the NSF is applying it to the design and 
development of ALMA.
    For possible ground-based initiatives in the decade 2010 to 2020, 
investment is required in very large, high-speed digital correlators; 
in infrared interferometry; and in specialized dark-matter detectors. 
Future space-based initiatives require investment in spacecraft 
communication and x-ray interferometry, as well as technology for the 
next-generation observatories. Such technology will include energy-
resolving array detectors for optical, ultraviolet, and x-ray 
wavelengths; far-infrared array detectors; refrigerators; large, 
lightweight optics; and gamma-ray detectors.
                     astronomy's role in education
    Because of its broad public appeal, astronomy has a unique role to 
play in education and public outreach. The committee recommends that 
the following steps be taken to exploit the potential of astronomy for 
enhancing education and public understanding of science:
  --Expand and improve the opportunities for astronomers to engage in 
        outreach to the K-12 community.
  --Establish more pilot partnerships between departments of astronomy 
        and education at a few universities to develop exemplary 
        science courses for preservice teachers.
  --Improve communication, planning, and coordination among federal 
        programs that fund educational initiatives in astronomy.
  --Increase investment toward improving public understanding of the 
        achievements of all NSF-funded science and facilities, 
        especially in the area of astronomy.

Table ES. 1.--Prioritized Equipment Initiatives (Combined Ground and 
Space) and Estimated Federal Costs for the Decade 2000 to 2010 
1}2

        Initiative                                              Cost \3\
Major Initiatives:
    Next Generation Space Telescope (NGST) \4\.................... 1,000
    Giant Segmented Mirror Telescope (GSMT) \4\...................   350
    Constellation-X Observatory...................................   800
    Expanded Very Large Array (EVLA) \4\..........................   140
    Large-aperture Synoptic Survey Telescope (LSST)...............   170
    Terrestrial Planet Finder (TPF) \5\...........................   200
    Single Aperture Far Infrared (SAFIR) Observatory \5\..........   100
                                                                  ______
        Subtotal for major programs............................... 2,760
                        =================================================================
                        ________________________________________________
Moderate Initiatives:
    Telescope System Instrumentation Program (TSIP)...............    50
    Gamma-ray Large Area Space Telescope (GLAST) \4\..............   300
    Laser Interferometer Space Antenna (LISA) \4\.................   250
    Advanced Solar Telescope (AST) \4\............................    60
    Square Kilometer Array (SKA) Technology Development...........    22
    Solar Dynamics Observer (SDO).................................   300
    Combined Array for Research in Millimeter-wave Astronomy 
      (CARMA) \4\.................................................    11
    Energetic X-ray Imaging Survey Telescope (EXIST)..............   150
    Very Energetic Radiation Imaging Telescope Array System 
      (VERITAS)...................................................    35
    Advanced Radio Interferometry between Space and Earth (ARISE).   350
    Frequency Agile Solar Radio telescope (FASR)..................    26
    South Pole Submillimeter-wave Telescope (SPST)................    50
                                                                  ______
        Subtotal for moderate initiatives......................... 1,604
                        =================================================================
                        ________________________________________________
Small Initiatives:
    National Virtual Observatory (NVO)............................    60
    Other small initiatives \6\...................................   246
                                                                  ______
        Subtotal for small initiatives............................   306
                        =================================================================
                        ________________________________________________
        Total..................................................... 4,670

\1\ Cost estimates for ground-based capital projects include technology 
development plus funds for operations, new instrumentation, and facility 
grants for 5 years.
\2\ Cost estimates for space-based projects exclude technology 
development.
\3\ Best available estimated costs to U.S. government agencies in 
millions of fiscal year 2000 dollars and rounded. Full costs are given 
for all initiatives except TPF and the SAFIR Observatory.
\4\ Cost estimate for this initiative assumes significant additional 
funding to be provided by international or private partner; see Panel 
Reports (NRC, 2001) for details.
\5\ These missions could start at the turn of the decade. The committee 
attributes $200 million of the $1,700 million total estimated cost of 
TPF to the current decade and $100 million of the $600 million total 
estimated cost of the SAFIR Observatory to the current decade.
\6\ See Chapter 1 for details.

        Prepared Statement of the American Geological Institute

    To the Chairman and Members of the Subcommittee: I appreciate this 
opportunity to present testimony on behalf of the American Geological 
Institute (AGI) in support of fiscal year 2003 appropriations for the 
National Science Foundation (NSF). The fundamental research supported 
by NSF has fueled our present economic growth and contributed to 
improvements in our health, safety, and quality of life. This 
subcommittee has shown leadership in expanding the federal investment 
in fundamental research, and that leadership will be even more critical 
in the coming year. AGI urges the subcommittee to carefully examine the 
president's request. In particular, we encourage the Subcommittee to 
reconsider the requested program transfers, enhance support for core 
programs in the Geosciences Directorate, and expand the Major Research 
Equipment account to accommodate both existing projects and the 
requested new starts. Such increases represent an important investment 
in the future of our nation and our planet at a time when we can ill 
afford not to make that investment.
    AGI is a nonprofit federation of 40 geoscientific and professional 
societies representing more than 100,000 geologists, geophysicists, and 
other earth scientists. Founded in 1948, AGI provides information 
services to geoscientists, serves as a voice for shared interests in 
our profession, plays a major role in strengthening geoscience 
education, and strives to increase public awareness of the vital role 
the geosciences play in mankind's use of resources and interaction with 
the environment.
    The rationale for supporting geoscience research and education has 
never been stronger. Global climate change, natural disasters, energy 
resources, and water quality issues are reported daily by the news 
media. Geoscience research plays an increasingly important role in an 
ever- growing range of scientific and societal problems, and federal 
investments in geoscience research should increase accordingly. Federal 
investments in geoscience R&D continue to pay enormous dividends, and 
both the federal government and the nation clearly have a stake in 
maintaining the health of the basic science on which applications and 
policy decisions ultimately must be based.
    NSF support for geoscience research activities covers the entire 
spectrum from individual investigators to major research centers and 
large research programs. Many of the most creative and important 
advances in geoscience research continue to be made by individual 
investigators and small research teams that are the backbone of the 
research and graduate education system. NSF should maintain and enhance 
support for this vital component of geoscience research.
NSF Geosciences Directorate
    The NSF Geosciences Directorate (GEO) is the principal source of 
federal support for academic earth scientists who are seeking insight 
into the fundamental earth processes that ultimately sustain and 
transform life on our planet. The president's request appears to 
provide a significant increase to this directorate, but the bulk of the 
increase is due to several proposed transfers. In fact, all of the 
proposed transfers into NSF go into this one directorate. As a result, 
an apparent 13.4 percent requested increase for GEO includes only a 1.2 
percent increase for existing programs. Whether or not the transfers 
are approved, we encourage the Subcommittee to provide real increases 
to existing programs in the Earth Sciences, Ocean Sciences and 
Atmospheric Sciences Divisions within GEO.
    AGI asks the Subcommittee to take a hard look at these proposed 
transfers to determine whether they fit the NSF mission or whether they 
are better left in their current agencies. We recognize that these 
transfers reflect the president's desire to reward agencies like NSF 
that have demonstrated good management practices. But there may be a 
mission mismatch, particularly in the case of the proposed transfer of 
the U.S. Geological Survey's Toxic Substances Hydrology program, which 
funds highly targeted, long-term, mission-oriented research that is 
very different from the fundamental, university-based research NSF 
supports.
NSF Major Research Equipment Account: EarthScope
    AGI urges the subcommittee to support the NSF Major Research 
Equipment (MRE) budget request of $35 million for a new earth science 
initiative called Earthscope. Taking advantage of new technology in 
sensors and data distribution, this four-pronged initiative will 
systematically survey the structure of the Earth's crust beneath North 
America. The fiscal year 2003 request includes support for three 
components: a dense array of digital seismometers that will be deployed 
in stages across the country; a 4-km deep borehole through the San 
Andreas Fault, housing a variety of instruments that can continuously 
monitor the conditions within the fault zone; a network of state-of-
the-art Global Positioning System (GPS) stations and sensitive 
strainmeters to measure the deformation of the constantly shifting 
boundary between the Pacific and North American tectonic plates. The 
fourth component will move forward in conjunction with NASA: a 
satellite-based Synthetic Aperture Radar mission that can measure 
changes in the Earth's crust after earthquakes and volcanic eruptions. 
All data from this project will be available in real time to both 
scientists and students, providing a tremendous opportunity for both 
research and learning about the Earth.
    EarthScope has broad support from the earth science community with 
endorsements from a number of AGI's member societies, including the 
Association of American State Geologists, Geological Society of America 
and Seismological Society of America. The National Science Board has 
not only endorsed EarthScope but has listed it as a priority for fiscal 
year 2003, a first for the Board. EarthScope has received a very 
favorable review from the National Academy of Sciences, which released 
a report last year entitled Review of EarthScope Integrated Science. 
Some key assertions from the report:

    ``The committee concludes that EarthScope is an extremely well 
articulated project that has resulted from consideration by many 
scientists over several years, in some cases up to a decade. During 
that time, the proponents have become experts, not just in the 
observing technology but in the data handling and retrieval systems 
that are necessary to manage information on this vast scale.''
    ``The committee concludes that EarthScope will have a substantial 
impact on earth science in America and worldwide. It will provide 
scientists with vast amounts of data that will be used for decades.''
    ``The time is right to undertake a full exploration of the nature 
of the continental crust of the United States and its underlying 
mantle. Such exploration is a critical requirement for understanding 
the nature of the earth on which we live and how society needs to 
manage and adapt to its rhythms and processes.''
    ``EarthScope provides an excellent opportunity to excite and 
involve the general public, as well as K-12 and college students, to 
work together with the earth science community to understand the earth 
on which they live.''
    ``The NSF should ensure that EarthScope's scientific potential is 
effectively realized and capitalized upon by continuing its support for 
the disciplinary and interdisciplinary programs within NSF's Division 
of Earth Sciences (EAR) that form the scientific foundation of the 
project.''
    ``The committee concludes that InSAR is an integral part of the 
EarthScope vision that will greatly enhance the effectiveness of the 
project, and it should not be viewed merely as a desirable add-on to 
the project. The committee urges NSF and NASA to collaborate to realize 
this goal at the earliest opportunity, so as to make [Interferometric 
Synthetic Aperture Radar] capability a reality during the lifetime of 
the other EarthScope components.''

    AGI applauds the Subcommittee's commitment to fund existing MRE 
projects, but at the same time we strongly encourage the Subcommittee 
to provide enough funding to accommodate the president's requested 
projects as well.
NSF Support for Earth Science Education
    Earth science plays a unique and essential role in today's rapidly 
changing world. Most human activities involve interactions with the 
planet Earth, and citizens need a basic understanding of the Earth in 
order to make informed decisions about the delicate balance between 
resource use and environmental protection. NSF can improve the nation's 
scientific literacy by supporting the full integration of earth science 
information into mainstream science education at the K-12 and college 
levels. The inclusion of earth science as a key component in the 
National Science Education Standards developed by the National Academy 
of Sciences presents a tremendous opportunity to achieve this goal.
    AGI urges the subcommittee to support the 25 percent increase that 
the president has requested for the NSF Math and Science Partnerships 
program with the Directorate for Education and Human Resources (EHR). 
These partnerships will be awarded through competitive, merit-reviewed 
process, and will work to develop and implement plans to raise math and 
science standards at both the classroom level and above. Unlike the 
similar partnerships that would be provided to each state by the 
Department of Education, the NSF partnerships will provide an 
opportunity for university scientists to play an active role.
    We encourage the EHR directorate to expand its interaction with the 
Directorate for Geosciences to further integrate research and education 
activities in the geosciences. Improving geoscience education to levels 
of recognition similar to other scientific disciplines is important 
because:
  --Geoscience offers students subject matter that has direct 
        application to their lives and the world around them. 
        Civilization depends on responsible use of Earth's natural 
        resources, including energy, minerals, and water. Moreover, 
        geoscience plays a key role in environmental protection.
  --Geoscience exposes students to a diverse range of interrelated 
        scientific disciplines. It is an excellent vehicle for 
        integrating the theories and methods of chemistry, physics, 
        biology, and mathematics.
  --Geoscience awareness is a key element in reducing the impact of 
        natural hazards on citizens--hazards that include earthquakes, 
        volcanic eruptions, hurricanes, tornadoes, and floods.
    We urge NSF to continue playing an active role in the major 
transformation that is taking place in geoscience education. For 
example, at the college level, geoscience curricula are changing to 
better incorporate environmental issues and changing employment 
opportunities. Improved teaching methods and new educational 
technology, combined with improvements in college and pre-college 
geoscience curricula, may help capture and hold the curiosity and 
enthusiasm of students and better prepare them for the workplace of the 
21st century. At the graduate and postdoctoral level, fellowships are 
increasingly critical in the geosciences because students, following 
the lead of industry and consumer needs, are conducting research that 
crosses traditional departmental, disciplinary, and funding boundaries.
    Yet some Americans, particularly those of lower income, are still 
significantly underrepresented in geoscience education. The problem is 
substantially worse at the graduate level. It is unlikely that any 
profession, including the geosciences, can flourish without greater 
participation by all Americans, including those from historically 
underrepresented groups such as ethnic minorities and women. Continued 
NSF leadership is needed to increase recruitment and retention of 
students from these groups through improved access to education and 
research experiences. We must all work together to address the 
underlying factors that prevent such participation.
    I appreciate this opportunity to provide written testimony to the 
Subcommittee and would be pleased to answer any questions or to provide 
additional information for the record. I can be reached at 703-379-2480 
ext. 228, 703-379-2480 fax, [email protected], or 4220 King Street, 
Alexandria VA 22302-1502.
                                 ______
                                 

 Prepared Statement of the American Indian Higher Education Consortium

    Mr. Chairman and Members of the Subcommittee, on behalf of this 
nation's 32 American Indian Tribal Colleges and Universities (TCUs), 
which comprise the American Indian Higher Education Consortium (AIHEC), 
thank you for the opportunity to express our views and requests for 
fiscal year 2003, to the Subcommittee.
                          summary of requests
    Department of Housing and Urban Development (HUD).--In fiscal year 
2001 a TCU initiative was established and funded within the Community 
Development Block Grant program. This competitive program is designed 
to help address the dire facilities and infrastructure needs at tribal 
colleges. We strongly urge the Subcommittee to support this program at 
a minimum $3 million, included in the President's fiscal year 2003 
budget request.
    National Science Foundation (NSF) Programs:
  --Tribal Colleges and Universities Program (TCUP).--This $10 million 
        program is designed to encourage American Indians to pursue 
        Information Technology and other science and technology fields 
        by building capacity at eligible institutions and assisting 
        them in strengthening teaching and learning in ways that 
        improve student access, retention, and completion of science, 
        technology, engineering and mathematics (STEM) programs. We 
        request Congress expand the $10 million included in the 
        President's budget request and fund this vital program at $15 
        million, to help support the addition of the Alaska Native and 
        Native Hawaiian serving institutions as eligible participants 
        in the program.
  --Tribal College-Rural Systemic Initiative (TC-RSI) was created 
        within NSF's Educational System Reform (ESR) division, to 
        promote systemic change in the areas of science, technology, 
        engineering and mathematics (STEM) at K-12 reservation schools 
        through partnerships with tribal colleges. There are currently 
        14 tribal college partners in this program. We strongly urge 
        the Subcommittee to support the ESR division budget. 
        Additionally, we seek report language reaffirming the expansion 
        of the tribal college program to include the remaining 18 
        tribal colleges.
  --Louis Stokes Alliances for Minority Participation (LSAMP) 
        Program.--In fiscal year 2001, funding was secured for phase II 
        of the All Nations Alliance for Minority Participation program, 
        which provides services to tribal colleges and is based at 
        Salish Kootenai College in Pablo, Montana. The goal of the 
        program is to establish a comprehensive interactive network to 
        substantially increase the number of American Indians receiving 
        baccalaureate and graduate degrees in science, mathematics, 
        engineering, and technology. We urge Congress to continue to 
        support and build upon this program to help prepare all 
        Americans for the 21st Century workforce.
    National Aeronautics and Space Administration (NASA).--In fiscal 
year 2001, the tribal colleges established a formal cooperative 
agreement with NASA for a $1.197 million project designed to increase 
access, participation, and success of American Indians in high quality 
pre-K to 16 mathematics, science, engineering, and technology programs. 
The agreement includes a tribal college liaison between AIHEC and NASA 
to oversee implementation of the project and provides modest program 
enrichment grants to the colleges. We urge Congress to include report 
language that encourages NASA faculty exchange programs and IPA 
contracts with TCUs to provide on-site expertise and partnerships. We 
respectfully request additional report language to encourage expansion 
of existing NASA programs, as well as new initiatives to address the 
critical technology infrastructure needs at TCUs.
                               background
    The Tribal College Movement began in 1968 with the establishment of 
Navajo Community College, now Dine College, in Tsaile, Arizona. A 
succession of tribal colleges soon followed, primarily in the Northern 
Plains region. In 1972, the first six tribally-controlled colleges 
established AIHEC to provide a support network for member institutions. 
Today, AIHEC represents 32 Tribal Colleges and Universities located in 
12 states, begun specifically to serve the higher education needs of 
American Indian students. Collectively, they serve approximately 30,000 
full-and part-time students from over 250 Federally recognized tribes.
    All tribal colleges offer 2 year degrees, and several institutions 
offer baccalaureate and graduate-level degrees. The majority of the 
tribal colleges are fully accredited by independent, regional 
accreditation agencies.\1\ In addition to college level programming, 
TCUs provide much needed high school completion (GED), basic 
remediation, job training, college preparatory courses, and adult 
education. Tribal colleges fulfill additional roles within their 
respective communities functioning as community centers, libraries, 
tribal archives, career and business centers, economic development 
centers, public-meeting places, and child care centers. Each TCU is 
committed to improving the lives of students through higher education 
and to moving American Indians toward self-sufficiency.
---------------------------------------------------------------------------
    \1\ The Tribal Colleges and Universities are accredited by regional 
accreditation agencies and must undergo stringent performance review on 
a periodic basis. The higher education division of the respective 
regional accreditation agency accredits twenty-seven of the TCUs. Two 
TCUs are at the Pre-candidate stage as they complete work to attain 
Candidate status; one TCU is at Candidate status. Two TCUs are 
accredited as ``Vocational/Adult Schools'' by the ``schools'' division 
of the respective regional accreditation agency.
---------------------------------------------------------------------------
    Tribal colleges provide needed access to higher education for 
American Indians and others living in some of this nation's most rural 
and economically depressed areas. These institutions, chartered by 
their respective tribal governments, were established in response to 
the recognition by tribal leaders that local, culturally-based 
education institutions are best suited to help American Indians succeed 
in higher education. TCUs combine traditional teachings with 
conventional postsecondary courses and curricula. They have developed 
innovative means to address the needs of tribal populations and are 
successful in overcoming long-standing barriers to higher education for 
American Indians. Since the first tribal college was established on the 
Navajo reservation, these vital institutions have come to represent the 
most significant development in the history of American Indian higher 
education, providing access to under-represented students and promoting 
achievement among students who may otherwise never have known 
postsecondary education success.
    Despite their remarkable accomplishments, tribal colleges are the 
most poorly funded institutions of higher education in the country. 
Grossly inadequate funding levels remain the most significant barrier 
to their success. Funding for basic institutional operations for 25 
reservation-based colleges is provided through the Tribally Controlled 
College or University Assistance Act (TCCUAA), Public Law 95-471. 
Funding was first appropriated through the Act in 1981, and is still 
less than two-thirds of its authorized level of $6,000 per full-time 
Indian student. In fiscal year 2002, these colleges receive $3,916 per 
full-time Indian student. While mainstream institutions have a 
foundation of stable state tax support, TCUs must rely on annual 
appropriations from the Federal government for their institutional 
operating funds. Because tribal colleges are located on federal trust 
territories, states have no obligation to fund them. In fact, most 
states do not even pay our colleges for the non-Indian state-resident 
students who account for approximately 20 percent of TCU enrollments.
    Inadequate funding has left many of our colleges with no choice but 
to operate in severely distressed conditions. Many colleges operate in 
surplus trailers; cast-off buildings; and facilities with crumbling 
foundations, faulty wiring, and leaking roofs. Sustaining quality 
academic programs is a challenge without a reliable source of 
facilities maintenance and construction funding.
    Today, one in five American Indians live on reservations. As a 
result of more than 200 years of Federal Indian policy--including 
policies of termination, assimilation and relocation--many reservation 
residents live in abject poverty comparable to that found in Third 
World nations. Through the efforts of tribal colleges, American Indian 
communities receive services they need to reestablish themselves as 
responsible, productive, and self-reliant.
                             justifications
    Department of Housing and Urban Development.--We are pleased that 
the President's budget request for fiscal year 2003 includes $3 million 
for HUD-TCUP, the TCU initiative funded under the Community Development 
Block Grant program. This competitive grants program enables our 
institutions to expand our roles and effectiveness in addressing 
development and revitalization needs in our communities. Some areas 
that currently receive support include housing rehabilitation, business 
development, job training, pre-employment counseling, and job creation. 
We strongly urge Congress to continue to fund this program at a minimum 
$3 million, included in the President's budget request, to help ensure 
that much needed community services and programs are continued.
    National Science Foundation Programs:
  --Tribal Colleges and Universities Technology Initiative.--In fiscal 
        year 2001, NSF launched a new tribal college initiative 
        designed to enhance the quality of science, technology, 
        engineering and mathematics (STEM) instruction and outreach 
        programs, with an emphasis on the leveraged use of information 
        technologies at tribal colleges. Through the program, colleges 
        are able to implement comprehensive institutional approaches to 
        strengthen teaching and learning in ways that improve access, 
        retention, and completion of STEM programs, particularly those 
        that have a strong technological foundation. Through this 
        program, colleges gain support their efforts to bridge the 
        ``digital divide'' and prepare students for careers in 
        information technology, science, mathematics, and engineering 
        fields. Because this program was broadened to include Alaska 
        Native and Native Hawaiian serving institutions in its first 
        year, after the original TCU-based funding level had been 
        determined, we request that Congress build upon the funds 
        requested in the President's budget to better reflect the true 
        needs of the greatly expanded eligible pool, and fund this 
        program at $15 million.
  --Tribal College Rural Systemic Initiative.--NSF expanded its 
        commitment to the High Plains Rural Systemic Initiative (HP-
        RSI) and created a tribal college component of the project. 
        Currently there are 14 tribal colleges participating in this 
        program. Each college is responsible for providing leadership 
        to the K-12 school systems located on their respective 
        reservations. All aspects of the school system are addressed in 
        systemic reform, including community and parental 
        participation, professional development activities, broad-based 
        business community support, convergence of multiple resources 
        to support the initiative, and coordinated student assessment 
        systems. All of these activities are organized and implemented 
        with careful consideration of the cultural academic needs of 
        the respective tribe and students being served. We strongly 
        urge Congress to support the ESR division budget. We request 
        report language to reaffirm the expansion of the tribal college 
        program to include the 18 remaining tribal colleges and to 
        afford them greater access to other NSF programs.
  --Louis Stokes Alliances for Minority Participation (LSAMP) 
        Program.--The All Nations Alliance for Minority Participation, 
        which provides services to tribal colleges, is based at Salish 
        Kootenai College in Pablo, Montana. The program brings together 
        25 TCUs and 32 state colleges and universities in nine states 
        and is designed to substantially increase the quantity and 
        quality of American Indian students receiving baccalaureate 
        degrees in science, technology, engineering and mathematics 
        (STEM). Subsequently, AMP aims to increase the number of these 
        students entering graduate school to attain doctorates in STEM 
        fields. AMP supports undergraduate systemic reform within this 
        Alliance with partners from both 2 and 4 year colleges; 
        businesses and industries; national research laboratories; and 
        local, state and federal agencies We strongly urge Congress to 
        continue to support the Louis Stokes Alliance for Minority 
        Participation program, at the highest possible level.
    National Aeronautics and Space Administration (NASA).--Through 
AIHEC, the tribal colleges have established a cooperative agreement 
with NASA to increase access, participation, and success of American 
Indians in high quality pre-K to16 science, mathematics, engineering, 
and technology programs. This cooperative agreement includes the 
appointment of a TCU liaison between AIHEC and NASA to serve as the 
focal point for implementation of the agreement. Additionally, the 
agreement provides modest funding to help improve the capacity of each 
TCU to help fulfill its technology objectives, as they relate to the 
mission and goals of NASA. We urge Congress to include report language 
that would encourage NASA faculty exchange programs and IPA contracts 
with TCUs to provide needed on-site expertise and partnerships. 
Additionally, we ask for report language to encourage expansion of 
existing programs, as well as new initiatives to address the technology 
infrastructure needs at the Tribal Colleges and Universities.
                               conclusion
    In light of the justifications presented in this statement and the 
overwhelming evidence of inequitable access to technology in rural 
America, we respectfully request the Subcommittee to increase funding 
for Tribal Colleges and Universities to help bring economic self-
sufficiency to Indian Country. Fulfillment of AIHEC's fiscal year 2003 
request will strengthen the missions of TCUs and the enormous, positive 
impact they have on their communities. Your support will help ensure 
that they are able to properly educate and prepare thousands of 
American Indians for the workforce of the 21st Century. Tribal colleges 
have been proven to be very responsible with the Federal support they 
have received in the last 21 years. It is important that the Federal 
Government now capitalize on its investment.
    Thank you again for this opportunity to present our views and 
requests to this Subcommittee. We respectfully request your continued 
support and full consideration of our fiscal year 2003 appropriations 
requests.
                                 ______
                                 

    Prepared Statement of the National Congress of American Indians

    On behalf of the National Congress of American Indians (NCAI) and 
its more than 200 member tribal Nations, we are pleased to have the 
opportunity to present written testimony on the fiscal year 2003 VA-HUD 
Independent Agencies appropriations bill.
    The tragic events of September 11 brought forth the strength and 
the determination of our Nation to survive in the face of adversity. It 
is this same spirit that has carried Indian Country through years of 
annihilation and termination. It is this same spirit that has propelled 
Indian Nations forward into an era of self-determination. And it is in 
this same spirit of resolve that Indian Nations come before Congress to 
talk about honoring the Federal Government's treaty obligations and 
trust responsibilities throughout the fiscal year 2003 budget process.
    The Federal trust responsibility represents the legal obligation 
made by the U.S. Government to Indian tribes when their lands were 
ceded to the United States. This obligation is codified in numerous 
treaties, statutes, Presidential directives, judicial opinions, and 
international doctrines. It can be divided into three general areas 
protection of Indian trust lands; protection of tribal self-governance; 
and provision of basic social, medical, and educational services for 
tribal members.
    NCAI realizes that Congress must make difficult budget choices this 
year. Aselected officials, tribal leaders certainly understand the 
competing priorities that members of Congress must weigh over the 
coming months. However, the fact that the Federal Government has a 
solemn responsibility to address the serious needs facing Indian 
Country remains unchanged, whatever the economic or political climate 
may be. We at NCAI urge you to make a strong commitment to meeting the 
Federal trust obligation by fully funding those programs that are vital 
to the creation of vibrant Indian Nations. Such a commitment, coupled 
with continued efforts to strengthen tribal governments and to uphold 
the government-to-government relationship, will truly make a difference 
in helping us to create stable, diversified, and healthy economies in 
Indian Country. NCAI's statement focuses on our key areas of concern 
surrounding the President's budget request. Of course, there are 
numerous other programs and initiatives within the VA-HUD-Independent 
Agencies appropriations bill that are important to American Indians and 
Alaska Natives. Attached to this testimony is a breakdown of key 
programs for which we urge your support at the highest possible funding 
level as the appropriations process moves forward.
                     department of veterans affairs
    Native American veterans have served the United States with honor 
and distinction since this Nation was founded, and Indian people have 
the highest percentage of veterans of any population within the United 
States. Native people also carry the proud distinction of being the 
most decorated group in this country's history. Today, Native veterans 
have many pressing needs such as housing, health care, benefits, and 
other concerns that include issues unique to Indian Country.
    We urge continued support for the Native American Veterans Housing 
Loan Program. While small, it serves an important function, providing 
direct loans to veterans living on trust land. Many times, these 
veterans are unable to secure such loans through local banks or credit 
unions. In these instances, the Native American Veterans Housing Loan 
Program provides the resources to help purchase, construct, or improve 
their homes. A VA direct loan can be used to purchase, construct, or 
improve a home on Native American trust land. These loans may also be 
used to simultaneously purchase and improve a home or to refinance 
another VA direct loan made under this program in order to lower the 
interest rate. The principal amount of loans under this authority is 
generally limited to $80,000 or the cost of the home, whichever is 
less.
              department of housing and urban development
    According to statistics provided by the National American Indian 
Housing Council, 40 percent of the homes in tribal communities are 
overcrowded and have serious physical deficiencies. The comparable 
national average is 5.9 percent, almost six times lower. These types of 
conditions have a very real and detrimental impact. Respiratory 
illness, skin conditions, head lice, sleep deprivation that affects 
schooling, and a lack of privacy that sometimes leads to child physical 
and sexual abuse can all be traced back to the housing crisis that 
plagues some of our reservations.
    The fiscal year 2003 request for programs under the Native American 
Housing Assistance and Self-Determination Act (NAHASDA) block grant 
actually cuts funding for training and technical assistance and for 
loans and loan guarantees, and it fails to provide adequate base 
funding for the NAHASDA block grant program. Per NCAI Resolution #SPO-
01-094, NCAI supports the NAIHC proposed request and urges Congress to 
address the real housing need in Indian Country by appropriating $1.1 
billion in fiscal year 2003 for the NAHASDA block grant.
                    environmental protection agency
    Tribes are sovereign entities with the ability to set environmental 
quality standards, make environmental policy decisions, and manage 
programs consistent with EPA standards and regulations. In order to 
preserve and enhance the environmental quality of Indian Country for 
present and future generations and sustain tribal cultures, tribes 
deserve equitable funding for their environmental regulatory programs. 
Therefore we urge support for the following funding levels:
    General Assistance Program.--Tribal environmental program managers 
view GAP activities, funded under the multimedia section of State and 
Tribal Assistance Grants, as their highest priority. We request that 
the program receive $75 million, a $25 million increase, which would 
provide the minimum coverage needed for all federally recognized tribes 
to build capacity for EPA-delegated environmental programs.
    Clean Water Act State Revolving Fund.--We request that Congress 
raise the program cap from 1.5 percent to 2 percent for tribal 
governments to help address the estimated $650 million in wastewater 
treatment unmet needs in Indian Country. Within the State Revolving 
Fund program, we urge continued funding for wastewater treatment 
facilities for Alaska Natives.
    Safe Drinking Water Act State Revolving Fund.--Section 1452(i) 
provides a tribal government allocation for public water system 
expenditures to facilitate compliance with the national primary 
drinking water regulations. NCAI urges Congress to provide an 
additional $5 million for tribal drinking water programs under this 
program and raise the program cap from 1.5 percent to 2 percent.
    Cooperative Agreements.--Congress in fiscal year 2001 and fiscal 
year 2002 authorized EPA to enter into cooperative agreements with 
tribal governments and tribal consortia to assist the agency in 
implementing Federal environmental programs. NCAI strongly recommends 
the permanent continuation of this authority and that $2 million be 
appropriated for tribal-EPA cooperative agreements.
                               conclusion
    Thank you for this opportunity to present written testimony 
regarding VA-HUD-Independent Agencies programs that benefit Indian 
Country. The National Congress of American Indians calls upon Congress 
to fulfill the Federal Government's fiduciary duty to American Indians 
and Alaska Native people. This responsibility should never be 
compromised or diminished because of any political agenda or budget cut 
scenario. Tribes throughout the Nation relinquished their lands and in 
return received a trust obligation, and we ask that Congress maintain 
this solemn obligation to Indian Country and continue to assist tribal 
governments as we build strong, diverse, and healthy Nations for our 
people.
  Attachment A: VA-HUD-Independent Agencies Appropriations Benefiting 
                                 Tribes
Department of Veterans Affairs
    The President's budget increases the VA's discretionary budget 
authority from $24.7 billion to $26.4 billion, with much of the 
increase going toward health care for veterans.

                                              (Dollars in millions)
----------------------------------------------------------------------------------------------------------------
                                                                    Fiscal year     Fiscal year     Fiscal year
                               VA                                  2001 enacted    2002 enacted    2003 request
----------------------------------------------------------------------------------------------------------------
Native American Veterans Housing Loan Program...................            $.54            $.54            $.56
----------------------------------------------------------------------------------------------------------------

Department of Housing and Urban Development
    The President has requested $31.4 billion for HUD, a $2 billion 
increase in budget authority, including $204 million for 34,000 new 
housing vouchers to subsidize rental housing for the poor and a $238 
million increase to the HOME investment partnerships program for 
housing rehabilitation and to encourage home ownership among low- and 
moderate-income households. The budget cuts several NAHASDA programs, 
but provides a $3 million increase for the Indian Community Development 
Block Grant.

                                              (Dollars in millions)
----------------------------------------------------------------------------------------------------------------
                                                                    Fiscal year     Fiscal year     Fiscal year
                               HUD                                 2001 enacted    2002 enacted    2003 request
----------------------------------------------------------------------------------------------------------------
Indian Housing Block Grant......................................          $650.0          $648.6          $647.0
Title VI Loans..................................................             6.0             6.0             2.0
Section 194 Indian Housing Loan Guarantee Program \1\...........             6.0             6.0             5.0
Indian Community Development Block Grant \2\....................            71.0            70.0            73.0
Rural Housing and Economic Development (small amt to tribes)....            25.0            25.0               0
Empowerment Zones Round II......................................           200.0            45.0               0
----------------------------------------------------------------------------------------------------------------
\1\ Fiscal year 2002 funding for the Section 184 Loan Guarantee Program will subsidize a loan principal of not
  more than $234.3 million. The fiscal year 2003 request will support a loan principal of not more than $197
  million.
\2\ The $4.3 billion appropriated for the Community Block Grant Development program in fiscal year 2002 includes
  the following additional set-asides for Indian programs: $4 million for Alaska Native and Native Hawaiian-
  Serving Institutions; $2.6 million for the National American Indian Housing Council; and $3 million for
  competitive facilities grants for tribal colleges and universities. The fiscal year 2003 request of $4.4
  billion for CDBG includes level funding for tribal colleges, $2 million for Alaska Native and Native Hawaiian-
  Serving Institutions, and $2 million for the NAIHC.
NCAI Resolution #SPO-01-094 Supports $1.075 billion for the Indian Housing Block Grant.

Environmental Protection Agency
    The President's budget would cut EPA spending from $7.9 billion in 
fiscal year 2002 to $7.6 billion in fiscal year 2003, primarily by 
eliminating $300 million in Congressional earmarks and projects that 
were not requested in the Administration's fiscal year 2002 budget. The 
budget includes $4.1 billion for general operations, the highest 
funding level ever for regulatory, enforcement and State grants, but 
would freeze hiring to fill vacancies in the enforcement division while 
shifting $15 million to the States for increased enforcement 
activities.

                                              (Dollars in millions)
----------------------------------------------------------------------------------------------------------------
                                                                    Fiscal year     Fiscal year     Fiscal year
                               EPA                                 2001 enacted    2002 enacted    2003 request
----------------------------------------------------------------------------------------------------------------
Environmental Programs and Management...........................          $2,083          $2,055          $2,048
Water and Wastewater Grants for Alaska Natives and Rural Areas..              35              40              40
Clean Water State Revolving Fund Tribal.........................            20.2            20.2            18.2
Safe Drinking Water State Revolving Fund........................             823             850             850
Superfund.......................................................           1,267           1,270           1,000
Leaking Underground Storage Tank Facilities.....................              71              73              72
State and Tribal Assistance Grants..............................           3,621           3,733           3,464
Tribal General Assistance Grants................................            52.5            52.5            52.5
American Indian Tribal Environmental Office.....................             n/a             9.9            10.2
----------------------------------------------------------------------------------------------------------------

    NCAI recommends that the 2003 appropriation for EPA include 
permanent authorization for tribal cooperative agreements; a $25 
million increase for the tribal General Assistance Program (GAP) to 
provide minimum coverage to all federally recognized tribes; $10 
million for Section 106 Clean Water Act grants; a $20 million earmark 
for tribes under the new watershed management grants to States; 
increased funding for tribal air quality programs; and, a permanent 
increase in the tribal set-aside from 1.5 percent to 2 percent for both 
the Clean Water Act State Revolving Fund and the Safe Drinking Water 
Act program.
                                 ______
                                 

      Prepared Statement of the American Psychological Association

    The American Psychological Association (APA) is a scientific and 
professional organization of more than 155,000 psychologists and 
affiliates. Because our behavioral scientists play vital roles within 
the National Science Foundation (NSF), the National Aeronautics and 
Space Administration (NASA) and the Department of Veterans Affairs 
(VA), APA will address the proposed fiscal year 2003 research budgets 
for each of these three agencies.
                      national science foundation
    As a member of the larger science community and an active leader in 
the Coalition for National Science Funding (CNSF), APA strongly 
recommends increasing NSF's overall budget by $718 million (or 15 
percent) above the fiscal year 2002 level of $4.79 billion, bringing 
the agency's budget to $5.508 billion in Fiscal Year 2003. We also 
would like to highlight the importance of fully funding two new NSF 
priorities in 2003, the special research initiative in the Social, 
Behavioral and Economic Sciences, slated to receive $10 million in its 
first year of support, and the Science of Learning Centers (SLCs), 
proposed at $20 million.
Core Psychological Research at NSF
    NSF is the only federal agency whose primary mission is to support 
basic research and education in math, engineering and science including 
behavioral and social science. NSF's investment in basic research 
across these disciplines has allowed for extraordinary scientific and 
technological progress, ensuring continued economic growth, improved 
prevention of disease, and strengthened national security. NSF's 
concern for education from kindergarten through graduate school allows 
for what we know about developmental processes, cognition, learning, 
and the environment to best construct the schools in which our children 
learn and to well inform the teachers who educate them, enabling our 
citizens to meet the intellectual and social challenges of the Twenty-
First Century.
    The necessity to support basic research continues to be paramount. 
With the increasing globalization of science, the U.S. faces greater-
than-ever competition for scientific innovation and discovery. At the 
same time that we must work in international communities of researchers 
and scholars, we must find new ways to make our country safe from 
threats not only to our physical structures but to the American 
tradition of free and shared science and to the many challenges we face 
at home. Our best defense is an offensive strategy in which we continue 
to be the best producer of science, ideas, and technology. We can do 
this only on the basis of a solid foundation of basic research.
    APA and CNSF recommend that additional funds for NSF above the 
fiscal year 2002 baseline be devoted to achieving the following 
objectives: (1) increase by $220 million the funding for core programs 
of research and education; (2) increase funding by $220 million to 
continue supporting key initiatives, including nanotechnology, 
biocomplexity, information technology research, workforce development 
(including mathematics and science partnerships), mathematics research, 
and a new priority area in social, behavioral and economic sciences; 
(3) provide an additional $130 million to increase grant size and 
duration; (4) provide an additional $100 million for Major Research 
Equipment and Facilities Construction and Major Research 
Instrumentation; (5) provide an increase of $25 million to assist with 
homeland security and anti-terrorism efforts; and (6) provide $23 
million to increase graduate student stipends.
    Although psychologists receive funding from diverse programs within 
NSF, most core psychological research is supported by the Social, 
Behavioral and Economic Sciences Directorate (SBE), with its focus on 
the variables that determine human behavior across all ages, affect 
interactions among individuals and groups, and decide how social and 
economic systems develop and change. A number of psychological 
scientists funded through SBE also lead ongoing basic research efforts 
with direct relevance to the events of September 11 and their 
aftermath, and APA applauds SBE for moving quickly to provide 
psychological researchers with emergency grants (through the agency's 
Small Grants for Exploratory Research program) to address time-critical 
issues such as trauma prevention and intervention and large-scale risk 
management.
    The Biological Sciences Directorate provides support for 
psychologists who ask questions about the very principles and 
mechanisms that govern life at the level of the genome and cell, or at 
the level of a whole individual, family or species. Our increasing 
sophistication about the genetic mechanisms of life allows us to ask 
increasingly complex questions about brain functioning. It also can 
lead us to ask how the genome is translated into a functioning, 
thriving organism that is, what is the exchange of gene and environment 
that decides whether the individual is more likely to learn than to 
forget, to love than to hate? These kinds of question cannot be 
answered by biology alone. An understanding of behavior requires 
analysis at all levels of functioning, from the cell to the whole 
organism, and an appreciation of the complex ways in which the 
environment impacts on the individual. It also requires description of 
the manner in which such interactions are written into the individual's 
history, and then serve to shape its behavior in the future.
Special Research Priority in the Social, Behavioral and Economic 
        Sciences
    Given the pace and demands of our increasingly technological 
society, APA strongly supports NSF's proposed $10 million initial 
investment in fiscal year 2003 for a new priority area in Social, 
Behavioral and Economic Sciences to further explore the complex 
interactions among society, its institutions, and technology. This 
priority area will examine human issues in the design and development 
of technological advances along with human adaptation to these dramatic 
changes, enabling us to develop technologies which enhance human 
capabilities while giving us tools to take greater advantage of 
technology and better anticipate and prepare for its consequences. The 
rapidly changing societal capabilities associated with technological 
development provide us with new opportunities to interact with the 
natural environment as well as with social and economic systems, and 
the new SBE priority area also will seek to address questions about 
these human-ecosystem interactions in support of the Administration's 
climate change research program. APA expects that the initial level of 
support for the special SBE research priority area will be a ``down 
payment'' on more significant investments in future years.
New Science of Learning Centers
    Investment in research on the learning process, the context of 
learning and learning technologies is crucial to both successful 
educational reform and effective workforce development, and the new NSF 
Science of Learning Centers (SLCs) will serve as the foundation-wide 
centerpiece of the Learning for the 21st Century Workforce priority 
area in fiscal year 2003. These multidisciplinary, multi-institutional 
centers will build collaborative research communities of scientists, 
educators, community groups and industries capable of addressing 
fundamental questions in learning and applying that knowledge to 
schools and workforce contexts.
    APA strongly recommends that Congress support the new SLCs, with 
the longer-term goal of making strides in math and science education 
analogous to the tremendous leaps forward we currently are making by 
applying research on reading. These improvements in our understanding 
of how children learn to read and how teachers can better help them are 
due in large part to research sponsored by the National Institute of 
Child Health and Human Development at the National Institutes of 
Health. NSF is uniquely poised to support similar breakthroughs in the 
critical areas of math and science learning, skills which are 
particularly critical in our technologically-sophisticated world. NSF 
scientists can engage investigators from the range of disciplines it 
supports, from cognitive psychology and neuroscience to geography, 
engineering and robotics, and examine learning in adult and child 
populations to support both workforce and formal education needs.
             national aeronautics and space administration
    Humans perform critical functions throughout all aspects of every 
NASA mission from concept development, system design and acquisition 
through operations. People are critical elements of complex aerospace 
systems. The ability to measure and predict human performance through 
all mission phases enhances mission safety and mission success. NASA 
Human Factors research and technology enhance the national capability 
to explore the stars and understand our own planet while contributing 
to the safety, affordability and efficiency of aerospace operations.
Office of Biological and Physical Research
    In order to continue advancing our understanding of human 
adaptation to space, APA joins the Federation of American Societies for 
Experimental Biology (FASEB) in recommending an annual increase of $100 
million for investigator initiated, peer reviewed research in fiscal 
year 2003 for the Office of Biological and Physical Research (OBPR).
    NASA is demonstrating an unprecedented interest in psychological 
and behavioral research. That interest stems from historical 
observations of astronauts and cosmonauts living aboard Mir and the 
recognition that a multicultural workforce is building and occupying 
the International Space Station. Psychologists are involved at many 
levels within NASA, studying everything from basic neuroscience in rats 
to optimization of the habitability of next-generation space suits. 
Much of this research has been funded OBPR.
    The Biomedical Research and Countermeasures and Advanced Human 
Support Technologies Programs are both involved in reducing threats to 
humans exposed to physiological and psychological health risks during 
space flight. NASA has focused considerable energy on sleep and 
circadian rhythms, performance related to neurovestibular function, 
psychophysiological monitoring, and cognitive performance on short-
duration missions. There is increasing recognition, however, that NASA 
needs to devote greater attention to behavioral health and psychosocial 
adaptation as these factors could significantly impact the success of 
long- duration missions.
    Human factors considerations for long-duration spaceflight extend 
far beyond physical crew interfaces into considerations of behavioral, 
psychological, physiological, and operational factors' influence on 
human performance and safety. The use of isolation chambers such as the 
Bioplex facility at Johnson Space Center offer the potential, and have 
been used successfully, to study behavior and performance under 
conditions of extended isolation and confinement. As such, it 
represents a high fidelity simulation facility for the development of 
advanced technologies and methodologies for monitoring individual and 
interpersonal behavior, as well as for studies of countermeasure 
testing and evaluation.
Office of Aero-Space Technology
    This arm of NASA makes good use of psychological science closer to 
Earth. APA applauds NASA for its attention to human factors research 
and recommends at least the $220.1 million requested for the Office of 
Aeronautics and Space Technology (OAST) to allow for critical Aviation 
Systems Safety and Airspace Systems programs to continue as planned.
    Two of NASA's long-term interests have been to reduce the aircraft 
accident rate and increase the aviation throughput. The vast majority 
of accidents are attributed to human error. Recent increases in air 
traffic volume and airport delays make these challenges especially 
daunting. NASA will need to make an extraordinary investment in human 
factors research to achieve these ambitious milestones. Fortunately, 
several NASA programs support these important goals most notably the 
Aviation Safety Program but also Aerospace Operations Systems, 
Engineering for Complex Systems, Advanced Air Transportation 
Technologies and Virtual Airspace Modeling Systems. Critical research 
focuses on data mining, modeling and visualization for the proactive 
management of aerospace system risk, allowing for the monitoring of 
incidents and normal operations to identify precursors of error and 
mitigate risk before accidents happen.
    However, in order to do this, enormous volumes of qualitative and 
quantitative data must be transformed into useful information for 
expert analysts through the application of new information technology 
tools. For example, the Aviation Safety Reporting System (ASRS) is a 
national aviation safety resource consisting of first-hand verbal 
reports of accidents and mishaps from a broad spectrum of aviation 
professionals (e.g., pilots, controllers, mechanics, dispatchers, 
flight attendants). These reports provide critical data for expert 
trend analyses and queries that are then made available to the public 
and private sector. Further, the Aviation Performance Measuring System 
(APMS) provides a set of information technology tools to support 
content analysis of the hundreds of flight data recorder parameters 
(even thousands in the case of the Boeing 777) that are collected on 
every commercial airline flight. These tools allow the reconstruction 
of problems and entire flights from the collected data set and can 
identify common problems across flights. Finally, from the control 
tower, the Performance Data Analysis and Reporting System (PDARS) 
routinely collects, processes and disseminates Air Traffic Control 
radar track data for use in identifying normal operations and anomalous 
flightpaths.
    Collectively, such data tracking systems will become part of a 
model to assess the impact of perturbations in the National Airspace 
System.
    Perturbations could include proposed technical innovations (such as 
advanced automation-assisted decision support) and changes in 
organizational structure or procedures, as well as accidents or 
terrorist attacks. Such a model will require a distributed simulation 
capability that can represent the full range of system behaviors at 
multiple levels of analysis, including people the current backbone of 
the aviation system.
                     department of veterans affairs
    Investment in investigator-initiated research projects at the VA 
have led to an explosion of knowledge that promises to advance our 
understanding of disease and unlock new strategies for prevention, 
treatment and cures. Psychological researchers play crucial roles in 
addressing the many health challenges still confronting the veteran 
community. APA joins the Friends of VA Medical Care and Health Research 
(FOVA), a coalition of over 50 organizations concerned about veterans' 
health, in recommending $460 million for the VA Medical and Prosthetic 
Research Account in fiscal year 2003. We also strongly support the 
Subcommittee's recommendation to expand the VA's Mental Illness 
Research, Education and Clinical Center (MIRECC) program.
Psychological Research in the VA
    Through its Medical and Prosthetic Research Account, the VA funds 
intramural research that supports its clinical mission to care for our 
nation's veterans. VA psychologists play a dual role in providing care 
for veterans and conducting research in all areas of health, including 
high-priority areas such as mental health, aging-related disorders and 
substance abuse. Psychological researchers continue to make great 
strides in: improving the diagnosis and treatment of Post Traumatic 
Stress Disorder; developing more sensitive diagnostic tools to detect 
the early stages of Alzheimer's disease and other dementias (problems 
increasingly seen both in our veterans and our aging population in 
society at large); and developing and implementing important substance 
abuse prevention programs. Because research has such a positive impact 
on the quality of care, APA strongly encourages the VA to ensure that 
neither research nor care suffers by developing mechanisms to designate 
time for clinicians to conduct research.
Mental Illness Research, Education and Clinical Centers
    APA supports the important work being conducted by the eight VA 
Mental Illness Research, Education and Clinical Centers (MIRECCs) 
currently in existence throughout the country, but is disappointed that 
the VA did not increase the number of MIRECCs in fiscal year 2002 as 
directed by the Senate in last year's report. These MIRECCs sponsor 
important basic and applied research as well as educational outreach to 
the VA community, and have been particularly effective in translating 
the findings of basic research into improved treatment protocols. The 
MIRECCs substantially support and upgrade the provision of mental 
illness services in their areas, but they exist in only eight of 22 
networks and are clustered on the East and West coasts. We recommend 
that the Subcommittee provide funds for the establishment of three 
additional MIRECCs in fiscal year 2003.
Summary
    APA appreciates this opportunity to provide written testimony in 
support of psychological research sponsored by NSF, NASA and the VA, 
and strongly encourages the Subcommittee to reaffirm its commitment to 
basic behavioral science at all three agencies. We recognize that this 
year there is a special need to strengthen research programs and 
operations related to national security, and we hope that Congress also 
will reinvest in the longer-term basic research which enables us to 
meet the full range of social, economic, health, and security 
challenges ahead. 




                 Prepared Statement of American Rivers

    This year, American Rivers was joined by over 600 local, regional 
and national conservation organizations \1\ from all 50 states in 
calling for significantly increased funding for the following 
Environmental Protection Agency (EPA) programs and other programs 
funded through the Veteran's Affairs, Housing and Urban Development, 
and Independent Agencies (VA-HUD) Appropriations bill. I urge that 
these requests be incorporated in the VA-HUD Appropriations bill for 
fiscal year 2003.
---------------------------------------------------------------------------
    \1\ These groups have endorsed ``The River Budget 2003'', a report 
of national funding priorities for local river conservation. A list of 
groups endorsing the River Budget can be viewed at http://
www.americanrivers.org/riverbudget/default.htm
---------------------------------------------------------------------------
       enforcement of discharge permits under the clean water act
    The Environmental Protection Agency's (EPA) ability to enforce 
environmental laws is critical to our nation's efforts to fulfill the 
Clean Water Act's clearly stated objective of restoring waters to 
fishable and swimmable conditions. While our nation has made great 
progress toward cleaning up our water, 40 percent of waters remain 
unsafe for fishing or swimming, illustrating a continuing need for 
enforcement.
    The Clean Water Act prohibits discharges of pollutants through 
point sources into U.S. waters without a National Pollution Discharge 
Elimination System permit. These permits contain limits on what can be 
discharged, monitoring and reporting requirements, and other provisions 
to ensure that discharge does not harm water quality or human health. 
To ensure that the permits are current and properly complied with, EPA 
engages in enforcement activities, including inspections, sampling, and 
testing, as well as civil and criminal enforcement actions. Civil and 
criminal enforcement activities result in real improvements in 
environmental quality. For instance, in fiscal year 1999, EPA's civil 
enforcement actions achieved over 6.8 billion pounds of pollutant 
reductions.
    For the last 2 years, the Administration has proposed significant 
reductions in funding for EPA's Office of Enforcement and Compliance. 
Last year the Congress rejected this initiative, yet the Administration 
has again recommended cuts for fiscal year 2003 that would reduce EPA 
staff in the enforcement office by over 200 employees. It is essential 
that Congress fund the EPA Office of Enforcement and Compliance at a 
level sufficient to retain fiscal year 2001 staffing levels with 
adequate increases to allow for cost of living increases. Congress 
should fund EPA's enforcement programs at $485 million.
                    clean water state revolving fund
    The Clean Water State Revolving Fund (SRF) provides capitalization 
grants to states, who in turn provide low-cost loans to communities for 
a variety of programs to clean up impaired water bodies and protect 
pristine waters. This program has been extremely effective in helping 
communities to improve water quality and provide safe drinking water. 
However, the needs to improve, repair and replace the nation's aging 
water infrastructure are tremendous. EPA and the WIN (Water 
Infrastructure NOW) coalition estimate that between $450 billion and 
$600 billion will need to be spent over the next 20 years just to 
ensure that water quality standards are met and that drinking water 
supplies are safe. Although the Federal Government should not be 
expected to bridge that funding gap, higher SRF funding is a clear and 
urgent priority. Postponing necessary water infrastructure investments 
will only defer and increase costs that must eventually be met. 
Congress has recognized this fact, giving strong bipartisan support to 
legislation authorizing substantially higher SRF funding in bills 
currently pending in the House and Senate.
    Despite the pressing need for more water infrastructure funding and 
strong support for the SRF program across the nation, the 
Administration's budget calls for a 10 percent cut in SRF funding for 
fiscal year 2003. We urge Congress to fund the Clean Water and Drinking 
Water SRF programs at the full authorization levels called for in any 
bill eventually passed this year by Congress. At a minimum, Congress 
should sustain past funding levels: $1.35 billion for Clean Water SRFS, 
and $859 million for Drinking SRFs.
       total maximum daily loads, clean water act section 303(d)
    One of the most powerful tools to reduce nonpoint source 
pollution--the leading cause of impairment of the nation's waters--is 
the Clean Water Act's Total Maximum Daily Load (TMDL) provision. The 
TMDL provision is unique because it addresses the total level of 
pollution regardless of its source and requires the EPA to step in if a 
state fails to combat chronic water pollution problems. EPA 
conservatively estimates that there are an average of 300 impaired 
water bodies in every state in need of a TMDL plan. The polluted waters 
include approximately 300,000 miles of river and shoreline and 
approximately 5 million acres of lakes.
    Given the scope of water body impairment across the nation, and the 
need to help states develop and implement TMDL plans, we urge Congress 
to ensure that the TMDL program, receives an increase in funding. 
Congress should appropriate $250 million for EPA's State Program 
Management Grants (Section 106 of the Clean Water Act) for grants to 
states for funding for pollution control activities, surveillance, 
monitoring, enforcement, and advice and assistance to local agencies to 
meet TMDL development and implementation deadlines.
                   nonpoint source management program
    Another tool for reducing nonpoint source pollution is the Clean 
Water Act Section 319 Nonpoint Source Management Program. This program 
provides grant money to states, territories, and Indian tribes that can 
be used for a variety of nonpoint source pollution reduction activities 
including technical and financial assistance, education, training, 
technology transfer, demonstration projects, and monitoring.
    Congress should fund the Section 319 Nonpoint Source Management 
Program at $250 million.
                      watershed assistance grants
    Solving today's water quality challenges, especially habitat loss 
and nonpoint source pollution, requires the active involvement of 
citizens who care about the water quality where they live and are 
willing to take action to improve it. In most cases, solutions will be 
most effective when they address problems on watershed-wide bases and 
all affected parties are included in the development of the solutions.
    To facilitate such solutions, EPA teamed up with citizen activists 
to institute the Watershed Assistance Grants program. To date, 1,162 
proposals (requesting approximately $15 million) have been submitted; 
68 awards have been made to locally initiated watershed partnerships in 
36 states.
    In order to build the capacity of this program in fiscal year 2003, 
Congress should fund the Watershed Assistance Grants program at $2 
million.
                             project impact
    The 20th century approach to flood control--trying to contain 
rivers with dams and levees and allowing excessive development in 
flood-prone areas--has devastated many river ecosystems while failing 
to adequately protect communities. Dams and levees that break during 
floods release even more devastating torrents, while those that hold 
often merely shift the brunt of a flood to other areas. Poorly planned 
floodplain development has put countless people in harm's way and 
eroded natural flood protections. According to the Federal Emergency 
Management Agency (FEMA), flood damages average more than $4 billion a 
year.
    Project Impact, run by FEMA, is changing how the nation deals with 
floods by turning nature into an ally instead of an enemy. Project 
Impact helps communities dramatically reduce disruption and loss caused 
by floods and other natural disasters by restoring and protecting 
healthy, more natural ecosystems.
    FEMA estimates that every dollar spent on damage prevention in its 
250 Project Impact communities saves two dollars in repairs. In fiscal 
year 2003, Congress should appropriate $50 million to expand FEMA's 
Project Impact to safeguard people and the environment.
                         chesapeake bay program
    The Chesapeake Bay is the nation's largest estuary and one of the 
most productive in the world, home to 3,600 species of plants and 
animals. The 64,000 square mile watershed drains more than 100,000 
rivers and streams; provides important opportunities for recreation and 
refuge for fish and wildlife; and is a key resource for the prosperity 
of the region.
    Unfortunately, the ecological integrity and productivity of the 
Chesapeake's watershed have been severely compromised by development, 
agriculture, over-harvesting of resources, and more than 2,500 small 
dams that block migratory fish from their historic spawning habitats.
    Concern over these threats culminated in the creation of the 
Chesapeake Bay Program in 1983, establishing what is now a national and 
international model for estuarine research and restoration. In fiscal 
year 2003, Congress should provide the Chesapeake Bay Program with $30 
million to better protect and restore this valuable ecosystem.
                               beach act
    The Administration's budget proposes $10 million for the Beaches 
Environmental Assessment and Coastal Health Act (BEACH Act) of 2000, 
equal to the amount approved by Congress for fiscal year 2002. While 
$10 million was a helpful start for the BEACH Act program's first year, 
it represents only one-third of what Congress originally authorized for 
the Act. Under the BEACH Act, grants are provided to states to help 
them improve water quality monitoring and public notification programs. 
When it created the program in 2000, Congress unanimously authorized 
$30 million for these grants. Congress should fund the BEACH Act grant 
program at $30 million.
                                 ______
                                 

       Prepared Statement of the American Water Works Association

Introduction
    The American Water Works Association (AWWA) appreciates the 
opportunity to present AWWA views on the Environmental Protection 
Agency (EPA) budget for fiscal year 2003 (fiscal year 2003). AWWA and 
its members are dedicated to providing safe, reliable drinking water to 
the American people.
    Founded in 1881, AWWA is the world's largest and oldest scientific 
and educational association representing drinking water supply 
professionals. The association's 57,000 plus members are comprised of 
administrators, utility operators, professional engineers, contractors, 
manufacturers, scientists, professors and health professionals. The 
association's membership includes over 4,500 public water systems that 
provides over 80 percent of the nation's drinking water.
    AWWA utility members are regulated under the Safe Drinking Water 
Act (SDWA) and other statutes. AWWA believes few environmental 
activities are more important to the health of this country than 
assuring the protection of water supply sources, and the treatment, 
distribution and consumption of a safe and healthful adequate supply of 
drinking water. We strongly support adequate levels of funding for 
EPA's drinking water, ground water protection and clean water pollution 
prevention programs in fiscal year 2003.
    The events of September 11, 2001, have added a new dimension to the 
protection of drinking water. In addition to protecting drinking water 
from contamination, America's homeland security requires a secure water 
supply. Public health, fire protection, and sanitation depend on it. 
The role of public water systems for first responders has been largely 
overlooked in the discussions concerning homeland security funding 
priorities. AWWA strongly urges both the Congress and the 
Administration to correct this oversight and make the protection of 
public water systems a high priority for homeland security. The al 
Qaeda terrorists network and others are known to have conducted 
research on public water systems in the United States. If the intent is 
to create terror in our society, water systems are targets of 
opportunity for terrorists, not only to contaminate the water supply, 
but also to deny first responders water for fire protection in a 
coordinated terrorist attack.
    Drinking water suppliers have a long history of security 
preparedness. However, the post-September 11, world has added a new 
understanding of security and has added an unprecedented financial 
burden on public water systems for immediate steps needed to protect 
our citizens. AWWA does not believe that the President's Budget request 
for EPA is adequate for EPA to meet the homeland security needs of our 
Nation's public water system infrastructure. We respectfully request 
the Congress to appropriate significantly increased funds for public 
water system security efforts that are essential to help provide a 
secure water supply for our citizens and first responders in either an 
emergency supplemental appropriation for fiscal year 2002 for security 
needs that require immediate funding or in the EPA fiscal year 2003 
appropriation. Our testimony today will highlight some of the major 
public water system security needs.
Request Overview
    AWWA recommends that the following funding be specifically 
appropriated for the indicated purpose:
  --For public water system water vulnerability assessments.--
        $450,000,000 to complete vulnerability assessments for systems 
        serving over 3,300 peopleas required in H.R. 3448.
  --For immediate public water system security upgrades.--
        $1,600,000,000 for capital improvements to ensure security of 
        access to critical public water system assets through barriers, 
        detection devices and cyber security systems.
  --For public water system security training.--$2,500,000 designated 
        for AWWA to develop and initiate peer-review or third party 
        certification programs to assure ongoing vigilance against 
        terrorist acts and educate water systems in distribution system 
        security and vulnerability assessments.
  --For public water system security research.--$15,000,000 to develop 
        technologies and methodologies to help prevent and respond to 
        the contamination or disruption of public water systems. 
        (Funding expected to be authorized in H.R. 3448.)
  --For the drinking water State revolving fund.--A minimum of 
        $1,000,000,000 as authorized in the SDWA.
  --For the AWWA Research Foundation (AWWARF) drinking water 
        research.--$7,000,000.
  --For public water system supervision (PWSS) grants to States.--
        $100,000,000 as authorized in the SDWA.
  --For drinking water research.--As requested in The President's 
        fiscal year 2003 Budget.
  --For the EPA drinking water program.--As requested in The 
        President's fiscal year 2003 Budget.
Public Water System Vulnerability Assessments
    Congress should appropriate $450 million to complete vulnerability 
assessments for public water systems. The cost of completing 
vulnerability assessments and revise emergency plans in all drinking 
water systems serving more than 3,300 people as mandated in the House 
version of H.R. 3448 is approximately $450 million, in addition to 
funds already appropriated. The Defense appropriations bill for fiscal 
year 2002 provided $83 million for assessment for the largest public 
water systems.
  --Recommended Action in the Fiscal Year 2002 Emergency Supplemental 
        or Fiscal Year 2003 Budget.--Appropriate $450,000,000 to 
        complete vulnerability assessments for public water systems.
Immediate Public Water System Security Upgrades
    Congress should appropriate $1.6 billion specifically for capital 
improvements to ensure security of access to critical public water 
system assets through barriers, detection devices and cyber security 
systems. AWWA research has determined the cost of immediate security 
upgrades for public water systems to ensure secure control of access to 
critical utility assets is approximately $1.6 billion. This will 
provide initial security improvements for about 53,800 water systems 
serving more than 264 million people. This does not include future 
capital costs of upgrades to address vulnerabilities identified in 
vulnerability assessments such as hardening pumping stations, chemical 
storage buildings, transmission mains, add redundant infrastructure or 
relocate facilities and pipelines.
  --Recommended Action in the Fiscal Year 2002 Emergency Supplemental 
        or Fiscal Year 2003 Budget.--Appropriate $1,600,000,000 for 
        capital improvements to ensure security of access to critical 
        public water system assets.
Public Water System Security Training
    Congress should appropriate $2.5 million for AWWA to develop and 
initiate peer-review or third party certification programs to assure 
ongoing vigilance against terrorist acts; educate water systems in 
distribution system security and vulnerability assessments; and teach 
emergency communications and legal issues. The details of this proposal 
are in a letter previously sent to the subcommittee. As the world's 
largest educational and scientific organization dedicated to safe 
drinking water, AWWA is uniquely qualified and has the proven expertise 
to accomplish these important tasks more effectively and in a more 
timely manner than any other entity in the United States. Before 
September 11 and since then, AWWA has been providing information and 
training to prepare water utilities for terrorist attacks and measures 
to prevent such attacks. With Federal assistance, AWWA can continue to 
deliver this training at little or no cost to participants. With our 
broad membership of over 57,000 members, AWWA can reach a large 
audience of water suppliers and utilities of all sizes--small, medium, 
and large. AWWA believes that these programs will significantly improve 
the security of the Nation's public water supply.
  --Recommended Action in the Fiscal Year 2002 Emergency Supplemental 
        or fiscal year 2003 Budget.--Appropriate $2,500,000 
        specifically designated for the American Water Works 
        Association for drinking water security training.
Public Water System Security Research
    Congress should appropriate $15 million for a new program to 
improve the technologies and processes that provide security for public 
water systems. Funding for this program is expected to be authorized in 
H.R. 3448 that is currently in a joint conference committee. One of the 
most pressing needs facing public water systems is to develop 
technologies and methodologies to help prevent and respond to terrorist 
actions to contaminate or disrupt the water supply. Now is the time to 
strategically invest in water security research and development in 
order to deploy real-time detection, identification and response tools 
to the field as soon as possible. Critical research needs are for the 
identification and characterization of biological and chemical agents, 
biological and chemical agent detectors, and security of cyber command 
and control systems. This new program will promote the transfer of 
results of research on critical infrastructure protection to the 
private sector, public water systems and other parts of the Nation's 
infrastructure. AWWA believes that public water system security 
research is an essential part of homeland defense and strongly urges 
Congress to fund this new program.
  --Recommended Action in the Fiscal Year 2003 Budget.--Appropriate 
        $15,000,000 to develop technologies and methodologies to help 
        prevent and respond to the contamination or disruption of 
        public water systems.
Drinking Water State Revolving Fund (DWSRF)
    AWWA believes that past funding to capitalize the DWSRF is not 
adequate to meet the Nation's drinking water needs. The SDWA Amendments 
of 1996 authorized for the DWSRF $599,000,000 for fiscal year 1994 and 
$1,000,000,000 for fiscal years 1995 through 2003. Through fiscal year 
2002, Congress has appropriated approximately $5.2 billion--which is 
approximately $3.4 billion less than authorized for the DWSRF up to 
this fiscal year. According to the 1999 EPA Drinking Water 
Infrastructure Needs Survey released in February, 2001, $150.9 billion 
is needed over the next 20 years just to comply with the requirements 
of the SDWA. We believe that the EPA Needs Survey is conservative. More 
recent comprehensive estimates developed by EPA in the Gap Analysis, 
AWWA and the Water Infrastructure Network (WIN) indicate that the need 
is much higher. WIN estimates that the Federal share to meet the needs 
of replacing aging drinking water pipes should be approximately $28.5 
billion over the next 5 years. We urge Congress to appropriate at least 
the $1 billion authorized for the DWSRF in fiscal year 2003 to assist 
States and public water systems in meeting current public health 
related infrastructure needs. Although it represents only a fraction of 
the need, the amount recommended by AWWA for the DWSRF will be a start 
and provide a source of much needed loans for financial disadvantaged 
communities that cannot obtain financing through other means. The 
Federal funds will leverage State and local resources, thus helping 
communities to comply with the mandates of the SDWA.
  --Recommended Action in the Fiscal Year 2003 Budget.--Appropriate a 
        minimum of $1,000,000,000 as authorized in the SDWA.
AWWA Research Foundation
    In a separate statement, the American Water Works Association 
Research Foundation (AwwaRF), (an organization independent of AWWA), 
requested that $7,000,000 in drinking water research funds be 
designated specifically for AwwaRF for drinking water research. AwwaRF 
proposes to allocate $5,000,000 of this amount for its ongoing research 
programs that address issues such as the link between disinfection by-
products and miscarriages, compliance with the new arsenic regulation, 
emerging contaminants such as perchlorate, infrastructure needs, and a 
host of other drinking water public health related issues. The other 
$2,000,000 will be allocated to high-risk security issues identified by 
a comprehensive workshop. AwwaRF will produce the May workshop that 
will include stakeholders from State and Federal Government, water 
utilities, and leading academic institutions. A research plan will 
emerge from this expert workshop on how to best protect public water 
systems from terrorism. Since fiscal year 1984, when Congress 
appropriated the first grant for AwwaRF, the Foundation has leveraged 
an additional $228,000,000 from its subscribers to support research 
projects across the country. Each dollar appropriated by Congress for 
AwwaRF produced over $6.00 in drinking water research. AWWA strongly 
believes that this kind of local/Federal research partnership is a wise 
and cost effective use of public funds and the only way to secure 
science-based drinking water regulations in these difficult budgetary 
times.
  --Recommended Action in the Fiscal Year 2003 Budget.--Appropriate 
        $7,000,000 specifically designated for the American Water Works 
        Association Research Foundation for drinking water research.
Public Water System Supervision Grants
    To comply with the SDWA, Congress intended that EPA develop 
drinking water regulations and that the States implement and administer 
the program to ensure compliance with and enforcement of its 
provisions. Implementation, administration, compliance and enforcement 
activities are collectively known as ``primacy'' requirements and 
Federal grants to the States are known as Public Water System 
Supervision (PWSS) grants. The massive demands on States arising from 
the SDWA have become increasingly apparent because of the dramatic 
increase in the number of regulated contaminants over the past few 
years. As each regulation is added, State resource shortfalls become 
more acute. Additional regulations are scheduled to be promulgated over 
the next few years and the SDWA Amendments of 1996 added new 
responsibilities for the States such as source water assessments, a 
consumer confidence report program and alternative monitoring programs. 
The SDWA authorizes a Federal share of up to 75 percent, but Federal 
funding has approximated only 35 percent. EPA's budget requests for the 
last several years for PWSS funding for States has remained essentially 
static in the face of increasing requirements. We strongly urge 
Congress to appropriate the $100,000,000 authorized for PWSS grants to 
States as the minimum necessary .
  --Recommended Action in the Fiscal Year 2003 Budget.--Appropriate 
        $100,000,000 for Public Water System Supervision (PWSS) grants 
        to States.
Drinking Water Research Funding
    Over the past several years, public water suppliers have worked 
together with EPA and the Congress to secure increased research funding 
for the Nation's drinking water program. We believe that, through this 
cooperative effort, needed increases in research dollars have been 
obtained for drinking water over the past few years after several years 
of steady decline. The use of good science as the foundation of the new 
drinking water standard-setting process under the SDWA amendments of 
1996 will require extensive drinking water research--particularly 
health effects research. Funding for drinking water research is 
becoming more of a critical issue. Every 5 years EPA is required by the 
SDWA to select at least five contaminants from the Contaminant 
Candidate List (CCL) and determine whether to regulate them. To 
determine whether to regulate a contaminant and establish a maximum 
contaminate level (MCL) or another regulatory approach, EPA will need 
good health effects research. Recognizing the serious burden this 
regulatory mandate presents, the drinking water community has offered 
its time, resources and expertise to work with EPA to develop a 
research plan for the contaminants on the CCL. Given the enormous need 
for immediate research to meet the deadlines of the SDWA amendments of 
1996, AWWA urges Congress to appropriate at least the amount requested 
in the President's fiscal year 2003 Budget for drinking water research 
and specifically designate it in the appropriation.
  --Recommended Action in the Fiscal Year 2003 Budget.--Appropriate 
        funding for the EPA drinking water research program as 
        requested in the President's fiscal year 2003 Budget.
EPA Drinking Water Program
    EPA's drinking water program took on greatly increased 
responsibilities in the 1996 SDWA amendments. In satisfying these 
requirements, EPA has involved the public in the regulatory process to 
an extent not equaled by another Federal agency and stands as a model 
for Federal rule making.. EPA and the Office of Drinking Water and 
Ground Water are to be commended for taking this new approach which 
should result in better regulations that protect public health. AWWA 
believes that funding the EPA drinking water program is vital to 
continue this new regulatory approach and urges Congress to appropriate 
the funds requested in the President's fiscal year 2003 Budget for the 
drinking water program to continue to implement the new provisions of 
the SDWA.
  --Recommended Action in the Fiscal Year 2003 Budget.--Appropriate 
        funding for the EPA drinking water program as requested in the 
        President's fiscal year 2003 Budget.
    This concludes the AWWA statement on the fiscal year 2003 EPA 
budget.
                                 ______
                                 

   Prepared Statement of the American Society of Mechanical Engineers

    ASME International is a worldwide engineering society focused on 
technical, educational and research issues. It conducts one of the 
world's largest technical publishing operations, holds some 30 
technical conferences and 200 professional development courses each 
year, and sets many industrial and manufacturing standards.
                   national science foundation (nsf)
    The National Science Foundation Task Force of the American Society 
of Mechanical Engineers (ASME International) is pleased to provide the 
following comments on the NSF fiscal year 2003 budget request.
NSF Fiscal Year 2003 Budget Request Overview
    The National Science Foundation plays a critical leadership role in 
directing the nation's non-defense related scientific and engineering 
research. Through thoughtful and visionary planning, NSF has greatly 
contributed to advancements in science, engineering and technology. The 
Task Force shares NSF's broad-based, cross-cutting vision for basic 
engineering and scientific research. As such, we strongly endorse the 
Foundation's efforts to continually improve and expand the ``innovative 
ideas, outstanding people, and cutting-edge tools'' that comprise the 
nation's technological and scientific infrastructure.
    The Budget Request for fiscal year 2003 reflects a 5.0 percent 
increase over the fiscal year 2002 Current Plan to $5.04B. Within this 
request, funding for the Engineering Directorate would increase 3.3 
percent to $488M.
    NSF has identified six initiative areas to headline the fiscal year 
2003 budget request. These are:
  --Information Technology Research (ITR),
  --Nanoscale Science and Engineering (NSE),
  --Biocomplexity in the Environment (BE),
  --Learning for the 21st Century Workforce (STEM),
  --Mathematical Sciences,
  --Social, Behavioral and Economic Sciences (SBE).
    Though not specifically identified as such, the Math and Science 
Partnerships (MSP) is essentially a seventh initiative area. This 
program began in fiscal year 2002 as part of President Bush's 
initiative to enhance K-12 math and science education contained in his 
``No Child Left Behind'' proposal.
    Funding has been requested to create two new initiative areas, 
Mathematical Sciences ($60.1M) and SBE ($10M) while expanding the four 
ongoing areas: ITR by 3.0 percent (to $286M), NSE by 11.3 percent (to 
$221M), BE by 36.3 percent (to $79M) and STEM by 27.5 percent (to 
$185M). Each of these priorities, NSE and STEM in particular, continue 
to be strongly supported by the Task Force.

                       TABLE 1.--NSF BUDGET OVERVIEW WITH AND WITHOUT THE INITATIVE AREAS
                                             [In million of dollars]
----------------------------------------------------------------------------------------------------------------
                                               NSF Agency Wide                       Engineering (ENG)
                                   -----------------------------------------------------------------------------
                                    Fiscal year
                                        2002     Fiscal year    Percent    Fiscal year  Fiscal year    Percent
                                      current        2003        change      current    2003 reqest     change
                                        plan       request                     plan
----------------------------------------------------------------------------------------------------------------
Total Budget......................    $4,795.88    $5,035.79          5.0      $472.32      $487.98          3.3
    Salaries and Expenses.........       176.40       210.16         19.1          n/a          n/a          n/a
    Inspector General.............         7.04         8.06         14.5          n/a          n/a          n/a
Total Program Budget..............     4,612.44     4,817.57          4.5       472.32       487.98          3.3
    ITR...........................       277.52       285.83          3.0        10.23        11.17          9.2
    NSE...........................       198.71       221.25          1.3        86.30        94.35          9.3
    BE............................        58.10        79.20         36.3         3.69         6.00         62.6
STEM..............................       144.82       184.69         27.5         3.40         4.87         43.2
    Mathematical Sciences.........        30.00        60.09        100.3            0         0.91          n/a
    SBE...........................         0.00        10.00          n/a            0            0          n/a
Remaining Funds...................     3,903.29     3,976.51          1.9       368.70       370.68         0.5
----------------------------------------------------------------------------------------------------------------
Comparisons include both agency-wide and engineering directorate.

    In spite of the requested 5.0 percent overall increase in the total 
NSF budget, expansions in the initiative areas significantly inhibit 
growth in other programs. Table 1 clearly shows the impact on funding 
for core programs. Agency-wide, there will only be a 1.9 percent 
increase in funding available for core programs relative to current 
year plans. If one accounts for the $76M in programs being transferred 
from the Environmental Protection Agency (EPA), National Oceanic and 
Atmospheric Administration (NOAA) and the United States Geological 
Service (USGS), there will actually be a slight net loss in overall 
funds for core programs. Flat funding for core programs is reflected 
within the Engineering Directorate (ENG). After initiative areas are 
removed, there will be a mere 0.5 percent increase in funding for core 
research programs.
Position
    The Task Force endorses the leadership role that NSF has played in 
guiding the nation's basic research activities. Combining exciting new 
developments with core programs to incubate such breakthroughs, NSF has 
built an outstanding record of supporting a broad spectrum of research 
of the highest quality. This record has been made possible only through 
strict adherence to the independent peer review process. We recognize 
the importance and timeliness of NSF's initiative areas that address 
major national needs for the 21st century. However, as will be 
discussed in the next section, it is not clear that an optimum balance 
has been achieved.
    There are a number of particularly positive items in the fiscal 
year 2003 budget request, beginning with the planned increase in 
graduate fellowship stipend levels. Ensuring a continuous stream of 
well-trained, highly qualified research scientists into leadership 
positions is critical to our economic growth and national security. In 
this respect, we strongly endorse NSF's planned increase in stipends 
for graduate fellows from $21,500 to $25,000. Making fellowship 
stipends attractive to the nation's best and brightest students is 
certainly a positive step. This serves to enhance the nation's pool of 
science, engineering and technology educators and leaders.
    The increase in numbers of graduate fellowships is also especially 
positive. NSF is the only Federal agency directly chartered to train 
graduate students for research and development careers. It is therefore 
imperative that this be a major priority area in perpetuity. It is 
interesting to note however that $80.6M is requested for the Graduate 
Research Fellowship (GRF) program to support 2,350 students 
in fiscal year 2003 while $41.4M for the GK-12 Fellowship program will 
support only 800 students. It is not clear that the GK-12 program has 
sufficient value added to justify its higher cost. Nor is it clear that 
the correct balance between types of graduate fellowships has been 
struck. It is critically important that education-based programs do not 
jeopardize funding for research programs at NSF.
    In general, the Task Force also supports and applauds activities 
within ENG. NSF's vision of a committed balance between people, ideas 
and tools is exemplified within ENG. It is important to recognize that 
fundamental sciences and engineering funded by NSF quite frequently 
spawns next generation technologies. Examples of successes emerging 
from ENG include development of an artificial retina and, a biocapsule 
for insulin delivery. ENG is also funding work on microscopic chains 
for magnetized particles that may be precursors of materials that will 
protect buildings from earthquakes.
    ASME has strongly supported the nanotechnology initiative since its 
inception as an NSF emphasis area in fiscal year 2000. In the past two 
years, funding for this initiative has grown substantially. With a 
growing record of research and development successes, the transitioning 
of nano-science and engineering into commercially viable technologies 
is becoming a pressing challenge for NSE. For this reason, it is 
important that multi-institutional tools be developed in the near term 
in which access, maintenance and staffing issues have been resolved.
    Finally, the Task Force continues to endorse NSF's participation in 
K-12 math, science and engineering education initiatives consistent 
with the agency's broader mandate to lead the nation's research and 
development enterprise. Most notably, NSF has included $200M in its 
fiscal year 2003 budget request for the Math and Sciences Partnership 
(MSP) program. The goal of MSP is coupling K-12 and higher education 
STEM education into a single integrated effort by encouraging 
universities to adopt STEM into their core missions.
    In this technological age, providing the highest quality math, 
science and technology education to all children should be a national 
imperative. We applaud the ``No Child Left Behind'' Act and NSF's role. 
However, the Task Force cautions that a proper balance' must be struck 
to preserve the integrity of NSF's fundamental research and development 
mission.
Concerns
    Maintaining a fundamental knowledge base is essential for 
intelligent and effective response to rapidly evolving technological 
challenges facing the nation. Events since September 11th highlight the 
impossibility of predicting what scientific and engineering disciplines 
will be needed in response to future technology challenges. Because of 
its commitment to core programs, ENG was able to rapidly respond to the 
World Trade Center collapse by funding work on the failure of one of 
the steel beams hit by a hijacked plane. However, the track record on 
funding core programs over the past few years has not been strong. As 
noted earlier, funds available for core programs are essentially flat 
across NSF in fiscal year 2003. Thus, as in previous years, Our key 
questions and concerns arising from the fiscal year 2003 budget request 
center on matters of balance. In particular, the Task Force is 
concerned with:
  --the gross funding imbalance in the Federal R&D portfolio,
  --inadequate funding levels for existing grants.
  --insufficient support for core engineering programs at NSF, and
    The overall imbalance in the Federal R&D portfolio remains a major 
concern. The requested increase for NIH this year is equal to the 
entire requested appropriation for Research and Related Activities at 
NSF. Focusing purely on health issues while the nation faces threats 
from dwindling energy supplies, aging infrastructure and geopolitical 
instability, to name but a few, is entirely inconsistent with a 
balanced leadership plan. Failure to adequately support broad, cross-
cutting fundamental research inherent to most NSF programs continues to 
undermine the long-term health and vitality of the nation.
    To date, NSF has had considerable success in stretching its funds 
to bridge (i.e. mask) this imbalance. Indeed, NSF richly deserves the 
governmental acclaim it has received for its efficiency and impact in 
managing basic research and development. However, this efficiency is 
coming at the expense of partial payment for the research. The 
projected median research award size for fiscal year 2003 is estimated 
to be $87,400 per year. This is in general sufficient to support one 
graduate student and a senior investigator with only a limited amount 
remaining to actually conduct the research. An extended period of 
constant grant sizes has eroded buying power and the ability to 
adequately support professional development. Further, forming small 
teams (2-3 senior investigators) to pursue and define the major 
initiative areas of the future is virtually impossible. Thus, to truly 
advance the frontiers of science, engineering and technology, 
significant increases must be made not only to the number of grants, 
but to the size of each grant as well. By way of reference, NIH's 
projection for the average size of new research project grants (RPGs) 
in fiscal year 2003 will be $370,000; this is coupled with 
an estimated 4 percent increase in the total number of RPGs funded.
    As indicated in Table I, growth in NSF for fiscal year 2003 is 
targeted at initiative areas and the transfer of programs from other 
agencies. After inflation, there will be a net decrease in funding for 
core programs. As an illustration of the imbalance this creates, 
consider the World Trade Center disaster of September 11. In its budget 
request documents, NSF points to the analytic and diagnostic tools 
available to examine failure of structural steel beams at the point of 
impact by the hijacked airliners. Funding for this work would come from 
the Civil and Mechanical Systems (CMS) subactivity within ENG, an area 
of strong interest to mechanical engineers. Yet CMS has seen, at best, 
minimal growth over the past five years. It appears that this is 
principally because steel (for example) is not tied to one of the 
initiative areas and has not been included in the growth plan of the 
Federal R&D portfolio.
Summary
    The Task Force continues its enthusiastic support for the National 
Science Foundation and its leadership in articulating the nation's 
basic research and development vision. In fiscal year 2003, NSF has 
requested funding to expand major, cross cutting initiatives addressing 
pivotal technological issues facing the nation. This includes the 
nanotechnology initiative strongly endorsed by ASME. Expansion of the 
graduate fellows programs coupled with increases in stipend levels 
reinforces NSF's commitment to graduate education. The focus on 
developing people and ideas in general is certainly reflected 
throughout the ENG directorate's budget request as well. The challenge 
for this year appears to be maintaining a healthy balance between core 
research programs and new initiatives such as the new K-12 Math and 
Science Partnerships.
    There is also great concern over continued growth in the imbalance 
between Federal funding of life sciences and the physical sciences and 
engineering. Crises, such as those occurring in the gasoline and power 
production industries, reflect long term failure to value and support 
core research focused at advancing the nation's technological 
infrastructure. In addition, recent events strongly underscore the fact 
that it is impossible to know what part of the science, engineering and 
technology base will be needed on short notice to respond to rapidly 
developing opportunities or crises. The current budget plan does not 
appear to permit NSF to meet key fiscal year 2003 Performance Goals 
(i.e. Goals III-1a and III-2). Increasing the number and size of its 
awards will enable NSF to better position itself to fulfill its 
leadership responsibility in directing the nation's research and 
development activities.
          national aeronautics and space administration (nasa)
    The American Society of Mechanical Engineers (ASME International) 
Aerospace Division and the Aviation Research and Technology Task Force 
are pleased to provide their views on the NASA fiscal year 2003 budget 
request as it affects the aeronautics research and technology programs.
    In recent years, the Task Force has written at length about our 
concerns that reducing Federal funding for aviation research and 
technology will jeopardize the nation's leadership in providing the 
technologies needed to develop the next generation aircraft, improve 
aviation safety and security, and attract the next generation of 
scientists and engineers. Over the last decade, funding for NASA's 
aeronautics research and technology program has fallen by approximately 
50 percent, and unfortunately, this trend is continuing. The 
Administration's fiscal year 2003 request of $541.4M for aeronautics is 
a reduction of $58M from fiscal year 2002 appropriated funding.
    Although we continue to view with concern the level of government 
investment related to aeronautics in NASA, we would like to commend the 
NASA Leadership for their strategic plan called the ``Aeronautics 
Blueprint.'' NASA's Aeronautics Blueprint not only describes the issues 
and challenges facing U.S. aviation, but describes a vision for 
reshaping the future architecture of the U.S. aerospace industry.
    The Aeronautics Blueprint acknowledges many of the same concerns 
our Task Force has addressed in earlier testimony, particularly our 
concerns about the declining investment in aeronautics research and 
development, the aeronautics infrastructure, and the aerospace 
workforce. It is important to note that the Aeronautics Blueprint 
states ``. . .the steady erosion of U.S. leadership in aeronautics, 
which is being directly challenged by international competitors, must 
be reversed'' and ``. . .the cost of inaction is gridlock, constrained 
mobility, unrealized economic growth, and loss of U.S. aviation 
leadership.''
    NASA has taken the first step toward articulating a vision for 
aviation research and technology. But that vision cannot be realized 
unless the continued decline in aeronautics funding is reversed and 
sufficient funding provided to develop near-term and revolutionary 
technologies. We are disappointed with the reductions to the 
aeronautics programs. We are also disappointed with the elimination of 
the rotorcraft program from NASA's budget. NASA has eliminated from its 
vision all rotary wing related activity, despite the fact that rotary 
wing vehicle technology is substantially less mature (by approximately 
four decades) than its fixed wing counterpart. Rotary wing vehicles 
have a potential for revolutionizing our air transportation system and 
make an important contribution to our national security.
    The ``Commission on the Future of the U.S. Aerospace Industry,'' a 
congressionally mandated Commission, recently issued their interim 
report calling for the creation of ``a multi-agency task force with the 
leadership to develop and implement an integrated plan to transform our 
air transportation system.'' The Commission recommends ``significant 
increases (in NASA R&D) to start developing a new air transportation 
system for the nation. R&D investments should focus on: security, noise 
and emission reductions, high bandwidth communications, precision 
navigation and surveillance, small aircraft transportation 
technologies, ground and airborne control automation, and advanced 
weather sensing. New mechanisms and incentives need to be developed to 
accelerate the application of existing and new technologies and 
concepts into the marketplace.''
    We heartily endorse the Commission's recommendations, and we urge 
Congress to provide sufficient funds to enable the development of new 
technologies that would reduce aviation gridlock, increase the margin 
of safety for the flying public, and reduce the impact of aviation on 
the environment.
    Last year, in testimony to this Subcommittee, our Task Force noted 
with concern the release of a report called the ``European Aeronautics: 
A Vision for 2020.'' This strategy document charts the path for the 
European Union to become a global leader in aeronautics, estimating 
that total funding required to achieve their vision--from all public 
and private sources over the next 20 years--could go beyond $95 billion 
over the next 20 years.
    Is there evidence to support the European Union's objective to 
become a world leader in aerospace technology? In February 2000, the 
National Research Council reported that the U.S. has been losing ground 
in world aerospace market share, falling from over 70 percent in the 
1980's to 55 percent in 1997. Today this situation continues, as U.S. 
aerospace industries are being severely challenged by the European 
aerospace industry, which is garnering a significant portion of the 
U.S. market as well as of the world market.
    In the past, large investments in evolutionary significant-risk 
technologies, such as the transition to commercial jet aviation, have 
been accomplished through a partnering among industry, NASA (and its 
predecessor NACA), DOD and the FAA. These partnerships have proven to 
be an efficient means for maintaining the past U.S. lead in 
aeronautical technology with concomitant economic benefits. We are not 
suggesting that the government share the cost of specific commercial 
aviation developments, as has been the case in other countries. Rather, 
we recommend that NASA undertake high-risk, potentially high-payoff 
R&D, which then can become the basis for commercial enterprises. In our 
view, NASA must resume its intellectual and financial support for 
partnerships that sustain mid- and long-term innovative basic research 
in core technologies (fluids, structures, materials) applicable not 
only to spacecraft, but also to future fixed and rotary wing vehicles. 
Partnerships between government and the private sector are essential to 
meeting these growing challenges.
    Turning the Aeronautics Blueprint into reality will require 
sustained partnerships between NASA, the Department of Defense, 
Department of Transportation, and the Federal Aviation Administration 
to develop a national aviation research and technology policy to plan 
and provide adequate resources that will ensure sustained U.S. world 
leadership in civil and military aviation.
    For the past 75 years American universities have provided creative, 
skilled engineers for national defense and aeronautical commerce. The 
development of an efficient global air transportation system has been 
driven by American engineering. Students who have come from American 
university campuses to industrial and governmental facilities have been 
the source of an undisputed American commercial success; sales of 
aircraft and aircraft equipment accounts for one of the largest single 
positive balance of trade with other nations.
    The nation is experiencing a diminishing pipeline of qualified 
aeronautical engineering students at both the undergraduate and 
graduate levels; young engineers and scientists do not consider 
aerospace a growth industry. Therefore, they are pursuing careers in 
life sciences, bioengineering, and other growth fields. We are very 
concerned about this issue and look to NASA leadership to make a course 
correction for the future.
    In recent testimony before the Commission, Dr. John Marburger, the 
Director of the Office of Science and Technology Policy stated ``the 
President wants to make sure that U.S. aerospace leadership continues 
in the 21st century,'' and ``Improvements in homeland defense, national 
defense and civil aviation require the same core suite of technologies. 
We can enhance the security while creating greater mobility for 
America. This is what the Administration wants and what our country 
needs.''
    Aviation and aerospace are vital to the U.S.' future. If Americans 
fail to support aeronautics and aviation-related research, there will 
be no next generation of professionals to solve the obvious looming 
problems and create products the world will demand. And without that, 
the U.S. puts at risk a linchpin of its economy, national security and 
quality of life.
Conclusions
    Air transportation is a key ingredient to economic growth and 
prosperity. Therefore, the decline of U.S. global market share in air 
transportation products and services over the past two decades, 
combined with European determination to become the dominant supplier of 
such products and services within the next two decades, should be of 
major concern to U.S. policy makers.
    The need for adequate funding for NASA and DOD aviation R&T must be 
addressed, not only with respect to the fiscal year 2003 budget, but 
also--and even more significantly--with respect to the preservation of 
U.S. capability and leadership in long term aeronautics research and 
technology.
    It is essential that the aeronautics research and technology 
programs at key agencies (NASA, DOD and FAA) continue to be clearly 
identified and defined as a separate line item, as required by Congress 
in the fiscal year 2002 budget.
    A fully coordinated National Aviation R&T policy--combining the 
efforts of NASA, DOD, DOT, and FAA--is essential to plan and provide 
adequate resources that will ensure sustained U.S. world leadership in 
civil and military aviation.
                 environmental protection agency (epa)
    The Environmental Protection Agency (EPA) Task Force of the ASME 
Environmental Engineering Division (EED) of the Council on Engineering, 
is pleased to have this opportunity to provide comments on the fiscal 
year 2003 budget request for the Environmental Protection Agency (EPA).
    Sound science is one of the key underpinnings of credible and 
defensible policy formulation and decision making in environmental 
management. The Task Force believes that the EPA's risk-based approach, 
which engages all interested parties (i.e., ``stakeholders'') provides 
a good framework for the formulation of environmental policies. We 
support EPA's continuing effort to implement a research program aimed 
at expanding the role, and improving the state-of-the-art, of 
environmental science as it pertains to decision-making and policy 
formulation. Overall, the requested increase in fiscal year 2003 budget 
over fiscal year 2002 levels in most key R&D areas contributing to 
environmental decision-making is fully supported by the Task Force.
    One area that the Task Force believes deserve more attention is the 
development and implementation of a decision-making framework that 
integrates scientific information with socio-economic values and 
issues. The continuous focus on strong, fundamental scientific research 
is essential; however, increased understanding is needed in the non-
scientific (e.g. social/societal) aspects of risk-based decision-
making. We recommend that efforts in the latter should commence.
    The Task Force is encouraged by the fact that the Science Advisory 
Board's (SAB) budget will remain fundamentally steady from fiscal year 
2002 to 2003. The SAB plays a key role in the prioritization of EPA's 
research activities and addressing key emerging issues. We believe 
that, given the SAB's pivotal role, the funding for SAB could be 
increased.
    Specific, focused research areas representing significant 
challenges to the environment and human health have been identified in 
the fiscal year 2003 budget request. We strongly support efforts in 
these research thrust areas due to the potential impact that may be 
generated by the substantial resources involved.
    Climate Change Research.--The Task Force believes that the EPA 
should commit more resources to the problem of greenhouse gas emissions 
and climate change. The fiscal year 2003 appropriations request for 
climate change research is $21.7M, a slight increase of $0.4M (1.9 
percent) over the fiscal year 2002 appropriation. Climate change is an 
issue of global significance. With the U.S. not participating in the 
Kyoto framework regarding climate change, we must ensure that we 
maintain and advance our scientific credibility and technological 
leadership in climate change research and in the development of 
technologies that reduce or eliminate the emissions associated with 
climate change. It is imperative that the complex interplay of 
increased energy demand and the environmental impacts that this 
produces be addressed on a scientific and technological basis. We 
strongly recommend increased funding in this area, which we project to 
be one of the most significant environmental issues for the next decade 
or more.
    Particulate Matter Research.--The Task Force supports continued 
research on the formation, migration, and mitigation of fine 
particulate matter (particulate matter smaller than 2.5 micrometers, 
termed PM2.5). These particles, primarily from combustion sources, have 
been shown to have significant acute and chronic impact on human 
health. The appropriation requested, $66.6M, is a slight increase (1.8 
percent) from the fiscal year 2002 enacted budget of $65.7M. We believe 
that EPA's commitment to ongoing research to address this significant 
health concern is essential.
    Tropospheric Ozone Research.--The Task Force supports continued 
research into the formation and mitigation of troposhperic (ground-
level) ozone. Repeated exposure to ozone pollution can cause permanent 
damage to the lungs, even at low levels. Ground-level ozone damages 
plant life and is responsible for $500 million in reduced crop 
production in the United States each year. The appropriation requested, 
$6.8M, is a 4.6 percent increase from the fiscal year 2002 enacted 
budget of $6.5M. We support EPA's commitment to ongoing research to 
address this costly environmental and health problem.
    Air Toxics Research.--The Task Force supports continued research in 
the identification, reduction, and mitigation of air toxics. Humans and 
animals can experience health problems when exposed to sufficient 
concentrations of air toxics over time. Numerous studies conclude that 
deposited air toxics are contributing to birth defects, reproductive 
failure, and disease. Persistent toxic air pollutants are of particular 
concern in aquatic ecosystems because the pollutants accumulate in 
sediments and may bioaccumulate in tissues of animals at the top of the 
food chain to concentrations many times higher than in the water or 
air. The fiscal year 2003 appropriation request for Air Toxics 
Research, $19.8M, is a 4.8 percent increase from the fiscal year 2002 
enacted budget of $18.1M. We support EPA's commitment to ongoing 
research to reduce the formation of air toxics.
    Pollution Prevention.--The Task Force strongly supports EPA's 
commitment to pollution prevention research and strategies. The 
appropriation requested, $25.1M, represents a significant increase 
(16.2 percent) from the fiscal year 2002 enacted budget of $21.6M. 
However, the fiscal year 2003 request is still substantially lower (-
8.4 percent) than the fiscal year 2000 enacted budget of $27.4M. 
Pollution prevention technologies can provide both environmental and 
economical benefits while also avoiding the damage to human health and 
the ecosystem that arises from the release of toxic and hazardous 
substances. We urge EPA to increase funding for pollution prevention to 
at least fiscal year 2000 levels and to maintain strong support for 
this critical area of research.
    Watershed and Drinking Water Research.--The Task Force remains 
concerned regarding overall Federal funding necessary to protect 
watersheds and drinking water supplies. Watershed protection comprises 
a key issue, especially since severe drought conditions exist in both 
Eastern and Western states. Competing needs in agriculture, protection 
of endangered species, and water rights represent just a few of these 
issues. The President's fiscal year 2003 budget proposal for EPA in the 
areas of ecosystem protection remains essentially flat from fiscal year 
2002 levels at $38M. We are encouraged by the proposed increase (18.6 
percent, to $38.3M) in the Environmental Monitoring and Assessment 
Program (EMAP), designed to provide watershed data for key inland 
waterways, and by a proposed increase of 8.6 percent, to $49.5M in 
funding for safe drinking water research. While EPA's proposed research 
program addresses important needs, we are concerned that proposed 
funding reductions for collaborative Federal agencies (USGS, USACE, 
USDA) pose significant risks to improvement of the technical basis of 
watershed protection. We suggest that the overall Federal budget for 
watershed research be considered as a whole, and urge increased funding 
over the overall levels proposed for fiscal year 2003.
    Hazardous Waste Research/Superfund Innovative Technology 
Research.--Hazardous waste cleanup, especially at Federal sites (i.e., 
Department of Defense and Department of Energy facilities) represents a 
significant challenge for the EPA. Many of these challenges relate to 
gaps in the scientific basis for risk assessment strategies and ongoing 
needs for both policy changes and technology advances to achieve 
cleanup at complex sites. For example, many hazardous waste streams 
resulting from decades of nuclear weapons research lack identified 
disposal methods. Through partnership agreements with industry and 
other governmental entities, EPA traditionally leverages its own 
research efforts. The Task Force supports these collaborative efforts, 
but further recommends a more aggressive approach, such that the Agency 
assumes a leadership role in the resolution of hazardous (including 
radioactive) waste disposition. Target areas for this recommendation 
are provided within the specific Agency funding objectives.
    The budget request for hazardous waste research (science and 
technology) for fiscal year 2003 is $9.6M, including continuation of 
SITE (Superfund Innovative Technology Evaluation). The Task Force 
supports these efforts, and recommends that the Agency continue to 
leverage its own research funding to support related efforts at the 
State and local level. We also note, with approval, that EPA recognizes 
the need to reconsider policy decisions in the Resource Conservation 
and Reclamation Act in view of recent technical advances or identified 
needs. The Agency also proposes implementation of National Academy of 
Sciences recommendations in contaminated sediment remediation. In view 
of potential funding reductions for the USGS and USACE, measurable 
progress in this effort remains at risk for 2003.
    The EPA's environmental education program has been transferred to 
the National Science Foundation (NSF) for fiscal year 2003. We are 
concerned with regard to the possible adverse impact this transfer 
could have on environmental education. In particular, the STAR 
Fellowship Program has been eliminated in the EPA's fiscal year 2003 
budget. In the past, this program provided a funding source for 
graduate students interested in the solution of environmental problems 
and allowed them to undertake research in areas directly relevant to 
EPA's mission and objectives. It is the opinion of the Task Force that 
EPA has a vested interest in environmental education and therefore EPA 
would be a better steward of the environmental education initiatives.
    The mechanism must be in place to train substantial numbers of 
graduate students in areas relevant to EPA's core research areas if the 
Agency is to maintain or strengthen its Science and Technology base. 
Sound public policy requires a strong scientific and technological 
basis. The overall decline in funding for physical sciences and 
engineering within the Federal budget over the past decade must be 
reversed in order to assure that the complex problems associated with 
issues such as environmental contamination and public health can be 
solved. In this vein, the Task Force recommends that extramural 
research funding, such as the STAR Grants Program, allocated to the EPA 
should increase, concomitant with the leadership role the Agency must 
play. Furthermore, the research portion of the Federal budget is the 
largest share of support for U.S. graduate students in fundamental 
science and engineering disciplines, through both fellowships and 
research grants to Universities. In areas such as environmental science 
and national defense, a broad view across agencies, rather than a 
programmatic view, is necessary to ensure sufficient graduates and 
continuing quality in graduate programs to solve science and technology 
problems of the future. The Task Force encourages lawmakers to consider 
not only current programmatic needs, but also the number of graduate 
students to be funded by Federal programs in particular science and 
engineering disciplines, as vital to ensuring future success in 
addressing national science and technology issues.
Conclusions
    Because of the complex, multidisciplinary nature of environmental 
issues, it is imperative that EPA base its actions on sound science. 
The change from a command-style regulatory/compliance model to a 
participatory risk-based model only heightens the need for a keen 
awareness of the environmental science in making policy decisions and 
recommendations. A strong R&D program is essential for the ongoing 
development of science- based decision-making. The Task Force supports:
  --Strong input and involvement of the Science Advisory Board in 
        helping set EPA research priorities;
  --Focusing on national environmental priorities that impact human 
        health, ecosystem health, and climate, particularly particulate 
        matter, greenhouse gases, and water quality;
  --Education of future environmental professionals, and building 
        interdisciplinary teams through the support of extramurally-
        funded research; and
  --Building a strong science and technology base, both within EPA, and 
        through partnerships with industry and other Federal and State 
        government agencies.
    These collective comments represent the views of the NSF Task Force 
of the Council on Education, the Aviation Research and Technology Task 
Force of the Aerospace Division and the Environmental Protection Agency 
(EPA) Task Force of the Environmental Engineering Division, of the 
Council of Engineering, of the ASME International and are not 
necessarily a position of the Society as a whole.
                                 ______
                                 

 Prepared Statement of the American Thoracic Society and the American 
                            Lung Association

    The American Thoracic Society (ATS) and the American Lung 
Association are pleased to present our recommendations for programs in 
the Environmental Protection Agency and the Department of Veterans 
Affairs medical and prosthetic research program.
    The American Thoracic Society founded in 1905, in an independently 
incorporated, international education and scientific society which 
focuses on respiratory and critical care medicine. The Society's 
members help prevent and fight respiratory disease around the globe 
through research, education, patient care, and advocacy. The Society's 
long-range goal is to decrease morbidity and mortality from disorders 
and life-threatening acute illnesses.
    The American Lung Association, established in 1904, is the nations 
oldest voluntary health association. The ALA is committed to improving 
the nation's lung-health through programs of education, community 
service, advocacy and research.
    The ATS and the ATS are united in our support for programs that 
protect the lung-health of the American public.
    Lung disease is a significant health problem in the U.S. Lung 
disease is the third leading cause of death in the U.S.--responsible 
for one in every seven deaths. More that 25 million Americans suffer 
from a chronic lung disease. Lung diseases cost the U.S. economy an 
estimated $89.1 billion annually. Lung disease represent a spectrum of 
chronic and acute conditions that interfere with the lung's ability to 
extract oxygen from the atmosphere, protect against environmental and 
biological assaults, and regulate a number of vital metabolic 
processes. Lung diseases include: chronic obstructive pulmonary disease 
(COPD--which includes emphysema and chronic bronchitis) lung cancer, 
tuberculosis, pneumonia, influenza, sleep-disordered breathing, 
pediatric lung diseases, occupational lung diseases, sarcoidosis, 
asthma and acute lung injury.
    Nearly all lung diseases are impacted by air pollution. How well or 
poorly our lungs perform is contingent on the quality of air around us, 
making the impact of air pollution inescapable. Air pollution remains a 
primary contributor to a high prevalence of respiratory diseases.
    For nearly 40 years, the American Thoracic Society and the American 
Lung Association have conducted scientific, public health and 
educational programs to fight air pollution and to improve the quality 
of the air we breathe. We remain strong supporters of the Clean Air Act 
and its amendments. We can attest to the significant impact that the 
Clean Air Act has had in improving the quality of our nation's air.
    However, much remains to be done. It is estimated that millions 
American's live in counties that do not meet current Clean Air Act 
health-standards, including our nation's Capitol. The American Lung 
Association State of the Air 2001 report estimates that 141 million 
Americans live in areas that expose them to unsafe levels of ozone. 
Millions live in areas that experience unsafe levels of particulate air 
pollution.
    Research has shown that air pollution is causing the premature 
death of literally thousands of people due to complications from 
exposure to air pollution.
                    environmental protection agency
Federal Enforcement Funding
    The ATS and the ALA are extremely concerned that the Administration 
has proposed dramatic reductions in EPA federal enforcement budget. We 
are extremely concerned that the proposed reductions in the federal 
enforcement program are a calculated attempt to weaken enforcement 
efforts of the Clean Air Act. Without strong federal leadership in the 
EPA enforcement, increases in funding for State, Tribal and local 
government enforcement efforts will ineffective and will ultimately 
erode recent gains in the quality of our nations air.
    The American Thoracic Society and the American Lung Association 
strongly encourage the Subcommittee to reject the Administration's 
proposed cuts to EPA Clean Air federal enforcement budget.
NAAQS Research
    The American Thoracic Society and the American Lung Association 
strongly supports the EPA National Ambient Air Quality Standards 
(NAAQS) research program. The NAAQS research program provides value 
information the health effects of exposure to polluted air. The NAAQS 
also helps develop the monitoring and pollution control technology that 
will ultimately lead to cleaner air of all of America.
    The American Thoracic Society and the American Lung Association 
recommend a $50 million increase in the EPA NAAQS research program.
Fine Particulate Matter and Ozone
    Recent studies have confirmed the significant adverse impact that 
existing levels of smog and fine particles have on health. Two recent 
studies have made clear the need to proceed with enforcement of the 
health-based Clean Air standard established 1997. A study published in 
the February 2, 2002 issue of Lancet showed a relationship between 
exposure to high levels of ozone and the development of asthma in 
children.\1\ A second study published in the March 6, 2002 edition of 
the Journal of the American Medical Association establishes a 
correlation between exposure to fine particulate air pollution and 
increased mortality from lung cancer and cardiopulmonary diseases.\2\ 
Despite the growing body of evident that air pollution plays a direct 
role in causing lung disease, the EPA has yet to implement the new more 
protective standards finalized in July 1997.
---------------------------------------------------------------------------
    \1\ R. McConnell et. al, Asthma in Exercising Children Exposed to 
Ozone: A Cohort Study, Lancet, Feb. 2, 2002, p.386-391.
    \2\ C. Pope, et.al., Lung Caner, Cardiopulmonary Mortality, and 
Lung-term Exposure to Fine Particulate Air Pollution, JAMA, March 6, 
2002, p. 1132-1141.
---------------------------------------------------------------------------
    The American Thoracic Society and the American Lung Association 
urge the Subcommittee to oppose any amendments, which would impair the 
expeditious implementation and enforcement of these standards.
New Source Review
    We are extremely concerned about the Administration initiatives to 
weaken the Clean Air Act and undermine the enforcement of the law. In 
particular, we are concerned about the effort to undercut the Clean Air 
Act's New Source Review Program. New Source Review (NSR) is a simple 
concept, made extremely complicated by those who want to avoid 
complying with the law. Simply stated, the NSR program requires 
facilities that undergo modification that significantly increase 
emissions, to install pollution control equipment. If the facility does 
not increase pollution, NSR does not apply. Do not buy the rhetoric. 
This program only applies when pollution increases. The NSR program is 
reducing pollution that is saving lives this year and every year. 
Legislative proposals promising greater air pollution reductions are no 
substitute for NSR. Such proposals must be implemented in concert with 
NSR, just as the current acid rain reduction program is. The public 
demands cleaner air and this program provides substantial public health 
benefits.
    The American Thoracic Society and American Lung Association urge 
the Subcommittee to resist efforts by the Administration to weaken the 
implementation or enforcement of the EPA New Source Review program.
Tier 2 and Heavy Duty Vehicles Standards
    In 1999 the Environmental Protection Agency established new 
tailpipe and gasoline standards for cars, light trucks, minivans and 
SUVs. The EPA also established new limits on sulfur in gasoline. When 
fully implemented, this program would be the equivalent of taking 164 
million cars off the road. EPA calculates that the final rule will 
prevent as many as 4,300 deaths, more than 10,000 cases of chronic and 
acute bronchitis, and tens of thousands respiratory problems a year.
    In 2000, EPA established new emission standards for heavy-duty 
vehicles and diesel fuel. These standard provide dramatic pollution 
reduction from heavy-duty vehicles. As a result of this program, each 
new truck and bus will be more than 90 percent cleaner than current 
models. The clean air impact of this program will be dramatic when 
fully implemented. This program will provide annual emission reductions 
equivalent to removing the pollution from more than 90 percent of 
today's trucks and buses, or about 13 million trucks and buses.
    The American Thoracic Society and the American Lung Association 
encourage the Subcommittee to provide EPA the resources necessary to 
proceed with implementation and enforcement of the Tier 2 and Heavy-
Duty Vehicle Standards.
               va medical and prosthetic research program
    The ATS/ALA recommends $460 million for the VA medical and 
prosthetic research program for fiscal year 2003. The fiscal year 2003 
2003 recommendations build on the $20 million increase provided for the 
current year. The Administration's fiscal year 2003 budget request for 
a $38 million (10 percent) increase in research program dollars is 
notable for being the first time in many years that an administration 
has proposed funding sufficient to maintain VA's current level of 
effort in advancing treatments for conditions particularly prevalent in 
the veteran population including prostate chronic obstructive lung 
disease (COPD) lung cancer, pneumonia and other pulmonary related 
diseases that impact the America's veterans. We applaud the 
Administration and Department of Veterans Affairs Secretary Anthony J. 
Principi for recognizing the invaluable contribution VA research makes 
to delivering high quality care for veterans and toward improving the 
health of veterans and the nation.
    The American Thoracic Society and the American Lung Association 
recommend the Subcommittee provide at least 4460 million for the VA 
medical and prosthetic research program.
    Please note that the Administration's budget request for a $38 
million increase for VA research includes a shift from OPM to VA of $15 
million in accrued government health and retirement benefit funds. 
Consequently, the Administration's budget proposes a $23 million (6 
percent) increase in research program funds plus $15 million in federal 
employee benefit expenses previously paid by an OPM account, for a 
total increase of $38 million (10 percent) over current year funding of 
$371 million. We strongly recommend that the entire $38 million 
increase be allocated to VA research's programmatic needs and that 
accrued benefits continue to be paid out of the OPM trust fund.
    However, even a $38 million increase would not allow VA to address 
all of the opportunities it has to improve care for veterans, nor to 
meet the new challenges presented by the tragedies of September 11 and 
subsequent events. We strongly encourage the VA-HUD Subcommittee to 
recommend an fiscal year 2003 appropriation of at least $460 million 
for the VA medical and prosthetics research program. This represents 
growth in program dollars of $89 million (24 percent).
Four core needs justify the ATS/ALA recommendation of $460 million:
    Investments in investigator-initiated research projects at the VA 
have led to an explosion of knowledge that promises to advance our 
knowledge of disease and unlock new strategies for prevention, 
treatment and cures. Attachment 1 is a list of just a few of VA's 
recent achievements and initiatives. However, many health challenges 
still confront the veteran community. Additional funding is needed to 
take advantage of the burgeoning scientific opportunities and to 
improve quality of life for our nation's veterans as well as the 
general public. We urge the Committee to support additional funding for 
the following research priority areas identified by the VA for fiscal 
year 2003:
  --Special Populations.--VA would expand research in quality of care, 
        community access and restoration of function to achieve greater 
        understanding of existing racial, ethnic and gender disparities 
        in health care.
  --Micro Technology.--In the area of low vision, work in retinal 
        prostheses is an emerging science and may restore sight lost as 
        a result of a variety of disorders including age-related 
        macular degeneration and retinal pigmentosa.
  --Patient Outcomes in Rehabilitative Care.--Specific areas of 
        emphasis include long-term care strategies to enhance patients' 
        independence and activities of daily life, consequences of 
        community reintegration and the impact of assistive technology 
        on quality and functionality of life.
  --Chronic Disease Management.--VA is proposing two major initiatives 
        in comparing clinical efficacy of (1) vascular surgery 
        conducted on and off cardiopulmonary bypass machines, and (2) 
        open versus endovascular surgery for abdominal aortic 
        aneurysms. The ATS/ALA are working with the VA to expand the 
        Chronic Disease Management concept to include COPD--a major 
        cause of morbidity and morality in the veteran's population.
    The complexity of research combined with biomedical research 
inflation has increased the costs of research. The average cost of each 
VA research project is now $150,000, a 9 percent increase in just 2 
years. As a result, VA requires an increase of at least $15 million 
just to maintain a stable number of programs.
    In response to the events of September 11, VA seeks to establish a 
research portfolio to address the threats of bio-terrorism. This 
objective is consistent with VA's statutory obligation to provide 
medical back-up services in times of national emergencies. VA has an 
established history of research accomplishments in the areas of 
infectious diseases and immunology, including vaccine development. The 
laboratories of VA research scientists are disseminated nationwide, and 
are affiliated with top-flight universities. VA research provides a 
unique national resource that can be readily adapted and quickly 
mobilized in response to diverse biological threats.
    To meet this emerging challenge, consistent with H.R. 3253, the 
National Medical Emergency Medical Preparedness Act of 2001, we 
strongly support VA's proposal to establish four new centers of 
research excellence focusing on fundamental issues critical for 
responding to chemical, biological and radiological threats to public 
safety. The targeted research portfolio would include pathogen 
detection, disease diagnosis and treatment, protection, and vaccine 
development. The mission of these centers would also encompass the 
evaluation and management of illnesses consequent to military service, 
especially in our current conflict.
    VA's career development programs are a national resource for 
training the next generation of clinician scientists, those doctors who 
treat patients and address questions that have a direct impact on 
patient care. Additional funding is needed to expand this program in 
order to address the growing national shortage of clinician-
investigators.
    In 1997, NIH conducted site visits of six VA research facilities 
and concluded that, ``VA has had increasing difficulty in providing 
sufficient resources via its congressional appropriation to 
satisfactorily fund the infrastructure necessary to support research at 
the VAMCs.'' It is our understanding that VA has made no significant, 
centrally administered investment in its existing research facilities 
since this finding. Ventilation, electrical supply and plumbing appear 
frequently on lists of needed upgrades along with space 
reconfiguration. Substandard facilities make VA a less attractive 
partner in research collaborations with affiliated universities; reduce 
VA's ability to leverage the R&D appropriation with other federal and 
private sector funding; and make it difficult to attract cutting edge 
researchers, both clinician investigators and laboratory scientists, to 
careers in VA. Facility R&D Committees regularly disapprove projects 
for funding consideration because the facility does not have the 
necessary infrastructure and has little prospect of acquiring it.
    Under the current system, research must compete with other medical 
facility and clinical needs for basic infrastructure and physical plant 
support. Unfortunately, the minor construction appropriation is 
chronically inadequate to meet facility needs for clinical improvements 
much less research upgrades, and year after year the list of urgently 
needed research repairs and upgrades grows longer. VA has identified 18 
sites in urgent need of minor construction funding to upgrade their 
research facilities. These sites plus the many facilities with smaller, 
but no less important needs, provide more than sufficient justification 
for an appropriation of $45 million specifically for research facility 
improvements.
    We recommend that a new funding mechanism, such as a minor 
construction appropriation specifically for research facilities, be 
developed to provide a permanent, steady stream of resources dedicated 
to upgrading and renovating existing research facilities. State-of-the-
art research requires state-of-the-art facilities.
    Separate from its recommendations for the VA research 
appropriation, ATS/ALA strongly encourage the Committee to address the 
increasingly urgent need for improvements in VA's research facilities 
by providing $45 million to address research facility improvements.
    The America Thoracic Society and the America Lung Association thank 
the Committee for consideration of its views. We look forward to 
working with the Subcommittee to further promote and protect the health 
of the American public.
                                 ______
                                 

         Prepared Statement the American Psychological Society

    Madam Chair, Members of the Committee: Thank you for this 
opportunity to present the views of the American Psychological Society 
(APS) on the fiscal year 2003 appropriations of the National Science 
Foundation (NSF). I am Alan Kraut, Executive Director of APS. We are a 
15,000-member organization of scientists and academics, most of whom 
are located in colleges and universities across the country. Many 
members of the American Psychological Society are supported by the NSF, 
and much basic research in our field could not exist without NSF 
funding.
    APS strongly supports the Coalition for National Science Funding's 
recommendation of $5.5 billion for the National Science Foundation in 
fiscal year 2003. This would be a 14.7 percent increase over fiscal 
year 2002.
    Both Congress and the Administration have expressed a high degree 
of confidence in NSF's mission and its efficient management of 
resources. As the only government agency to receive a ``green light'' 
rating from the Office of Management and Budget (OMB) for financial 
management in the President's budget, NSF has proven that this would be 
an investment that pays off for Congress and America. OMB's praise did 
not end there--its director, Mitch Daniels, added last November that 
``The National Science Foundation is one of the true centers of 
excellence in this government It has supported eight of the 12 most 
recent Nobel Prize awards earned by Americans at some point in their 
careers. Programs like these. . . deserve to be singled out, deserve to 
be fortified and strengthened.''
    More recently, the House Budget Committee proposed an increase of 
11 percent for NSF in the fiscal year 2003 budget resolution passed on 
March 13th. Chairman Boehlert's assessment, that ``the federal 
investment in science and technology is absolutely vital to our 
nation's economic stability and national security,'' could not be more 
accurate. However, it should be noted that $76 million of this increase 
is due to the transfer into NSF of three programs formerly operated run 
by other agencies.
    The increase that you and your colleagues in the Senate provided 
for NSF in fiscal year 2002, and the increase that we are recommending 
in fiscal year 2003, are important steps in offsetting the comparative 
under-funding that has characterized NSF's budget in the past several 
years. The scientific community is grateful for your support and it is 
our hope that you will continue to approve the much-needed expansion of 
NSF's budget.
    Within the NSF budget, we ask the Committee to continue its history 
of support for behavioral and social science research at NSF. This 
Committee was instrumental in encouraging NSF to establish its Social, 
Behavioral, and Economic Sciences (SBE) Directorate a decade ago, and 
over the years has encouraged many of the initiatives coming out of 
that directorate. The fiscal year 2003 budget request to Congress 
contains a 15.9 percent increase for SBE as a whole, and an 11.6 
percent increase in the Behavioral and Cognitive Science program.
    These increases reflect the high regard in which NSF holds these 
fields. For the first time at NSF, the budget calls for funding of a 
Foundation-wide priority area in the Social, Behavioral and Economic 
Sciences, which will explore the complex interactions between society 
and technology. NSF's budget recommendation calls for $10 million in 
``seed money'', with this goal in mind: for our society to take greater 
advantage of the technology available to it, and to prepare for further 
advances. There will be an emphasis on studies of decision-making, 
cognition, and learning. The money is there, and the time is now.
    Before addressing specific activities of the SBE directorate, I 
first want to provide a brief overview of basic psychological research, 
to give you an idea of the scope and breadth of the field that I 
represent.
    An Overview of Basic Psychological Research: Programs and 
initiatives that involve psychological science are our best chance to 
solve the enigma that has perplexed us for so long: How does the human 
mind work and develop? APS members include thousands of scientists who 
conduct basic research in areas such as learning, cognition, and 
memory, and the linked mechanisms of how we process information through 
visual and auditory perception. Others study decision-making and 
judgment; mathematical reasoning; language development; the 
developmental origins of behavior; and the impact of individual, 
environmental and social factors in behavior. The basic psychological 
research conducted by APS members has implications for a wide range of 
applications, including designing technology that incorporates the 
perceptual and cognitive functioning of humans; teaching math to 
children; improving learning through the use of technology; developing 
more effective hearing aids and speech recognition machines; increasing 
workforce productivity; and ameliorating social problems such as 
prejudice or violence. While this is a diverse range of topics, all of 
these areas of research are bound together by a simple notion: that 
understanding the human mind, brain, and behavior is crucial to 
maximizing human potential. That places these pursuits squarely at the 
forefront of several of the most pressing issues facing the Nation, 
this Congress, and the Administration.
    Progress and investments in psychological science will not simply 
lead us to a better understanding of how humans think, decide, 
evaluate, and adapt. It will lead us to revolutionary advances in our 
powers to predict, detect, and prevent. In this time of uncertainty, 
where we can come to rely so heavily on technology to keep us safe and 
confident, we must turn to cognition in order to maximize this 
technology. An understanding of how people process information will 
enable us to design technology and computers that fit our needs and 
make us comfortable when using them. The potential for advances would 
be limitless.
    Turning now to the SBE Directorate, I'd like to highlight some of 
its programs, specifically those cognitive neuroscience, and those in 
child development. These initiatives exemplify SBE's essential 
leadership on the cutting-edge frontiers of research, and they 
illustrate the important work that will only flourish if funded to the 
levels that they deserve.
    NSF's Cognitive Neuroscience Initiative.--Basic behavioral science 
supported by SBE traditionally has included research in cognition, 
perception, language, development, emotion/affect, and social 
psychology. These have been funded primarily through its Division of 
Behavioral and Cognitive Sciences. Theoretical work in behavioral 
science has greatly advanced our understanding of the basic mechanisms 
underlying memory, emotion, learning, and other psychological and 
cognitive processes. Recognizing the potential contributions of 
neuroscience to these and related areas, the directorate has added 
funds to these programs for the express purpose of bringing more 
neuroscience perspectives to bear on these topics to map these 
psychological mechanisms onto the physical dimensions of the brain.
    NSF, with the right support, will have the ability to link advances 
in human thought and behavior to the natural and social sciences. Now, 
with brain imaging and other non-invasive techniques, we are poised to 
confirm and extend these theories through studies of the living brain. 
Scientists from a range of areas will be able to test theories about 
normal brain functioning; assess the behavioral consequences of brain 
damage; and reach new levels of understanding of how the brain develops 
and matures, in terms of both structure and function. NSF is currently 
seeking highly innovative, interdisciplinary proposals aimed at 
advancing the understanding of how the brain supports thought, 
perception, action, social process, and other aspects of behavior.
    One final point on this topic: Investment in new technologies is no 
longer the sole domain of the physical sciences. A stable, long-term 
commitment to the study and development of new technology ensures 
continued advances in all fields, including our own discipline of 
psychological science, which is part of the broader behavioral and 
social science research enterprise. Emerging fields, such as behavioral 
genetics and cognitive neuroscience--which employ the latest in imaging 
and computing technology to unlock the mysteries of the mind and the 
origins of behavior--are examples of where gains in technology are 
necessary if we are to see a return on our investment in science. In 
addition, addressing human factors in the design of technology is 
essential; advances in technology would be severely undermined unless 
we incorporate what we know about perception, learning and memory, and 
other behavior-based processes that people draw on in using technology. 
Advances in science and technology will not only make the U.S. a world 
leader in many arenas, but will also contribute to better homeland 
security and a stronger economy.
    NSF's Children's Research Initiative.--Recognizing that a 
combination of perspectives--cognitive, psychological, social, and 
neural--is needed to fully understand how children develop and how they 
acquire and use knowledge and skills, the SBE directorate will support 
new interdisciplinary research centers that will focus primarily on 
integrating traditionally disparate research disciplines concerned with 
child development. Known as the Children's Research Initiative (CRI), 
this program will bring together such areas as cognitive development, 
cognitive science, developmental psychology, linguistics, neuroscience, 
anthropology, social psychology, sociology, family studies, cross-
cultural research, and environmental psychology, to name only some of 
the relevant disciplines. Basic researchers from these areas will focus 
on problems that cannot be solved through single investigator studies. 
This initiative aims to enhance the content knowledge of the fields 
involved; build an intellectual infrastructure within and among 
disciplines; and build a program of research in relevant aspects of 
developmental, learning, and human sciences.
    One of the CRI's four research centers is the one led by principal 
investigator and psychology researcher Stephen J. Ceci, of Cornell 
University. The Cornell Institute for Research on Children will conduct 
rigorous multi-disciplinary research on issues of significance to 
children and their families. Specifically, the center will commission 
national teams of the nation's most distinguished developmental 
scientists to study policy relevant questions, and to create a 
consensus position for dissemination to the public. Ultimately, this 
project will place science-based information in the hands of Congress 
and other policymakers.
    The two initiatives I just described are in the Division of 
Behavioral and Cognitive Science. SBE's other main component, the 
Division of Social and Economic Sciences, also supports a substantial 
amount of basic psychological science. Examples of research topics 
being addressed in that division include: human dimensions of global 
change, group and individual decision making, risk management, and 
human factors. Research in these areas has the potential to increase 
employee and organizational productivity, improve decision making in 
critical military or civilian emergency situations, and inform the 
public policymaking processes across a range of areas.
    The Science of Learning.--How people think, learn and remember is a 
core area of interest at NSF. Known as the science of learning, this 
field draws from a variety of research topics across psychology, such 
as brain and behavior, learning, memory, perception, social psychology, 
and development. The basic challenge for both the science and education 
communities is this: How can we apply and extend our knowledge of how 
people think, learn and remember to improve education?
    NSF's program has two broad goals: improving our understanding of 
the learning process, and then transferring that understanding into 
application. We have the knowledge base and a critical mass of top-
flight scientists to help solve the educational and learning issues 
that have been identified by the government as high priorities. But 
getting that knowledge into the classroom is going to require a multi-
disciplinary, multi-agency effort. This will be facilitated via 
investigations in human-computer interactions, cognitive psychology, 
cognitive neuroscience, and other activity related to child learning 
and cognitive development. Through the establishment of three or four 
multi-disciplinary Science of Learning Centers, NSF will for the first 
time attempt to focus the full range of science and research onto a 
scientific workforce objective. These centers will also provide a 
research base for the President's Math and Science Partnership.
    I'm pleased to report to the Committee that two recent editions of 
the APS journal Psychological Science in the Public Interest (PSPI) are 
excellent examples of how psychological science can be used to enhance 
the education of our children. One of three scientific journals we 
publish, PSPI presents reports modeled after those generated by the 
National Academy of Sciences. Developed by panels of distinguished 
scientists, our reports focus on issues where psychological science can 
contribute to our understanding of topics of national importance, such 
as education and education research.
    The May 2001 issue of PSPI, entitled ``Does Class Size Matter,'' 
describes what we know about the effects of class size on children's 
learning. Of all the ideas for improving education, few are as simple 
or attractive as reducing the number of pupils per teacher. With its 
uncomplicated appeal, class-size reduction has lately gone from being a 
subject of primarily academic interest to a policy juggernaut. In the 
United States, more than 20 states and the federal government have 
adopted policies aimed at decreasing class sizes, and billions of 
dollars have been spent or committed in the past few years. But those 
policies are based on anecdotal assumptions. The research summarized in 
this report indicates that class size alone is not the only determinant 
of effective learning.
    Similarly, in the November 2001 issue of PSPI, ``How Psychological 
Science Informs the Teaching of Reading,'' the authors examine 
research, theory, and practice relevant to how children learn to read 
English, summarizing research from developmental psychology on 
children's language competency when they enter school and on the nature 
of early reading development. Two inescapable conclusions emerged: (a) 
Mastering the alphabetic principle (Phonics) is essential to becoming 
proficient in the skill of reading, and (b) methods that teach this 
principle are more effective than those that do not. Using whole-
language activities to supplement phonics for instruction does help to 
make reading fun and meaningful for children, but ultimately, phonics 
instruction is critically important because it helps beginning readers 
understand the alphabetic principle and learn new words. Thus, 
elementary-school teachers who make the alphabetic principle explicit 
are most effective in helping their students become skilled, 
independent readers. I'm pleased to provide copies of these reports to 
the Committee. In addition, they are available online at our website: 
www.psychologicalscience.org/journals. You should also know that NSF 
has supported the development and dissemination of PSPI.
    These are just two examples among a range of others that illustrate 
how important the science of learning is when it comes to getting the 
most out of education. We ask this Committee to monitor and support 
NSF's efforts to bring the science of learning to bear on the nation's 
educational needs. Congress has demonstrated that it understands the 
importance of education research by introducing such legislation as HR 
3801, which will provide for education research, and HR 3130, the 
Technology Talent Bill. The expanded budget we recommend for fiscal 
year 2003 will allow NSF to capitalize on the growing momentum 
surrounding this issue both at NSF and in the field. Last year, 
Congress passed the historic ESEA, promising to leave no child behind. 
Using the science of learning and education research to develop 
education will make sure that none are.
    In closing, I want to note that building and sustaining the 
capacity for innovation and discovery in the behavioral and social 
sciences is a core goal of the National Science Foundation. We ask that 
you encourage NSF's efforts in these areas, not just those activities 
I've described here, but the full range of activities supported by the 
SBE directorate and by NSF at large. Your support in fiscal year 2003 
will help NSF lay the groundwork for this long-overdue emphasis on 
these sciences.
    Thank you again for the opportunity to appear before you to present 
our recommendations. I would be pleased to answer questions or provide 
additional information.
                                 ______
                                 

     Prepared Statement of the Association of American Universities

    Madam Chair and Members of the Subcommittee: My name is Nils 
Hasselmo and I am president of the Association of American Universities 
(AAU), which includes 63 of North America's most prominent public and 
private research universities. These universities are among the main 
recipients of research and education grants provided by the National 
Science Foundation (NSF) and the National Aeronautics and Space 
Administration (NASA).
    While policymakers disagree over precisely the right mix of fiscal 
and monetary policy to ensure a continuation of our nation's 
prosperity, many now recognize that continued investment in basic 
scientific research and in the people who do this research is an 
essential catalyst for progress. A study released last year by the 
prestigious Council on Competitiveness, which includes some of our 
nation's leading chief executives in industry and academia, called for 
an increasing commitment to innovation, particularly to Federal 
investments in research and development funding. The study said these 
investments were necessary ``just to maintain the position of the 
United States, much less improve in relative terms.''
    Basic research in each field of science expands the knowledge base 
in that field and, increasingly, creates new opportunities and raises 
new questions that can only be addressed by interdisciplinary research. 
Thus, a thriving research base in many scientific disciplines is 
important to the vitality of them all: research advances in the 
physical sciences, mathematics and engineering are increasingly 
interdependent. There is also growing interdependence between these 
disciplines and the biological and medical sciences. Medical 
technologies such as magnetic resonance imagery, ultrasound, and 
genomic mapping could not have occurred without underlying knowledge in 
biology, physics, mathematics, chemistry and engineering. Continuing 
significant medical advances in our lifetime will require concomitant 
advances in other sciences.
                      national science foundation
    The National Science Foundation (NSF) is at the heart of the 
Federal investment in basic scientific research. Since its founding in 
1950, NSF has had an extraordinary impact on American scientific 
discovery. Despite its small size, it is the only Federal agency with 
responsibility for research and education in all major scientific and 
engineering fields.
    NSF is also widely recognized for excellence in the management of 
Federal funds. Approximately 95 percent of the agency's total budget 
goes directly to support the actual conduct of research and education, 
while less than five percent is spent on administration and management 
at NSF. NSF was the only agency in the entire Federal government to 
receive a ``green light'' for Financial Management in a review 
utilizing the ``traffic light'' grading system by the Treasury 
Department, General Accounting Office and Office of Management and 
Budget. The review was published in the Administration's fiscal year 
2003 budget request. All other agencies were graded either with 
``yellow'' or ``red'' lights.
    Two years ago, congressmen and senators from both parties began to 
pursue the objective of doubling the budget of NSF from its funding 
level in fiscal year 2000 ($3.9 billion) to approximately $8 billion by 
2005. This process began in the fiscal year 2001 appropriation with the 
largest increase that Congress has provided NSF in a single year an 
increase of $519 million, or 13.3 percent, over the fiscal year 2000 
level. Last year, although President Bush had requested an increase of 
only one percent for the Foundation above the fiscal year 2001 
appropriation, the Congress provided an increase of $374 million, or 
8.5 percent. You and Senator Bond played a critical role in securing 
these increases, Madam Chair, and the university community is 
enormously grateful for your support. This year, we believe it is 
critical not to lose the opportunity to build on this strong start, and 
we strongly hope the fiscal year 2003 appropriation will continue this 
effort.
    The Administration has requested $5.036 billion for NSF in the 
fiscal year 2003 NSF budget request. AAU recommends $5.508 billion, an 
increase of $718 million (or 15 percent) above the fiscal year 2002 
appropriation. We suggest that the additional funds, above the fiscal 
year 2002 appropriation, should be devoted to achieving the following 
objectives:
    Advance core programs for research and education.--Presently, 13 
percent of highly rated proposals to NSF are not funded because of 
inadequate resources. High quality NSF research contributes to the 
development of new knowledge and the preparation of the next generation 
of scientists and engineers. NSF education programs contribute to 
improved student learning at all levels in science, engineering and 
mathematics. The proposed increase would provide $220 million to enable 
more highly rated proposals to be funded and to strengthen NSF's 
important education programs.
    Continue supporting key initiatives.--Nanotechnology; 
biocomplexity; information technology research; workforce development 
(including math and science partnerships); mathematics research; and 
social and behavioral sciences have all been identified as fields ripe 
for advances. An increase of $220 million would continue progress in 
these critical areas.
    Increase grant size and duration.--The average NSF grant in the 
year 2001 was for $93,000 and lasted for just under three years. By 
comparison, the average NIH grant in 2000 was for $338,000 and lasted 
for just over four years. Increasing the size and time period of grants 
will enable researchers to concentrate on discovery rather than 
paperwork. Of the proposed increase, $135 million would be devoted to 
increasing grant size and duration.
    Add funding for Major Research Equipment and Facilities 
Construction and Major Research Instrumentation.--Several proposals are 
pending for large-scale research resources that would provide benefits 
not only to the institution or region where the research project is 
located, but also to researchers throughout the United States and the 
world. An increase of $50 million to the Major Research Equipment and 
Facilities Construction program would hasten progress on these 
important capital projects. In fiscal year 2001, the NSF Major Research 
Instrumentation program awarded $75 million, but many worthy 
applications could not be funded. NSF could easily and quickly award an 
additional $50 million for needed research instrumentation in fiscal 
year 2003. If additional funds were made available, this equipment 
(virtually all of which is supplied by American companies) could be 
purchased rapidly from American vendors. Not only would these purchases 
advance important scientific research goals, but they would also 
benefit the domestic economy.
    Assist with Homeland Security and anti-terrorism efforts.--The 
September 11 calamity has greatly increased recognition of the role of 
science and engineering in preventing and/or mitigating future 
disasters. Working closely with other Federal agencies, NSF can enhance 
support for groundbreaking research into information security, 
detection of airborne hazards, structural studies to improve building 
safety, psychological effects of living with terrorism, wireless 
communications, and a broad range of other relevant issues. Of the 
proposed increase, $25 million would support grants in critical areas 
related to the War on Terrorism.
    Increase graduate student stipends.--Providing better compensation 
to graduate students will attract more qualified Americans to science 
and engineering careers, thereby addressing long-term workforce needs. 
With an additional $23 million above the fiscal year 2002 
appropriation, NSF can increase these stipends from $21,500 per year in 
fiscal year 2002 to $25,000 in fiscal year 2003.
            international traffic in arms regulation (itar)
    Universities engaged in space science research have been concerned 
over the past 2 years by Executive Branch and space contractors 
interpretations of the International Traffic in Arms Regulation (ITAR) 
that place increasingly strict restrictions on unclassified, civilian 
research collaborations with foreign-born scientists. Science is an 
international activity, and space science, in particular, has thrived 
through such interactions. Indeed, Congress has encouraged such 
partnerships in the past. Although we recognize that security 
considerations have changed dramatically since September 11, we 
continue to believe that scientists carrying out unclassified research 
on civilian spacecraft do not pose a threat to national security.
    In both the fiscal year 2001 and fiscal year 2002 conference 
reports, the VA-HUD-Independent Agencies Appropriations Subcommittees 
directed the Office of Science and Technology Policy (OSTP) to work 
jointly with other government agencies, including the National Security 
Council, NASA, and the State Department, to expeditiously issue 
clarification of ITAR in order to allow important university 
collaborations and personnel exchanges to continue. A report was issued 
on March 18, and while we have not yet had time to determine whether 
this will adequately address the universities' concerns, we appreciate 
the Subcommittee's support in this area.
             national aeronautics and space administration
    Both the current and former NASA Administrators have publicly 
expressed concern on NASA's ability to continue to attract and retain 
qualified scientists and engineers. Within the next 5 years, one third 
of NASA's workforce will be eligible for retirement. At the same time, 
the pipeline of the next generation of space scientists and engineers 
is declining. The consequence could be an inability to ensure success 
in any challenging future NASA program. In some fields the problem is 
acute, with the major scientists all in their sixties, and limited 
enrollments of graduate students to follow them. In other areas, there 
is expected growth major new initiatives to be undertaken and yet no 
certainty that the required educated workforce will be available.
    The workforce problem is seen in another area as well. Over the 
last decade there has been a growing recognition of the need for 
infusion of new technology to execute the space program, and 
considerable funds to pursue this new technology have been applied. And 
yet new and better technology is only one part of the problem. Unless 
there is an adequate workforce that is well trained, with imagination 
and vigor, the space program cannot succeed. However, NASA's investment 
in producing the required workforce has been minimal.
    The nation's security also depends on a space program, both for 
surveillance and active defense, and the economic impact of space 
communications and remote sensing is large. An educated workforce can 
be seamlessly applied to any and all space applications, for defense or 
for economic growth. Undergraduate education is often not sufficient, 
however. Graduate education, at the Master's and Doctoral level is 
required, and for the graduate training to be most effective, the 
students must participate in forefront research during their graduate 
studies.
    At the inception of the space program, NASA recognized that the 
talent necessary to pursue the science and engineering for the space 
program resided in the universities, and that in universities the 
required future workforce would be developed. NASA invested heavily, in 
infrastructure and capabilities, in research and education, and 
virtually every success that the nation has enjoyed in space can be 
traced back to this investment. This includes scientific discoveries, 
new instrumentation, or simply the graduate student support that 
allowed individuals who have devoted their careers to the pursuit of 
space to be trained.
    These initial investments have run their course. The current aging 
workforce benefited greatly from it, as did the nation, but it is time 
for a new generation to be developed. It is time to invest again in the 
capabilities of the nation's universities to pursue forefront research, 
to have faculty who are leaders in space science and engineering, to 
have students who are well- supported, well-trained, and determined to 
continue this nation's exploration and utilization of space.
    The Administration has requested $8.918 billion for NASA's Science, 
Aeronautics and Technology (SA&T) account in fiscal year 2003. The AAU 
recommends $9.054 billion for these activities. Within the SA&T 
account, the following items are of particular interest to research 
universities.
    Space Science.--AAU supports the Administration's request of 
$3,428.3 billion for the Office of Space Science (OSS). This represents 
a 19 percent increase over fiscal year 2002, although since $210 
million of this is due to the transfer of the Deep Space Network to 
OSS, the net increase is 11.7 percent. Space science missions produce 
basic knowledge about our environment, the solar system, and the 
universe. This information gives us a deeper understanding of the 
history and condition of our world that enables us to make better 
decisions about how to sustain and improve it.
    The most substantial proposed changes in NASA's budget concern 
planetary exploration. The Administration has proposed an unprecedented 
long-term plan for planetary science and exploration. For the first 
time in a decade, the budget provides a real, albeit small, increase in 
Research and Analysis funds. This line has long been a priority of the 
space science community. The request also maintains a vigorous program 
to explore Mars, adds a line (New Frontiers) for moderate-size 
missions, and supports the development of nuclear power and propulsion 
technologies to allow longer-lived landers and more capable space 
missions. The Explorer and Discovery programs, both of which have 
strong university components, would receive increases as well. We 
applaud these developments that augur well for future solar system 
exploration.
    The New Frontiers activity will be competitively selected and, 
according to current guidelines, are restricted to missions concerned 
with origins and the outer solar system. We appreciate the focus on 
competitive selection but suggest that the scientific priorities being 
established by the ongoing National Research Council planetary decadal 
survey be used to guide selections. This program will re-invigorate our 
exploration of the solar system.
    The development of nuclear capabilities should revolutionize the 
type of planetary missions that can be flown a decade hence. We are 
enthusiastic about this revitalization and believe that the support of 
other technologies may also yield significant benefits to the planetary 
program. We caution that these improvements, however, will not be 
available for a decade or more.
    Biological and Physical Research.--Last year, significant cost 
overruns were identified in the International Space Station (ISS). In a 
report released last November, the ISS Management and Cost Evaluation 
Task Force reaffirmed the importance of research as a primary rationale 
for the ISS and emphasized the indispensable role of the ISS life 
science centrifuge facility.
    The quality of the ISS research facilities is a crucial factor in 
determining the value of its scientific program. There is already a 
queue of over one hundred flight investigations waiting their turn for 
access to these on-orbit facilities. These investigations encompass 
five disciplines in the physical sciences in addition to biological and 
biomedical research. Although NASA emphasizes the biomedical research 
associated with crew health maintenance and preservation, a large 
number of investigations address cutting-edge scientific problems of 
fundamental importance, but also with direct application to Earth-based 
technological, industrial, and health issues. Advances in the 
scientific understanding of these issues can be significantly advanced 
through low-gravity experiments.
    Ground-based research is also essential for developing the 
knowledge base and for validating experimental approaches for 
spaceflight experiments. NASA currently funds approximately five 
ground-based investigations for each flight investigation, and hopes to 
eventually reach an eight to ten-to-one ratio to guarantee that the 
highest quality research goes on for further testing on a flight 
platform.
    NASA's Office of Biological and Physical Research (OBPR) currently 
provides multi-year grant support to approximately 450 investigators. 
Last year, OBPR received roughly 430 investigator-initiated grant 
applications. Of this amount, over one-third were judged as meritorious 
and worthy of funding by the peer-review system. However, due to budget 
constraints, less than 20 percent of the submitted proposals were 
funded. Increased funding for OBPR extramural research would permit 
grants to be funded at higher levels for longer periods of time and 
would allow a second review cycle to be added. AAU recommends an 
increase of $100 million to enhance these research opportunities.
    AAU also recommends that the National Space Biomedical Research 
Institute receive $25 million in fiscal year 2003, a $2.5 million 
increase over fiscal year 2002. These two recommended augmentations to 
the budget would increase overall funding for OBPR to $953.8 million.
    Earth Science.--AAU urges that the Earth Science Enterprise (ESE) 
receive an increase equal to inflation. The Administration requested 
$1.64 billion, which is $14 million, or 0.9 percent below the fiscal 
year 2002 level. A 2 percent inflationary increase would be $29.5 
million, raising the total for the office to $1.67 billion. ESE is in 
the midst of deployment of the Earth Observing System (EOS), a set of 
spacecraft and associated interdisciplinary science investigations to 
initiate a long-term data set of key parameters required for the study 
of global climate change. A number of academic institutions and other 
partners are also working with ESE to develop the next generation of 
new instruments and smaller, more capable spacecraft. Increased funding 
would help achieve these goals.
    Space Grant.--The Space Grant College system continues to play an 
important and successful role in workforce development through its 
university programs and its K-12 outreach. Its matching funds result in 
a highly leveraged program. AAU urges Congress to fund the Space Grant 
program at its authorized level of $28 million. The Administration has 
requested $19.1 million for this program in fiscal year 2003, while 
Congress appropriated $24.1 million for it last year.
    Competitive Merit Review.--Finally, NASA's numerous scientific 
achievements are due both to the hard work of agency and university 
scientists and to the agency's use of merit review for allocating 
research funding. We believe that merit review should continue to be 
the method NASA uses to allocate research funds, since this system has 
helped produce the discoveries and advances from which the nation has 
benefited.
    Thank you for your attention to these matters, and for the 
opportunity to provide this testimony.
                                 ______
                                 

 Prepared Statement of the Association of Minority Health Professions 
                                Schools

    Mr. Chairman and members of the subcommittee, thank you for the 
opportunity to express the views of the Association of Minority Health 
Professions Schools (AMHPS).
    I am Dr. John E. Maupin, Jr, President of Meharry Medical College, 
and President of the Association of Minority Health Professions 
Schools. AMHPS is an organization which represents twelve (12) 
historically black health professions schools in the country. Combined, 
our institutions have graduated 50 percent of African-American 
physicians and dentists, 60 percent of all the nation's African-
American pharmacists, and 75 percent of the African-American 
veterinarians.
    AMHPS has two major goals (1) to improve the health status of all 
Americans, especially African-Americans and other minorities; and (2) 
to improve the representation of African-Americans and other minorities 
in the health professions. We are working toward achieving this goal by 
seeking to strengthen our institutions and fortify other programs 
throughout the nation that will improve the role of minorities in the 
provision of health care and research.
            agency for toxic substances and disease registry
    Congress created the Agency for Toxic Substances and Disease 
Registry (ATSDR) to implement the health-related sections of law that 
protect the public from hazardous wastes and environmental spills of 
hazardous substances. The mission of ATSDR is to prevent exposure and 
adverse human health effects and diminished quality of life associated 
with exposure to hazardous substances from waste sites, unplanned 
releases, and other sources of pollution. ATSDR works in partnership 
with Environmental Protection Agency, the Centers for Disease Control 
and Prevention, and the National Institute of Environmental Health 
Sciences to carry out its public health activities.
    ATSDR is performing critical work in the field of environmental and 
toxicological studies that has a profound impact on public health. In 
order to carry out the level of activity that is called for in its 
mission statement, AMHPS recommends an appropriation of $85,000,000 for 
ATSDR in fiscal year 2002, an increase of $6,765,000 over fiscal year 
2002.
   the atsdr/amhps cooperative agreement on environmental health and 
                          toxicology research
    In 1992, ATSDR identified a need for enhanced information on 38 
hazardous substances. Through a cooperative agreement between ATSDR and 
the Minority Health Professions Foundation (MHPF), the historically 
black health professions schools that I represent are engaged in 
research on twelve of these priority hazardous substances. They 
include: Lead; Mercury; Benzene; Cadmium; Benzo (a) pyrene; 
Flouranthene; Trichlorocthylene; Toluene; Zinc; Manganese; Chlordane; 
and Di-n-butylphthalate.
    Mr. Chairman, I would like to express my appreciation to the 
subcommittee for its support again last year of the ATSDR/MHPF 
Cooperative Agreement. The productivity of this research program is 
evidenced by the number of publication and scientific presentations 
made by the funded investigators. To date, more that 55 manuscripts 
reporting the finding of the various research projects have been 
published in peer-reviewed and prestigious scientific journals. These 
journals include: Brain Research, Neurotoxicology, Journal of 
Neurochemistry, and Environmental Health Prospectives.
    Moreover, investigators have made more than 120 presentations at 
national and international scientific meetings, including the annual 
meeting of the Society of Toxicology, the Experimental Biology meeting, 
the International Congress of Toxicology meeting, and the International 
Society of Psyschoneuropharmacology meeting. Finally, the ATSDR/MHPF 
Cooperative Agreement has contributed significantly to the training of 
students in toxicology and environmental health. Annually, more than 30 
students, both graduate and undergraduate, are actively involved in the 
research program.
    Mr. Chairman, MHPF and ATSDR are completing 10 years of successful 
research. We expect to continue with a new cooperative agreement in 
fiscal year 2003, to not only conduct toxicological research, but to 
also engage in health services and health disparity research. For 
fiscal year 2003, we ask that the subcommittee provide $4 million for 
this important research collaboration.
    Thank you very much for the opportunity to present the views of the 
Association of Minority Health Professions Schools. I would be pleased 
to answer any questions that you may have.
                                 ______
                                 

  Prepared Statement of the Aerospace Engineering Division, American 
  Society of Mechanical Engineers; Aerospace Industries Association; 
  American Association of Engineering Societies; American Helicopter 
 Society; American Institute of Aeronautics and Astronautics; American 
Society of Civil Engineers; General Aviation Manufacturers Association; 
    Institute of Electrical and Electronics Engineers-U.S.A.; NASA 
            Aeronautics Support Team; and NASA Alumni League

    In 1947, the American Institute of Biological Sciences was 
federally chartered as a non-profit scientific organization to advance 
research and education in the biological sciences. Today the American 
Institute of Biological Sciences comprises 86 scientific societies with 
a collective membership of over 240,000 scientists in disciplines 
spanning all of biology--from basic to applied, from molecular to 
landscape ecology, from agronomy to zoology. AIBS facilitates 
communication and interactions among biologists, biological societies, 
and biological disciplines in order to serve and advance the interests 
of organismal and integrative biology in the broader scientific 
community and other components of society on issues related to 
research, education, and public policy.
    We appreciate the opportunity to provide testimony on these 
important matters. If we may be of further assistance, please do not 
hesitate to contact Dr. Adrienne Froelich at the AIBS Public Policy for 
further assistance ([email protected] or 202-628-1500 x232).
The need for biological science funding from NSF
    Much has been said about the need for more balance in funding 
between the various scientific disciplines. At a recent House Science 
committee hearing on the future of the NSF budget, several witnesses 
presented charts documenting funding in physical sciences and 
engineering, as compared to the life sciences. While funding for a 
portion of the life sciences, that related to human health, has 
steadily increased in recent years due to increased funding for the 
NIH, funding for the biology of the natural world has not matched that 
pace. The NSF remains the principal federal supporter of academic, non-
medical research in biology and ecology. In the fiscal year 2002 
appropriations, most of NSF's research directorates received increases 
(over fiscal year 2001 appropriations) greater than 8 percent, except 
for the Biology Directorate, which increased by only 4.9 percent from 
fiscal year 2001 to $509 million.
    In many cases, the link between hot issues like West Nile Virus and 
pesticides, and work funded by the biological sciences directorate at 
NSF, may not be immediately obvious. For instance, we have seen 
ridicule of NSF funding for research into the sexual behavior of 
insects, which can lead to the development of non-chemical pest 
control. In fact, one of the earliest Golden Fleece awards targeted a 
research grant entitled ``The Sexual Behavior of the Screw-worm Fly.'' 
Former NSF deputy director Richard Atkinson, in a 1999 talk at UC 
Berkeley, recalled that Sen. William Proxmire, who created the Golden 
Fleece award, got tremendous attention for this particular award. 
However, Atkinson recalled, Proxmire later admitted that the study of 
the sex life of the screw-worm fly had been of major importance in the 
field of non-chemical pest control. (Colloquium Series on the History 
of Science and Technology, University of California at Berkeley, 10 
November 1997, and published in the Proceedings of the American 
Philosophical Society, Vol. 143, No. 3, September 1999).
    Similarly, in 1996 The Conference of the Parties to the Convention 
on Biodiversity (COP) requested a report from the Subsidiary Body on 
Scientific, Technical and Technological Advice (SBSTTA) on ways to 
overcome the shortage of taxonomists available to inventory and 
characterize the world's biodiversity a word that is now in everyday 
usage by the general public. Yet, the Association for Systematics 
Collections (now the Natural Science Collections Alliance) says 
taxonomy is largely outside the world economy. It and reliable 
knowledge about the natural world are taken for granted as a free good 
by governments, resource managers, drug and seed companies, and even by 
many scientists. People want taxonomy, but do not see the connection 
between that need and the need for increased funding at the National 
Science Foundation.
    In our testimony, we address funding levels for NSF's Research and 
Related Activities, with particular emphasis on the Biological Sciences 
directorate and the Geological Sciences directorate. A summary of 
funding requests is below, followed by a detailed explanation of each 
request.
Summary of budget requests
    The American Institute of Biological Sciences requests the 
following items:
  --$5.2 billion for NSF, $4.0 billion of which would be for ``Research 
        and Related Activities,'' as included in the House Budget 
        Resolution;
  --$550 million for the Biology Directorate;
  --$15 million for the National Ecological Observatory Network;
  --$79.2 million for the Biocomplexity in the Environment initiative;
  --$37 million to increase the annual stipend for graduate students 
        from $21,500 to $25,000;
  --$200 million for the Math and Science Partnership program;
  --$185 million for the Learning for the 21st Century Workforce 
        program.
  --Funding for the core programs of the GeoSciences Directorate should 
        be increased at the same rate as other directorates of NSF, 
        independent of any funds that may be transferred from other 
        agencies.
  --AIBS does not support the transfer of programs from NOAA, USGS or 
        EPA. However, should the transfer of Sea Grant to NSF remain in 
        place, we request that it be funded at a minimum of the fiscal 
        year 2002 appropriation of $62.4 million. Likewise, we request 
        the fiscal year 2002 appropriated level for the USGS Toxic 
        Substances Hydrology program, which would be downsized to $10 
        million under the President's budget.
Overall funding for the National Science Foundation
    At the March 2002 House Science Committee hearing on the NSF 
budget, Dr. Stephen Director of the University of Michigan told the 
committee that of the NSF proposals receiving ``Very good'' to 
``Excellent'' reviews, only 56 percent are actually funded. Even more 
disturbing, 14 percent of the proposals receiving an evaluation of 
``Excellent'' were not funded. Dr. Director noted that low funding 
rates ``discourage faculty from submitting good ideas because of the 
low probability of success Success rates below one-third are generally 
viewed as detrimental to encouraging the submission of best ideas, and 
the NSF rate is now below this level.'' He also told the committee that 
one impact of low NSF funding is that researchers are tailoring their 
research programs to meet the needs of more ``mission-oriented'' 
research agencies such as the Department of Defense. In the long-term, 
low funding rates are also influencing career decisions of future young 
scientists. Dr. Irwin Feller from Pennsylvania State University told 
the committee that:
    ``students with talents and aptitudes for research perceive 
research as life on a treadmill, one that constantly requires them to 
run in place to stand still, much less progress. Being at a formative 
period of their career, graduate students are apt to focus on those 
aspects of academic life that involve constantly writing proposals 
rather than the challenge and excitement of finding answers to 
intrinsically and extrinsically rewarding questions. Talented and 
flexible as they are, they opt out of academic careers and indeed 
careers in research in other settings, becoming in many ways productive 
members of society, but also failing to replenish or add to the 
nation's pool of scientific and engineering personnel.''
    While we support the move to double the research budget at NSF, we 
acknowledge that initiating a 5-year doubling effort under the current 
budget scenario may not be possible. However, we believe that a 
substantial increase in funding for core NSF programs is long overdue. 
We support the House Budget Resolution funding levels for the National 
Science Foundation, which would provide $5.2 billion for the agency, 
$4.0 billion of which would be for NSF's ``Research and Related 
Activities''. This represents an 11.1 percent increase in the major 
grant programs, but assumes the inclusion of the programmatic transfers 
included in the President's budget. AIBS does not support the transfer 
of these programs and respectfully requests that the entire 11.1 
percent increase in funding for NSF's grant programs be distributed 
equally among the existing, core programs for each directorate.
Biological Sciences Directorate
    Advances in understanding the biology of the natural world are 
dependent on advances in each of the disciplines represented by our 
member societies. To provide an example, the field of parasitology is a 
classic example of the interaction of the many disciplines of biology 
it draws from taxonomy, epidemiology, ecology, wildlife biology, 
genetics, molecular biology, physiology, biochemistry and other 
disciplines and has a wide range of applications. The various 
disciplines of biology are not mutually exclusive and increased funding 
for one sector of the field should not come at the expense of other 
disciplines.
    Advances in ecology and interdisciplinary programs such as 
biocomplexity depend on a foundation of biological studies at the 
organismal level, as well as taxonomy and systematics. Ecological 
theory and large-scale projects enable managers to evaluate impacts of 
various activities on a system, and thus enhances their ability to 
provide useful recommendations regarding policy.
    Traditional, single-organism zoological and botanical studies are 
essential not only to investigators working at larger scales, but to 
natural resource managers who must make decisions with the data that is 
available. While managers use ecological theories to predict impacts of 
human activities, management of threatened and endangered species is 
first dependent on basic biological information for those species 
(e.g., range of occurrence, life span, food habits, reproductive rate). 
Having a foundation of rigorous, peer-reviewed studies on the basic 
biology of those species is essential for agencies tasked with 
determining critical habitat and imposing regulations on activities in 
that area. Unfortunately, managers must make decisions with or without 
quality science to guide their decisions. Decisions made without 
adequate scientific information have proven to be extremely costly, and 
could have been avoided with a better investment in the biological 
research programs funded by the National Science Foundation.
    A high-profile controversy regarding an endangered species 
highlights this point. In late 2000, a lawsuit by environmental groups 
prompted the National Marine Fisheries Service (NMFS) to issue strict 
fishing regulations in habitat used by steller sea lions, an endangered 
species of marine mammal. Acting on the assumption that Alaskan pollock 
was the preferred food source of the mammals, NMFS issued strict 
regulations that severely threatened the nearly $1 billion pollock 
fishery. In March 2002, the Anchorage Daily news reported that 
approximately $80 million of federal funding is being spent to study 
the sea lions to determine the cause of their decline. Hundreds of 
scientists from at least 25 institutions have initiated over 150 
studies on the sea lions in the past 2 years. In one such study, 
scientists have discovered that even where pollock is abundant, sea 
lions forage only on a different species of fish, herring. Thus, 
harvest restrictions on pollock would not aid recovery of steller sea 
lions. This instance highlights that even basic biological studies on 
the feeding habits of a single species are of extremely high value. 
Having that information available before controversies erupt could save 
American taxpayers a substantial amount of money spent on lawsuits.
    In addition to the societal benefit to funding research at the 
organismal level, studies of this type are ideal for smaller 
universities and undergraduate research projects. Organismal studies 
are typically of a shorter duration and smaller spatial scale than 
ecological studies. To attract top talent into the pool of U.S. 
scientists, students must have first-hand experience with what 
scientists do. For students to be involved in all aspects of conducting 
research (hypothesis formation, study design, data collection and 
analysis), there must be funding available for small, short-term 
projects.
    In the fiscal year 2002 appropriations, most of NSF's research 
directorates received increases (over fiscal year 2001 appropriations) 
greater than 8 percent, except for the Biology Directorate (BIO; up 4.9 
percent from fiscal year 2001 to $509 million). It is difficult to 
determine how much funding is necessary for research in the various 
disciplines. However, given the immediate relevance of studies funded 
by NSF-BIO to natural resource management, we believe that BIO should 
receive an increase of at least that received by other directorates in 
fiscal year 2002. Therefore, we request an 8 percent increase in 
funding for the Biology Directorate in fiscal year 2003 to a level of 
approximately $550 million.
Transfer of programs from NOAA, EPA and USGS
    Whatever the merits of the proposed transfers, we are concerned 
that the probable costs have not been adequately considered. These 
changes may have dire effects on these programs. In some cases, the 
effect may be tantamount to termination and valuable research efforts 
will be lost. It can be difficult and costly to rebuild strong 
scientific research programs, if it can be done at all, so it is 
important to assess carefully the costs and benefits of major 
structural changes such as those under consideration by OMB.
    We appreciate the fact that this administration values competitive 
research, and we also agree with Mr. Daniel's view that the National 
Science Foundation has an excellent record of supporting the Nation's 
research. We whole-heartedly support NSF. However, NSF is legislatively 
mandated to fund basic research. Therefore, we question whether NSF is 
the best place for the USGS and Sea Grant. Sea Grant's research agenda 
is based on the needs of marine industry, government, resource managers 
and the public. We question whether NSF can and will fund this kind of 
research. The National Research Program of the USGS Water Resources 
Division, as well as the entire USGS research program, are commonly 
characterized as ``applied'' research. Indeed, it is the very research 
that is needed for management of the quality and quantity of the 
natural resource that is vital to our very existence. We are concerned 
that NSF cannot and will not fund much of the research underway at 
USGS, not because it is not valuable or of high-quality, but because it 
is of a different nature from that typically funded at NSF. Therefore, 
AIBS does not support the transfer of these programs.
    Within the transferred programs, we note that Sea Grant only 
receives $55.8, a 10 percent decrease from its fiscal year 2002 
appropriation. Should the transfer of Sea Grant to NSF remain in place, 
we request that it be funded at a minimum of the fiscal year 2002 
appropriation of $62.4 million. Likewise, we request the fiscal year 
2002 appropriated level for the USGS Toxic Substances Hydrology 
program, which would be downsized to $10 million under the 
administration's budget.
GeoSciences Directorate (GEO) and Ocean Research Funding
    While it appears that GEO will receive a 13.4 percent increase of 
approximately $82 million in fiscal year 2003, $74.0 million of that 
increase is due to the transfer of programs from NOAA, EPA and USGS. 
The remaining $8.0 million represents a mere 1 percent increase in 
funding. We are particularly concerned about the funding level for the 
Ocean Sciences Division, which is slated for an approximate decrease of 
2 percent in funding, notwithstanding transfers of programs from other 
agencies. Combined with the decrease in funding for the Sea Grant 
Program, total funding for ocean science and research would decrease by 
3.5 percent. The decreases in ocean research funding for NSF and Sea 
Grant proposed in the President's budget are in stark contrast to the 
testimony presented before the President's Commission on Ocean Policy, 
which was created through the Oceans Act of 2000. While the Commission 
will not issue its recommendations until next year, numerous credible 
witnesses have testified before the Commission that funding for ocean 
research and education is sorely inadequate. Therefore, we oppose the 
administration's decrease in ocean research funding and respectfully 
request that funding for the core programs of the GeoSciences 
Directorate be increased at the same rate as other directorates of NSF, 
independent of any funds that may be transferred from other agencies.
National Ecological Observatory Network (NEON)
    With NEON, NSF hopes to improve scientific understanding of complex 
ecosystem dynamics and to enhance the ability to predict the effects of 
changes from such trends as climate change. Because of its ultimately 
wide network across the nation, NEON would have the potential to detect 
threats ranging from invasive species to chemical or biological 
terrorist activities. NEON has gone through peer review, with the 
National Science Board recommending its funding. Through its Major 
Research Equipment budget area, NSF is requesting $12 million to launch 
to NEON prototype sites. An additional $3 million for operational 
support of the two prototype sites is included in the Biological 
Sciences Directorate under Biological Infrastructure. AIBS strongly 
supports the administration's total request of $15 million for NEON-
related expenses.
Biocomplexity in the Environment
    The Biocomplexity initiative is designed to respond to the demand 
for new approaches to investigating the interactivity of biota and the 
environment. It will result in more complete understanding of natural 
processes, of human behaviors and decisions in the natural world. The 
Biocomplexity initiative encourages collaboration among investigators 
in multiple fields of science, extending questions of sustainability 
beyond biology to include, among others, mathematicians, social 
scientists and economists. AIBS supports the administration's request 
of $79.2 million for the Biocomplexity in the Environment initiative.
Investing in the future U.S. scientific workforce
    Graduate Student Stipends.--The average starting salary for 
students holding a Bachelor's degree in science or engineering are 
nearly twice the level of current stipends for graduate students. The 
amount of debt incurred by U.S. undergraduates has more than doubled in 
the 1990's. The low level of stipends, combined with the increasing 
burden of debt, acts as a deterrent, limiting the number of students 
choosing to pursue advanced studies. A student's time in graduate 
school will be much more effective if they are not constantly worrying 
about making ends meet. Therefore, we support the administration's 
request for $37 million to increase the annual stipend for graduate 
students from $21,500 to $25,000.
Math and Science Partnership and Learning for the 21st Century 
        Workforce
    AIBS believes that safeguarding the biosphere and promoting 
sustainable global development increasingly depends upon understanding 
the earth's biological interactions. Maintaining the integrity of the 
biosphere therefore depends upon a strong research, education, and 
outreach program with resources adequate to support the increasing 
demand for biological scientists and students, as well as a 
scientifically-literate public. NSF's programs, Math and Science 
Partnership and Learning for the 21st Century Workforce, will result in 
a more scientifically- literate public and will increase the number of 
talented young people entering the U.S. scientific workforce. 
Therefore, we support the administration's request for $200 million for 
the Math and Science Partnership program and $185 million for the 
Learning for the 21st Century Workforce program.
                                 ______
                                 

       Prepared Statement of the Aviation Research and Technology

           the crisis in u.s aviation research and technology
    We are deeply concerned about the lack of a national commitment to 
sustain U.S. leadership in aviation research and technology. While 
public demand for aviation transportation services is expanding, 
federal funding for civil and military aviation research is declining. 
Since 1998, the combined NASA and DOD investment in aeronautics 
research and technology programs has been reduced by one-third, and 
this trend is continuing. Advanced technologies are needed to assure 
public safety and on-time flight schedules. Without continued 
investment in aviation R&T, U.S. market share in aviation products and 
services will decline, as will employment in the nation's aviation 
industry.
    The NASA and DOD aeronautics R&T budgets have been cut dramatically 
over more than a decade, and tens of thousands of skilled workers have 
left the industry. U.S. graduates at the bachelor and master degree 
levels in aerospace engineering and related disciplines have dropped by 
57 percent and 39 percent, and Electronics respectively, since 1990. 
These facts, combined with the fact that the average age of those 
employed in the aerospace industry is in the mid-to-upper 40s and 
climbing, suggest a potentially catastrophic loss of one of the 
nation's most important sources of societalbenefits.
    NASA and DOD have taken the first steps toward clearly articulated 
visions for aviation research and technology. These visions must now be 
supported by national aviation research and technology strategy that 
maintains and builds U.S. market share in aviation products and 
services, ensures our national security, provides a continuing supply 
of qualified people to meet the nation's future aviation workforce 
needs and creates an environment conducive to a healthy U.S. aviation 
industry.
    While U.S. government support for aviation research is declining, 
foreign government funding is increasing. European and Asian countries 
recognize the value of the aviation industry and its quality jobs to 
their economies. National will, available capital, and investments in 
leading edge technology are determining winners in this global 
competition.
    According to a 1999 National Research Council report, ``Recent 
Trends in U.S. Aeronautics Research and Technology,'' the U.S. aviation 
and rotorcraft industries (Boeing, Pratt & Whitney, General Electric, 
General Dynamics, Lockheed Martin, Textron, and others) contribute 
approximately $436 billion per year of total output to the U.S. 
economy. Of this amount, air transportation and aircraft manufacturing 
account for approximately $339 billion, accounting for over half a 
million manufacturing and engineering jobs. If the American public 
expects the U.S. aviation industry to continue to be the largest 
positive contributor to U.S. balance of trade, then we must have the 
ability to develop the next generation of aircraft that will enable 
them to compete internationally.
    The future of U.S. aviation, with respect to both global 
competition and societal benefits, depends on new technology and new 
concepts. Government research establishments have conducted essential 
fundamental and applied research, which were high risk, high cost, and 
long term. The uncertainty and risk inherent in revolutionary concepts 
cannot be undertaken solely by the private sector. The future demands a 
clear statement of national policy, establishing U.S. leadership both 
in aircraft and rotorcraft technology development that assures national 
security with additional societal benefits, such as:
  --Advanced vehicle technologies for innovative applications;
  --Increased safety;
  --Efficient air traffic management systems to reduce delays;
  --Reduced air transportation cost and travel time;
  --Increased fuel efficiency; and
  --More environmentally friendly aircraft.
    Historically, the government's support of aeronautics and 
rotorcraft research and technology (in collaboration with industry and 
universities) has been indispensable in for attracting highly talented 
people whose contributions have made possible the societal benefits 
that we have seen to date. If America fails to support aviation R&T, it 
may well fail to provide an essential nucleus of next generation 
professionals for the nation's aviation future.
    Recommended Actions:
  --Adequate funding for NASA and DOD aviation R&T must be addressed, 
        not only with respect to the fiscal year 2001 budget, but 
        also--and even more significantly--with respect to the 
        preservation of U.S. capability and leadership in long term 
        aeronautics research and technology, as required by law.
  --As the fiscal year 2000 federal budget has generally subsumed 
        aeronautical research and technology programs within an all-
        encompassing category termed ``Aerospace Research and 
        Technology,'' it is essential that the aeronautics R&T programs 
        at the key mission agencies (NASA, DOD and FAA) be clearly 
        identified and adequately funded within this category.
  --The establishment of a National Aviation R&T policy to plan and 
        provide adequate resources that will ensure sustained U.S. 
        world leadership in civil and military aviation.
    As we approach the centennial of the Wright Brothers' first flight, 
it is more important than ever that America renews our national 
commitment to leadership in aviation. In order to do so, we must ensure 
the strength and stability of the nation's aviation infrastructure by 
formulating and committing to a national aviation research and 
technology policy that incorporates adequate federalfunding for long- 
term aviation research.
                                 ______
                                 

          Prepared Statement of Babyland Family Services, Inc.

    Mr. Chairman: Thank you for giving me an opportunity to submit 
written testimony on behalf of Babyland Family Services, Inc. about two 
economic development initiatives: (1) Project NET-TO-WORK: A 
Neighborhood Employment and Technology Initiative for Healthy Children 
and Self-Sufficient Families and (2) the Babyland Pediatric Health 
Center.
                          project net-to-work
    Babyland Family Services seeks $1 million through the Department of 
Housing and Urban Development (HUD) and the Economic Development 
Initiative (EDI).
    Project NET-TO-WORK is a 1-year capital and program start-up 
request in which federal funding will enable the agency to complete the 
construction or renovation of a major facility (approximately 36,000 
square feet) that will thereafter offer the ongoing employment 
training, placement and support services necessary to promote economic 
development. It will also provide the necessary seed funds for program 
operations, which will be sustained through the generation of program 
income, local and state government contracts and grants from 
foundations.
    Project NET-TO-WORK will provide a comprehensive safety net and 
partnership--one-stop employment and self-sufficiency services that 
eliminate common barriers to employment for TANF recipients and low to 
very low-income families in Newark and surrounding areas. Babyland's 
current service area includes those portions of Newark (Central, West 
and North Wards) and East Orange that are still economically 
distressed. The project will target low-income African-American and 
Latino families who are receiving or at risk of receiving public 
assistance. In particular the initiative will be addressing the needs 
of single mothers, teenage parents and males involved in or at risk of 
involvement in the criminal justice system.
    The project will create 50 new child care jobs and will provide 
employment training and placement services for 150 residents. In 
addition, the project will address multiple barriers to job training 
and employment retention, including: (1) Full-day, year-round child 
care, especially for infants; (2) Pediatric health care services, 
including asthma management and preventive health education; (3) Family 
counseling, especially substance abuse and mental health services and 
(4) Quality of life and violence issues, especially family violence, 
crime and dilapidated housing.
    The main components of the project include the following:
  --Employment training, placement and follow-up support services--
        which includes individualized assessment, planning, basic 
        skills development including literacy and computer skills, 
        mentorship, peer counseling, support service referrals, 
        classroom instruction, internship placements, job placements 
        and ongoing mentorship after placement.
  --Child care and early childhood education services for 198 children, 
        from infant to 5 years old, and their families through center-
        based and family child care options.
  --Preventive health services will be provided onsite at the facility, 
        including assessment, screening and examination, education, 
        referral and follow-up for children and families.
  --Access to Computer Technology for community residents through the 
        creation of computer labs and training programs.
  --Family counseling to prevent and address family violence and child 
        abuse issues, with an emphasis on parent education, substance 
        abuse counseling and mental health counseling.
  --Neighborhood safety and quality of life initiative that trains and 
        empowers residents to develop a five-block safety zone around 
        their neighborhood through the creation and development of 
        block associations, community policing, local business 
        associations and other community organizing efforts.
    The goal of Project NET-TO-WORK is to help eliminate physical and 
economic distress in the communities that the agency serves. Through 
this project, Babyland expects to create at least 200 new jobs, 
especially in the areas of education, security, medical child care, 
human services and food preparation. The agency also expects to create 
a facility that will serve as a stabilizing force in an economically 
distressed neighborhood. A child care component will promote the 
healthy development of 198 children as well as serve as a job-
supporting service for 198 parents.
    A health component will directly benefit over 1,500 at-risk 
children in the Babyland service area through the prevention and 
management of childhood illnesses, thereby further preventing parent 
absenteeism from work. A computer technology component will provide 
over 300 low-income residents with access to basic and individualized 
computer technology knowledge that is essential to their long-term 
success at work. Finally, a grass-roots neighborhood violence reduction 
component will promote partnerships among residents, law enforcement, 
churches, businesses and other stakeholders and achieve the following: 
the reduction of physical blight (graffiti and dilapidated housing), 
prostitution, drug dealing, car jacking, domestic violence and various 
forms of crime.
    There is widespread support for this very important initiative. 
Babyland Family Services, Inc. expects to receive funding for the 
project from the following sources:
  --The Annie E. Casey Foundation Families Count Award--$166,000 
        unrestricted funds
  --The Newark Public Schools--approximately $1 million for early 
        childhood education
  --Private lending institutions--$1 million for capital support
  --Local government (City and County)--$250,000 for employment 
        training and employment support services.
  --Local Foundations--$70,000 for health and community organizing 
        projects.
  --United Way--$200,000 for program operations
  --Other potential funders include The Healthcare Foundation of New 
        Jersey and the Prudential Foundation.
                  the babyland pediatric health center
    Babyland Family Services seeks $1 million as an Economic 
Development Initiative (EDI) through the Department of Housing and 
Urban Development (HUD). The project is a 1-year capital and program 
start-up request that will enable the construction or renovation of a 
facility that will offer direct family health services and employment 
training in the pediatric health care field. Federal funding will also 
provide the seed funds for program operation which will be sustained 
through local and state government contracts, third-party affiliations 
and foundations.
    Background.--Babyland provides child care and early childhood 
education services for 750 children (0 to 5 years old) at eight child 
care centers and provides emergency shelter and family support services 
to 750 other at-risk and low-income children and families. Babyland is 
currently Newark's Early Head Start grantee (serving children 0 to 3 
years old, pregnant teenagers, young fathers and families living with 
HIV/AIDS) and has a partnership with the Newark and East Orange Public 
Schools to provide Abbott preschool services to over 250 children. The 
agency has an extensive partnership with the New Jersey Department of 
Human Services for the provision of child welfare, family violence and 
child care services.
    Babyland is a lead agency for the United Way's Success By 6 
Initiative and the State's Family and Children Early Education Services 
(FACES) Initiative which, combined, provides early childhood support 
services to 2,000 children and over 30 other child care agencies and 
schools. The agency provides employment training and placements in the 
areas of child care and medical day care for TANF recipients as well as 
accreditation support for local teachers and child care centers. 
Babyland is implementing the Open Airways Asthma Education Program at 
eight elementary schools through a grant from the Centers for Disease 
Control. Finally, the agency's newly established Technology Initiative 
is providing early computer education to preschool children, a 
Technology Center for computer-related employment skills to local 
residents and an agency intranet that will develop an outcome and 
service-based model for family support services.
Project Description
    Babyland is in a unique position, as the lead agency for several 
collaborative initiatives that promote the development of young 
children under 6 years old, to launch a pediatric health initiative 
that will prevent and manage childhood illnesses in Newark. In 
partnership with over 30 child care agencies, elementary schools and 
local health care providers, Babyland will develop a coordinated 
community-based approach for residents to gain access to health care 
services. As part of the agency's new multipurpose building, this grant 
will enable the agency to include a pediatric and family health center 
that will directly provide basic health services to over 1,000 families 
and provide health education, assessments, screening and follow-up 
services to 2,000 families with children under 6 years old.
    In addition to the pediatric and family health center, the new 
multipurpose building will include a child care center for 198 children 
(0 to 5 years old), a computer technology center, an employment 
training and placement center and family resource center. The new 
health center will particularly focus on increasing immunizations, 
screening for lead poisoning, asthma management, preventive dental care 
services, nutrition, prenatal care, home safety, parent education and 
child development, HIV/AIDS prevention and other preventive health 
education.
    Increased access to health care services will be achieved through 
the following methods: training and placing 45 low income residents in 
the medical day care/special needs field; training for over 50 Abbott 
Family Workers who provide case management services for 2,000 
preschoolers; parent-to-parent workshops that will be part of a series 
of parent and health education workshops; and creative grass-roots 
efforts that will encourage families to utilize the health center's 
resources. Community outreach workers, parents, nurses and a team of 
other health professionals will provide health outreach, education and 
services. Services will be coordinated with existing partners that 
include the Newark Department of Health, the Newark Public Schools, 
child care agencies and other local health care service providers.
    In conclusion, the project will also eliminate physical distress by 
developing a facility that will serve as a stabilizing center that will 
help revitalize a distressed neighborhood. The health center will 
prevent illnesses and provide health maintenance support for young, 
sick, low-income children. In addition, the center will serve as an 
onsite employment-training center for TANF recipients who will enter 
the health-related field for children with special needs. The project's 
health services will reduce the need for emergency services and lost 
time and wages for working parents.
    Matching Funds.--$1 million capital funding from the following: The 
Annie E. Casey Foundation ($166,000 unrestricted award) and $500,000 
from a lender. Operating funds will come from the United Way, Essex 
County and the State of New Jersey. Other potential funders could 
include previous health-related supporters such as the Robert Wood 
Johnson Foundation, the Johnson and Johnson Company and the Healthcare 
Foundation of New Jersey.
    We hope the Subcommittee will support these two critically 
important economic development initiatives as the appropriations 
process gets underway.
    Thank you for your consideration.
                                 ______
                                 

 Prepared Statement of the California Industry and Government Central 
                California Ozone Study (CCOS) Coalition

    Mr. Chairman and Members of the Subcommittee: On behalf of the 
California Industry and Government Central California Ozone Study 
(CCOS) Coalition, we are pleased to submit this statement for the 
record in support of our fiscal year 2003 funding request of $2.5 
million from the Environmental Protection Agency (EPA) for CCOS as part 
of a Federal match for the $8.7 million already contributed by 
California State and local agencies and the private sector.
    Most of central California does not attain federal health-based 
standards for ozone and particulate matter. The San Joaquin Valley is 
developing new State Implementation Plans (SIPs) for the federal ozone 
and particulate matter standards in the 2002 to 2004 timeframe. The San 
Francisco Bay Area has committed to update their ozone SIP in 2004 
based on new technical data. In addition, none of these areas attain 
the new federal 18-hour ozone standard. SIPs for the 8-hour standard 
will be due in the 2007 timeframe and must include an evaluation of the 
impact of transported air pollution on downwind areas such as the 
Mountain Counties. Photochemical air quality modeling will be necessary 
to prepare SIPs that are approvable by the U.S. Environmental 
Protection Agency.
    The Central California Ozone Study (CCOS) is designed to enable 
central California to meet Clean Air Act requirements for ozone State 
Implementation Plans (SIPs), as well as advance fundamental science for 
use nationwide. The CCOS field measurement program was conducted during 
the summer of 2000 in conjunction with the California Regional PM10/
PM2.5 Air Quality Study (CRPAQS), a major study of the origin, nature, 
and extent of excessive levels of fine particles in central California. 
CCOS includes an ozone field study, a deposition study, data analysis, 
modeling performance evaluations, and a retrospective look at previous 
SIP modeling. The CCOS study area extends over central and most of 
northern California. The goal of the CCOS is to better understand the 
nature of the ozone problem across the region, providing a strong 
scientific foundation for preparing the next round of State and Federal 
attainment plans.
    The study includes six main components:
  --Developed the design of the field study
  --Conducted an intensive field monitoring study from June 1 to 
        September 30, 2000
  --Developing an emission inventory to support modeling
  --Developing and evaluating a photochemical model for the region
  --Designing and conducting a deposition field study
  --Evaluating emission control strategies for upcoming ozone 
        attainment plans
    The CCOS is directed by Policy and Technical Committees consisting 
of representatives from Federal, State and local governments, as well 
as private industry. These committees, which managed the San Joaquin 
Valley Ozone Study and are currently managing the California Regional 
Particulate Air Quality Study, are landmark examples of collaborative 
environmental management. The proven methods and established teamwork 
provide a solid foundation for CCOS. The sponsors of CCOS, representing 
state, local government and industry, have contributed approximately 
$8.7 million for the field study. The federal government has 
contributed $2,150,000 to support some data analysis and modeling. In 
addition, the CCOS sponsors are providing $2 million of in-kind 
support. The Policy Committee is seeking federal co-funding of an 
additional $6.75 million to complete the remaining data analysis and 
modeling portions of the study and for a future deposition study. 
California is an ideal natural laboratory for studying deposition given 
the scale and diversity of the various ground surfaces in the region 
(crops, woodlands, forests, urban and suburban areas).
    There also exists a need to address national data gaps, and 
California should not bear the entire cost of addressing these gaps. 
National data gaps include issues relating to the integration of 
particulate matter and ozone control strategies. The CCOS field study 
took place concurrently with the California Regional Particulate Matter 
Study previously jointly funded through Federal, State, local and 
private sector funds. Thus, CCOS was timed to enable leveraging the 
efforts of the particulate matter study. Some equipment and personnel 
served dual functions to reduce the net cost. From a technical 
standpoint, carrying out both studies concurrently was a unique 
opportunity to address the integration of particulate matter and ozone 
control efforts. CCOS was cost-effective since it builds on other 
successful efforts including the 1990 San Joaquin Valley Ozone Study. 
Federal assistance is needed to address these issues effectively.
    For fiscal year 2003, our Coalition is seeking funding of $500,000 
from the Department of Energy (DOE) Fossil Program.--The California 
Energy Commission is a key participant, having contributed $3 million. 
Consistent with the memorandum of understanding between the California 
Energy Commission and the DOE, joint participation in the CCOS will 
result in: (1) enhanced public interest in programs on energy research, 
development, and demonstration; (2) increased competitiveness and 
economic prosperity in the United States; and (3) further protection of 
the environment through the efficient production, distribution, and use 
of energy.
    The CCOS program coincides with DOE's initiative to develop the 
Federal Government's oil technology program. In fact, the oil industry 
in California has been working for several years with DOE to identify 
innovative partnerships and programs that address how changes in those 
sectors can cost-effectively reduce particulate matter and ozone-
related emissions. This approach will likely result in new ideas for 
technologies to improve oil recovery technologies, as well as improve 
environmental protection in oil production and processing operations. 
The overlap of CCOS and the California Regional Particulate Matter Air 
Quality Study provides a unique opportunity to perform research related 
to petroleum-based VOC and particulate matter emissions as well as 
methods to characterize these categories of emissions. The CCOS program 
is utilizing modeling, instrumentation, and measurement to obtain 
results that can be used to better understand the impact of oil and gas 
exploration and production operations on air quality. CCOS program 
results might also be applied to identify the most efficient and cost-
effective methods of reducing emissions from oil and gas operations.
    The Department of Energy has been a key participant in many 
programs with the oil and agricultural sectors. By becoming a partner 
in this program, DOE will be furthering its own goals of ``Initiatives 
for Energy Security'' by aiding domestic oil producers to enhance their 
environmental compliance while reducing their costs. DOE will also be 
building upon an established and effective partnership between state 
and local governments, industry, and institutional organizations.
    For fiscal year 2003, our Coalition is also seeking funding of 
$250,000 from the National Park Service (NPS) and $250,000 from the 
Forest Service.--The National Park Service and Forest Service conduct 
prescribed burns that contribute to both ozone and particulate matter 
pollution. Prescribed burns are needed for forest health or to reduce 
fuel loads, and must be carefully managed to minimize public health and 
visibility impacts.
    Improving the fundamental science related to emissions, 
meteorological forecasting, and air quality modeling will help in 
designing effective smoke management programs. In addition, attainment 
of air quality standards is an important goal for protecting national 
parks and forests. Ozone damage to trees and vegetation in national 
parks and forests is well documented in California and nationwide. The 
National Park Service and Forest Service are key stakeholders relying 
on the success of SIPs in achieving the emission reductions needed to 
attain air quality standards. The participants in the CCOS have been 
partners in regional study efforts addressing visibility and haze 
impacts on national parks and forests in the West. The results of this 
study will provide valuable information that will further those efforts 
on a regional basis.
    Scientists at the University of Nevada, Desert Research Institute 
(DRI) are involved with the CCOS. To expedite research studies related 
to biomass burning and smoke management for CCOS, it is requested that 
funds provided by the National Park Service and Forest Service be 
allocated directly to DRI.
    Thank you very much your consideration of our requests.
                                 ______
                                 

         Prepared Statement of the City of Gainesville, Florida

    Mr. Chairman: On behalf of the City of Gainesville, Florida, I 
appreciate the opportunity to present this written testimony to you 
today. The City of Gainesville is seeking Federal funds in the fiscal 
year 2003 HUD Appropriations bill to assist with the following two 
innovative projects the City is undertaking:
  --The Depot Regional Stormwater Park, to provide stormwater treatment 
        for approximately 125 acres of the Downtown and allow the 
        redevelopment of existing buildings and parking lots within 
        Downtown into mixed residential, commercial, and office uses. 
        This project will serve as a mechanism not only to further the 
        revitalization of Downtown but also to treat the stormwater 
        runoff prior to discharging to Sweetwater Branch and ultimately 
        Paynes Prairie and the Floridan Aquifer, and
  --The Underserved Neighborhood Improvement Project, to upgrade the 
        public infrastructure in particular older neighborhoods in east 
        Gainesville. Specifically, the City has identified the 
        neighborhoods that are encompassed in the newly designated 
        Eastside Redevelopment District and the Porter's Neighborhood, 
        which is included in the Downtown Redevelopment District 
        Expansion Area. The Eastside Redevelopment District is 
        primarily residential in nature but includes commercial 
        sections along NE Waldo Road, East University Avenue and SE 
        Hawthorne Road. Except for a few businesses on the periphery, 
        the Porter's Neighborhood is strictly residential.
Depot Regional Stormwater Park
    The Depot Regional Stormwater Project is a U.S. Environmental 
Protection Agency (USEPA) and Florida Department of Environmental 
Protection (FDEP) designated Brownfield pilot project. The project 
includes the cleanup of contaminated soils, construction of the 
regional stormwater management facilities, installation of reuse water 
system for irrigation, and development of the recreational components 
of the park.
    The Depot Regional Stormwater Project is located on the southern 
boundary of Downtown. The Downtown area is located within the 
Sweetwater Branch watershed, which contains approximately 3 square 
miles of Gainesville. The Sweetwater Branch drains into Paynes Prairie 
Preserve, which is part of the State of Florida Park System and has 
been designated as an Outstanding Florida Water. An earthen levee 
segregates creek flow to a small area of the prairie before discharging 
into Alachua Sink, a natural sinkhole located on the northeast boundary 
of the prairie. Alachua Sink is an active sink with direct hydraulic 
connection to the Floridan aquifer.
    Urbanization of the watershed has resulted in significant pollution 
loads entering the creek from non-point sources. Land use within the 
urban sections of the Sweetwater Branch watershed includes commercial, 
industrial and residential types. Most of the surfacewater runoff is 
discharged directly to the creek without receiving treatment or 
attenuation. The urbanization of eastern Gainesville took place prior 
to implementation of regulations requiring on site treatment of 
surfacewater. The Saint Johns River Water Management District's 
(SJRWMD) non-point source-screening model indicates that the non-point 
pollution load to Sweetwater Branch is significant. The water quality 
within Sweetwater Branch adversely impacts the Paynes Prairie ecosystem 
and contributes to the degradation of the Floridan aquifer.
    The Paynes Prairie Preserve provides habitat to a variety of 
wildlife, including threatened species and species of special concern 
including the, bald eagle, white ibis, roseate spoonbill, and Florida 
sandhill crane. It is believed that the degraded water quality within 
Sweetwater Branch has had an adverse impact on vegetative communities 
in Paynes Prairie. A diagnostic study is currently underway to 
determine the extent of this problem.
    Water quality within Sweetwater Branch is described as fair 
according to the Water Quality Index (WQI) presented in the State of 
Florida Department of Environmental Protection's (FDEP) 1996 305(b) 
Report, see Appendix E. The WQI is the arithmetic mean of anywhere from 
1 to 6 water quality index categories (water clarity, dissolved oxygen, 
oxygen demanding substances, nutrients, bacteria, and biological 
diversity).
    The Depot Regional Stormwater Park will provide stormwater 
treatment for approximately 125 acres of the Downtown and allow the 
redevelopment of existing buildings and parking lots within Downtown 
into mixed residential, commercial, and office uses. This project will 
serve as a mechanism not only to further the revitalization of Downtown 
but also to treat the stormwater runoff prior to discharging to 
Sweetwater Branch and ultimately Paynes Prairie and the Floridan 
Aquifer.
    The regional stormwater management facility is being planned as a 
landmark stormwater park that will not only serve as a functional 
stormwater management facility, but will return unusable brownfield 
property into an active land use. The project is located on the 
southern boundary of Downtown adjacent to the City's Historic Train 
Depot (built in 1907) and the City's Electric Utility's historic Kelly 
Power Plant, which has recently been repowered. The Historic Train 
Depot was purchased by the City and is in the process of being 
renovated in accordance with Federal and State Historic requirements 
and using Transportation Enhancement Program and State Historic 
Preservation funding. The Historic Train Depot will be a vital 
component of the regional stormwater park to allow a center of activity 
that is complementary of the overall goals of the Depot Regional 
Stormwater Management Project and the Revitalization of Downtown.
    The Stormwater Park will also function as a Rail Trail Hub to 
provide linkage of four primary existing and proposed rail trail 
systems. From the south the existing Gainesville Hawthorne Rail Trail 
provides a linkage to the Historic Boulware Springs facility and 
proposed park owned by the City, the State Payne's Prairie Preserve and 
further out to the City of Hawthorne. The proposed Downtown Connector 
will connect the Gainesville Hawthorne Rail Trail through the 
Stormwater Park and is being implemented with funding through the 
Transportation Enhancement Program. From the east the existing Waldo 
Road Beautification Trail connects the Stormwater Park with the City's 
recently completed Martin Luther King Multipurpose Center, a community 
sports complex that provides much needed community meeting space and 
recreational programs. In addition, the Waldo Trail provides a linkage 
to many predominately African American neighborhoods including the 
City-developed Cedar Grove residential affordable housing neighborhood. 
The proposed 6th Street Rail Trail will provide access to the north and 
west through three historic, and predominantly African American 
communities: the Porters, Pleasant Street, and Grove Street 
Neighborhoods. The 6th Street Trail will be constructed using a 
combination of local, State and Federal dollars. The existing Depot 
Avenue Rail Trail connects these trails along the borders of the 
Stormwater Park and Depot Avenue. The trail and enhanced roadway will 
provide a primary multi-modal transportation corridor connecting the 
University of Florida and Shands Medical Complexes to Downtown.
    The Depot Regional Stormwater Park component will provide 
stormwater treatment for Depot Avenue, the proposed Rail Trails, as 
well as the Downtown portion of the Sweetwater Branch watershed located 
upstream of the park. The site of the proposed Park served as the rail 
transportation hub linking Fernandina Beach on the east coast of 
Florida to Cedar Key on the west coast in the mid-1800's. The Historic 
Train Depot's under-roof, otherwise open loading docks will provide 
open vistas to the proposed Sweetwater Urban Stormwater Park. The 
historic Depot building's unique character and location will serve to 
make it both a lively destination hub for the neighborhood and a 
catalyst for further redevelopment of Downtown. The building is a 
standing testament to and a significant visual emblem of Gainesville's 
rich history. The restoration of this building in conjunction with the 
restoration of the 22-acre Sweetwater Urban Stormwater Park is expected 
to provide a major community destination and regional ``eco-tourism'' 
attraction for the community.
    The remaining unfunded costs of the Depot Regional Stormwater Park 
are estimated at $10,700,000.00. The City of Gainesville has acquired 
approximately 25 acres for the project and anticipates completing 
acquisition of the balance of the property by summer of 2002. The City 
has set aside $1 million of the Stormwater Management Utility revenues 
for construction of the stormwater management components. Grant funding 
from a variety of Federal, State and local sources totals 
$3,111,365.00. Among these are a Florida Communities Trust grant to 
assist with acquisition costs, State and Federal Brownfield grants for 
site investigation and design activities currently underway, and an EPA 
grant for $500,000 for preliminary engineering and environmental work 
for a portion of the stormwater component of the project. The City's 
Federal funding request is for $10,700,000.00 to complete the Depot 
Regional Stormwater Park.
The Underserved Neighborhood Improvement Project
    The City of Gainesville is pursuing a strategy to assist in 
upgrading the public infrastructure in its older neighborhoods. 
Gainesville has a significant number of older, predominantly low- and 
moderate-income neighborhoods that lack adequately paved roadways, 
curbs and gutters, and sidewalks. The population of these neighborhoods 
tends to include a disproportionately large percentage of children and 
youth, single-parent families and the elderly. Due to income 
limitations of the residents, it is not feasible to utilize special 
assessment districts as a funding mechanism for upgrading the 
infrastructure in these neighborhoods.
    The City currently allocates 15 percent of its annual Community 
Development Block Grant (CDBG) entitlement for upgrading public 
infrastructure in eligible neighborhoods. This year (fiscal year 2001-
02), that amounted to about $230,000. However, due to the significant 
numbers of neighborhoods that need assistance, this funding strategy is 
inadequate to meet the demand.
    To make a meaningful impact on the problem, the City is requesting 
$1 million to upgrade the public infrastructure in particular older 
neighborhoods in Gainesville. Specifically, the City has identified the 
neighborhoods that are encompassed in the newly designated Eastside 
Redevelopment District and the Porter's Neighborhood, which is included 
in the Downtown Redevelopment District Expansion Area. The Eastside 
Redevelopment District is primarily residential in nature but includes 
commercial sections along NE Waldo Road, East University Avenue and SE 
Hawthorne Road. Except for a few businesses on the periphery, the 
Porter's Neighborhood is strictly residential.
    According to the 1990 Census, the Eastside Redevelopment District 
had a total population of 4,043 persons, with 71 percent qualifying as 
low- and moderate-income under HUD's definition (80 percent of median 
family income). The Porter's Neighborhood had a total population of 441 
persons in 1990, with 87 percent low- and moderate-income. This 
compares with about 49 percent low- and moderate-income for the city as 
a whole in 1990.
    As part of the City's November 2000 Finding of Necessity for the 
4th Redevelopment District (now known as the Eastside Redevelopment 
District), the City Public Works Department identified approximately 11 
miles of semi-paved local streets and seven miles of local streets with 
pavement only meaning no sidewalks or storm drainage facilities in the 
District. The total cost to repave or reconstruct all of these semi-
paved streets and streets with pavement alone, including providing 
sidewalks where needed, was estimated to be $9 million. The Department 
estimated that it would cost another $1 million to repave the 
approximately 6.5 miles of streets with curb and gutter in the 
District.
    Similarly, the Porter's Neighborhood has numerous deficiencies in 
its public infrastructure. The December 2000 Assessment of Need Study 
prepared for the Downtown Redevelopment District Expansion Area noted a 
general lack of sidewalks in the neighborhood, narrow streets with 
deteriorated pavement surfaces and a widespread absence of stormwater 
management and pollution control facilities. While the cost to upgrade 
the infrastructure in the broader Downtown Redevelopment District 
Expansion Area is estimated at upwards of $4.4 million, a sizable 
portion of this cost (approximately $1 million) can be attributed to 
just the Porter's Neighborhood.
    Street and structure (mainly residences) flooding is known to occur 
at several locations in the Eastside Redevelopment District and the 
Porter's Neighborhood due to inadequate and non-existent storm drainage 
facilities. This results in unsafe and unsanitary conditions. None of 
the semi-paved streets in either area have curbs and gutters, as most 
of these neighborhoods pre-date local government requirements for 
stormwater management and treatment.
    In order to address these critical needs in the Eastside 
Redevelopment District and the Porter's Neighborhood, the City proposes 
to replace open drainage swales with closed drainage systems, build 
sidewalks in locations where they are needed, and continue work on 
master stormwater management systems. An infusion of $1,000,000.00 
additional capital would allow the City to make a significant impact in 
both areas. 


         Prepared Statement of the City of Miami Beach, Florida

    Mr. Chairman: On behalf of the City of Miami Beach, Florida, I 
appreciate the opportunity to submit this written testimony to you 
today on three extremely important initiatives, currently underway 
within our city, for which we are requesting Federal assistance.
HUD Requests
    Initiative on the Homeless.--Miami Beach seeks $1 million in 
assistance for the development of a Homeless Assistance program under 
the sole jurisdiction of the City of Miami Beach. (Priority #1)
    North Beach Cultural Center.--The City seeks $5 million for the 
rehabilitation of a large downtown theater to serve as a cultural and 
community center. (Priority #3)
EPA Request
    Stormwater Infrastructure Improvements.--The City is seeking a 90 
percent-10 percent local/Federal split of the total cost through the 
wastewater account within the EPA, with the total Federal share for 
this project being $9 million. (Priority #2)
The Homeless Issue on Miami Beach
    Every day, by some accounts, many Miami Beach residents are 
homeless. Homeless individuals and families live in substandard 
conditions in places usually not suitable from human habitation, and 
face violence, sickness and despair; as well as the attendant issues 
resulting from abject poverty. Public health and safety are affected, 
and community concerns spur the City to undertake service enhancements 
such as additional police, fire, rescue, parks and street maintenance, 
sanitation services, and others. Within the Miami-Dade County area, the 
City of Miami Beach is singularly attractive to homeless migration. 
Routinely, the City receives a number of homeless that have left 
neighborhood municipalities in search for a place to sleep. With its 
tropical climate and beautiful beaches, the City provides a comfortable 
environment for encampments to take root. To address this continuing 
challenge, the City of Miami Beach provides funds to local nonprofit 
organizations and service providers, who attempt to serve the needs of 
the homeless population. The City also funds the enhancements that 
result from this activity.
    In 1994, homeless individuals in Miami settled a historic lawsuit 
with the City of Miami. Although not a party to this lawsuit, the City 
of Miami Beach is, however, directly affected by it. City of Miami 
Beach homeless individuals and families were left out of the zoning for 
the Homeless Assistance Center built by the Miami-Dade County Homeless 
Trust. In practical terms, this means that on any given day, homeless 
found in Miami Beach will only have access to a limited amount of 
shelter beds, which are shared by all other municipalities in the 
County. In 1999, the City Administration, the City of Miami Beach 
Police Department and the Committee on the Homeless developed a 3-year 
pilot program to further address the needs of homeless individuals and 
families on Miami Beach.
    The program tied into the City's adopted ``Continuum of Care'' 
Plan, which is a part of the City's Consolidated Plan for Federal 
Funds. Services included outreach and emergency shelter for homeless 
individuals identified by the Police Department and local service 
providers. The program served a total of 185 individuals and families. 
At the end of the first 3 years of the program, several obstacles have 
been identified that have an impact on the ability of the City of Miami 
Beach to meet the needs of its homeless population.
    First and foremost is the lack of funds. Current Federal programs 
for the homeless are allocated on a competitive basis rather than to 
each community. This has benefited the Miami-Dade County community; 
however, there are still significant needs that are not being addressed 
in Miami Beach. The County allocates funds received under the 
SuperNOFA, to address countywide priorities that may not coincide with 
local, municipal priorities, such as the need for emergency shelter and 
transitional housing. It is estimated that approximately $1,000,000 
will be needed over the next 3 years to fund a sufficient amount of 
emergency shelter beds in available facilities, to address the needs of 
the Miami Beach homeless population. An additional amount of $1,300,000 
will be needed to fund transitional housing over the next 3 years. To 
complete the Continuum of Care System for Miami Beach, permanent 
housing must also be funded, at an estimated amount of $1,500,000 over 
the next 3 years.
    The second largest obstacle is the need for coordination of housing 
and supportive services, regardless of funding source. In addition to 
its funding of homeless activities, the City also expends approximately 
$2 million each year in Federal funds for affordable housing 
initiatives for very low, low and moderate-income residents. The City 
funds approximately $500,000 each year in social services for low and 
moderate-income residents, which includes homeless individuals. 
Although the City of Miami Beach's homeless individuals and families 
are currently participating and benefiting, in part, by the countywide 
Continuum of Care system, better linkages and coordination between the 
City's Federally-funded affordable housing, social services and 
homeless activities--and the SuperNOFA-funded programs at the County 
level needs to take place. The City estimates that the development of 
such service coordinators and the establishment of an intake facility 
will represent an expenditure of approximately $900,000 over the next 3 
years.
    The third and final obstacle is the lack of data on the homeless 
population in Miami Beach and its treatment needs. The information is 
key to tracking the progress or failure of the homeless person after a 
shelter intake; report on and evaluate results; and recommend program 
changes, treatment gaps, and funding needs. The development and 
implementation of an information tracking system is estimated at 
approximately $300,000 over the next 3 years.
    A total of $1,560,173 is currently being targeted from diverse 
sources to assist the homeless in Miami Beach. The County applies for, 
and receives the City's Pro-Rata share from the HUD-funded SuperNOFA 
each year. This amounted to $766,963 last year. Additionally, the City 
has set aside approximately $752,750 for activities that include 
homeless prevention activities, outreach, emergency shelter and 
transitional housing for homeless individuals. Approximately $40,500 of 
City of Miami Beach Police Department funds are used to support these 
activities.
    The City of Miami Beach has identified that need exists for 
$1,000,000 for emergency shelter beds, $1,300,000 for transitional 
treatment beds, $1,500,000 for permanent housing for formerly homeless 
individuals and families; $900,000 for the development of intake and 
outreach facility and staffing for the City; and finally $300,000 for 
an information system. This cost of this program is estimated at 
$5,000,000 over the next 3 years.
    The City of Miami Beach requests Federal assistance in the amount 
of $3,439,000 for the development of a 3-year Homeless Assistance 
Program on Miami Beach, beginning with an appropriation of $1 million 
in the 2003 VA, HUD and Independent Agencies Appropriations Bill.
Stormwater Infrastructure Improvements
    The City of Miami Beach is facing a significant financial challenge 
in its attempts to provide adequate potable water and stormwater 
treatment/protection to its citizens. The City Commission has approved 
a local expenditure of $60,000,000 for the water and stormwater 
improvements, which has resulted in water and sewer rate increases to 
126 percent of national averages in fiscal year 2000 with approved 
increases bringing rates to 144 percent by fiscal year 2006. 
Unfortunately, the estimated cost to complete construction of these 
water and stormwater improvements is $90,000,000. The City does not 
have the ability to fund this entire amount. We are here today to ask 
for supplemental funding of $9,000,000 from U.S. EPA's State and Tribal 
Assistance Grant Account. This figure represents 10 percent of the 
project cost. The funds will be spent in the most socio-economic 
disadvantaged neighborhoods in the City.
    The City is responsible for distribution of potable water and 
providing stormwater conveyance, treatment and disposal to a diverse 
permanent population of 87,933 people, and a seasonal population of 
approximately 140,000 people. During the mid to late 1990s, the City of 
Miami Beach commissioned the preparation of a Water Master Plan, Sewer 
Master Plan and Comprehensive Stormwater Management Master Plan. These 
planning efforts evaluated the existing infrastructure and recommended 
improvements to meet the needs created by changes in land use and aging 
infrastructure. These Master Plans led to the creation of the City of 
Miami Beach Neighborhood Right-of-Way Infrastructure Program 
(``Program''), the funded portions of which the City anticipates to 
complete in late 2006. The City is reconstructing aged watermain and 
stormwater infrastructure in existing neighborhoods to maintain safe 
and reliable potable water service, improve water quality in the 
Biscayne Bay aquatic preserve and minimize stormwater flooding damage 
to public and private property. Individual neighborhoods will benefit 
from infrastructure upgrade projects relating to watermain replacement, 
sanitary sewer rehabilitation, and stormwater collection, treatment and 
disposal facility improvements.
    The majority of existing watermains in the City were installed 
anywhere from 50 to 80 years ago, and have reached the end of their 
useful life. Planned enhancements will replace corroded galvanized 
pipes and pipes installed with lead joints and will improve safety 
issues related to potable water distribution. Some water mains have 
become almost ``blocked'' by a process called tuberculation, where 
deterioration of a pipe's interior wall lining has occurred as result 
of chemical reactions with potable water. Excessive tuberculation has 
significantly decreased the effective pipe diameter, thereby affecting 
public safety through inadequate fire flows and by decreasing water 
pressure at the household tap, or more drastically, causing pipe 
collapse or failure. The new or rehabilitated watermains will improve 
water pressure and provide appropriate internal pressure to safeguard 
against backflow contamination during fire flows or other peak use 
situations.
    With regard to the City's stormwater system, the Master Plan 
identified over 160 drainage basins throughout the City of Miami Beach. 
Approximately 34 basins were identified as a priority based upon 
pollutant loading, pollutant concentration, flooding potential, citizen 
complaints and City operational staff rankings. The City experiences 
various levels of flooding, depending on the extremity of the rain 
event. With many of the City's priority drainage basins barely above 
sea level, and the system not being capable of handling a 5-year storm 
event, flooding occurs in many of the basins during a regular rain 
event, with higher flooding levels occurring during high tide or a 
major storm. Due to high groundwater elevations, drainage is slow, 
requiring extensive periods of time to dissipate. Continuous excessive 
ponding over the long term causes the deterioration, and ultimately 
failure, of paved roads, and can lead to mosquito breeding areas. When 
the proposed improvements are completed, these priority basins will 
dispose of a 7.2-inch rainfall (5-year storm) event over a period of 24 
hours.
    All of the City's stormwater runoff is drained into Biscayne Bay, a 
nationally recognized aquatic preserve. Biscayne Bay was identified as 
one of Florida's highest priority water bodies and was the subject of a 
specific plan developed to help protect and enhance it. This plan is 
referred to as the Biscayne Bay Surface Water Improvement and 
Management (SWIM) Plan. One of the main goals of the plan is to 
maintain and improve water quality to protect and restore natural 
ecosystems and compatible human uses of Biscayne Bay. The City's plan 
to construct and/or enhance existing systems for stormwater conveyance, 
treatment and disposal facilities helps achieve that goal. As a 
municipality within Miami-Dade County, the City is a National Pollutant 
Discharge Elimination System (NPDES) Phase I permittee, and is required 
to eliminate pollutants to the maximum extent practical. The proposed 
stormwater improvements will enhance treatment of runoff prior to 
discharge, minimizing pollutant loadings into the Bay and help the City 
fulfill its requirement.
    While the majority of the Program is currently locally funded, 
requesting Federal cost sharing is reasonable. The City is one of the 
few large Dade County communities to embark on such a program before 
regulatory pressures require it. Typically, municipalities have waited 
to make such improvements until either State or Federal officials used 
regulatory reform or enforcement actions to force the issue through a 
consent degree, administrative order or court judgments. In contrast, 
the City has already bonded $60,000,000 for these improvements from 
local resources, which represents two-thirds of the total Program cost. 
The City is considered a major vacation spot in the County, as well as 
the nation. Regular flooding impedes the commercial uses of the City 
and detracts from the City's reputation as a tourist destination. The 
City's system is not even capable of expelling stormwater at a 5-year 
storm level, whereas most places in the nation are able to expel 
stormwater at that level.
    The City has limited its Funding Request to four neighborhoods that 
comprise the City's North Beach area. These neighborhoods, including 
Biscayne Point, North Shore, Normandy Shores and Normandy Isle, have 
very low Median Household Incomes (MHI). The targeted neighborhoods' 
average MHI is approximately $18,000, or 70 percent of the State of 
Florida average. These neighborhoods include a variety of land uses, 
including highly urban commercial, residential, recreational and multi-
family areas, with some pockets of single-family residential, and are 
eligible for such Federal funding as the US Department of Housing and 
Urban Development (HUD) Community Development Block Grant and Section 
108 funds.
    As discussed earlier, the City seeks to have funding in the amount 
of $9,000,000 for this Program approved in the fiscal year 2003 VA, 
HUD, and Independent Agencies Appropriations Act's STAG Account by 
having the following language included:
    ``A $9,000,000 grant to the City of Miami Beach, Florida for the 
watermain reconstruction and stormwater improvements in the 
neighborhoods of Biscayne Point, North Shore, Normandy Shores and 
Normandy Isle.''
    The City is in a position to accept the traditional local match 
share requirement of 45 percent and will make the $7,000,000 in local 
funds available upon approval of the funding. However, without the 
approval of this grant, portions of the Program will be in jeopardy of 
not being constructed because of lack of local financing.
    To date, this Appropriations Act has granted $4,894,812,625 in 
``special needs'' water related grants between fiscal year 1992 and 
fiscal year 2002 to similar projects in municipalities across the 
nation. During this same time frame, Florida has received $117,945,000 
of the total monies granted. This is the City of Miami Beach's first 
request for funding from this source. This Program truly impacts the 
health and safety of City residents by replacing deteriorated 
watermains that will improve fire flows and prevent backflow 
contamination during peak use. In addition, enhanced stormwater 
collection, treatment and disposal will provide residents and property 
with adequate storm protection, facilitate the dissipation of standing 
water, and remove pollutants from stormwater runoff flows prior to 
disposal to the Biscayne Bay, a nationally recognized aquatic preserve.
North Beach Cultural Center
    The Byron Carlyle Theater was an abandoned 7-screen movie theater 
that is located in the central business district of Miami Beach's North 
Beach area. The theater was closed by Regal Cinemas in 1999, and was 
vacant until the City purchased it and leased a small portion to four 
local non-profits in late 2001. The City of Miami Beach has begun the 
implementation of a strategic plan for the revitalization of the North 
Beach area, which includes approximately $124 million in capital 
improvement projects that will be implemented during the next 6 years. 
The redevelopment of vacant buildings such as the theater is crucial to 
the economic and business development components of the North Beach 
Strategic Plan. However, due to the unique layout and structural nature 
of older movie theaters, such as this, redevelopment options are 
limited and expensive.
    There are two reasons that Miami Beach is transforming this 
building into the North Beach Cultural Center. First, the redevelopment 
of this theater is an integral component of the Strategic Plan for the 
economic revitalization of the North Beach area of Miami Beach. While 
other areas of Miami Beach have enjoyed tremendous economic success 
over the last 10 years, the North Beach area has lagged in its growth 
and continues to evidence a concentration of low-income households and 
a lack of private sector investment. The emergence of cultural 
institutions during the beginnings of the economic revitalization of 
South Beach's Art Deco District directly contributed to the area's 
continued success. Secondly, the success that cultural organizations 
helped create in South Beach is also a reason for the creation of a 
cultural facility in North Beach. As South Beach boomed, local cultural 
institutions became self sufficient and successful, area market trends 
began to improve and property values appreciated significantly. In 
1993, the primary cultural area in South Beach was on Lincoln Road, 
where rental rates averaged $12 per foot. In 2000, rental rates reached 
$75 per square foot, and many small businesses and cultural 
organizations were forced to either relocate or dissolve. Additionally, 
many cultural organizations currently housed in City-owned facilities 
will soon have to relocate as the City expands to meet the ever-
increasing service levels expected by the citizens. A central facility 
that accomplishes both goals is critical to the economic revitalization 
of North Beach. To date, the City has completed the Phase I renovation 
of the former lobby area, and has leased this new office space to three 
cultural organizations that were displaced from South Beach. The City 
has leased additional space in the facility to the North Beach 
Development Corporation.
    The development of the North Beach Cultural Center will also help 
transform the entire City of Miami Beach into a world-renowned center 
for the creation and consumption of culture. Miami Beach is home to 
many internationally acclaimed cultural organizations, such as the New 
World Symphony, the Miami City Ballet, and the Bass Museum. These 
organizations, however, are located in a small concentrated area of 
South Beach. The City also has over 75 smaller cultural groups that are 
the true cultural heart of Miami Beach. Organizations such as the 
Concert Association of Florida, Ballet Flamenco La Rosa, and the 
Performing Arts Network continue to struggle for their economic 
survival. The ability to provide a facility that allows these groups to 
remain in Miami Beach will provide a venue where many emerging small 
organizations can continue to grow and prosper and at the same time 
provide a catalytic cultural component to the revitalization effort in 
North Beach.
    In 1999, in an economic impact report to the City of Miami Beach's 
Mayor's Economic Council, Florida International University identified 
that investment in the cultural arts has the highest economic output 
multiplier of all local industries. The challenge for cities such as 
Miami Beach, however, is, providing the level of Cultural Arts 
investment that is required to generate this ``biggest bang for the 
buck.''
    The City of Miami Beach purchased the facility for $1.7 million, 
and spent an additional $500,000 on the Phase I renovations. Phases II 
and III are much more extensive and costly, and projected costs are 
approximately $6 million. These phases will include renovation of two 
of the former movie theater spaces into a single use space capable of 
accommodating 250 people. The City has applied to the State of Florida 
for a $460,000 grant for this project, and the North Beach Development 
Corporation, the Miami Beach Community Development Corporation, and 
Miami-Dade County have committed a total of $750,000 to the Phase II 
renovations. The City has also identified funding sources that will be 
committed to the annual operation of the facility once it opens. When 
completed, the Facility will interact with the nearby North Beach Youth 
Center, a $6 million project that is currently under development one 
block away. The City of Miami Beach requests an appropriation of $5 
million for the North Beach Cultural Center in the 2003 VA, HUD and 
Independent Agencies Appropriations Bill.
                                 ______
                                 

          Prepared Statement of the City of Newark, New Jersey

    The City of Newark, NJ hereby submits for the record, testimony 
regarding three projects that are of great importance to the State of 
New Jersey's largest City. The projects described below each address an 
aspect of the needs of Newark's low income population. The third oldest 
major city in America, Newark is also one of the most densely 
populated. The provision of educational, cultural and recreational 
opportunities for our residents continues to be critical to the 
economic and social growth of the City. Through partnerships with other 
levels of government and the non-profit and private sectors, Newark is 
involved in expansive change. Your assistance is sought on the three 
projects described below.
                         newark public library
    The Newark Public Library system is one of the unsung foundations 
of the City. It has serviced every segment of the Newark community for 
over 100 years. Located in the heart of the city's James Street 
Historic District, the Newark Public Library has since 1888 served as a 
major influence in the intellectual and cultural life of this great 
American city. The Newark Public Library system, anchored by the Main 
Library on Washington Park, includes 10 branches one in every 
neighborhood of the city. The library system offers service to 270,000 
city residents, to 175,000 people who commute to Newark every day to 
work or attend college and university classes, and to many individuals 
and libraries from the surrounding region and throughout the state.
    The Newark Public Library's mission is to be Newark's premier 
center for education and learning. Fulfilling this mission, it serves 
as an education and learning support center, a reference and research 
library, a popular materials library, and a community center. The 
Library offers encouragement and support to all people in the 
achievement of their educational goals and their pursuit of lifelong 
learning. It provides people of all ages with abundant opportunities 
for enrichment and supports them in the discovery of the joy of 
reading.
    During the past several years, the Newark Public Library has 
systematically improved and modernized each of its ten branches, which 
serve as homework centers and Internet access sites, in addition to 
more traditional library functions. Indeed, the City's $5 million 
capital allocation has enabled the Library to completely renovate one 
branch in each of the City's five wards.
    With an operating budget of approximately $12 million dollars, the 
Library still relies upon foundation, corporate, individual and State/
Federal grants to meet the increasingly diverse needs of the patrons. 
With grants from funders like the Prudential Foundation, the Victoria 
Foundation, Lucent, MCI, and the Turrell Fund, the Library is able to 
augment its operating budget by approximately $2 million dollars per 
annum.
    Now the Library, recognizing that Newark requires and deserves a 
first rate downtown facility, will undertake a major renovation of its 
landmark main building. The Library needs to add environmentally 
controlled collection space, accessible reader areas, parking 
facilities, and upgraded systems to support expanding technology 
capabilities. A comprehensive fundraising campaign has been planned and 
adopted by Library leadership to reach out to private donors, 
corporations, foundations and government sources. The Library's current 
donor base, including the 13-year old organization, Friends of the 
Library, will also be asked to make significant pledges over a 5-year 
period. The Library has hired professional fundraising counsel, a 
feasibility study has been completed and the leadership gift phase of 
the campaign is underway with its first gift of $1 million.
    In addition to the lead gift from The Prudential Foundation, the 
Library has received $289,733 from the Public Library Construction Bond 
Fund, and $90,000 in project support from the Victoria Foundation. 
Federal funds are sought to support the renovation initiatives and to 
act as a critical incentive for private source giving.
    An investment in the Main Library facility is also an investment in 
its services and programs. For decades, the Newark Public Library has 
provided significant programming for its entire community. The 
Library's summer educational program for children is a model for the 
nation. That program provides unique weekly activities for thousands of 
children throughout the summer. During the academic year, the Library, 
together with the Newark School District, provides daily educational 
services for children in grades K-12.
    Evening cultural programs include lectures by significant authors 
and other educational and cultural figures. Performances conducted in 
Library facilities encompass the full spectrum of the arts including, 
dance, theater, film, and music. Adults have been attending in record 
numbers in recent years.
    Classes for adults include English as a Second Language, literacy, 
and computer skills training. The Library is, appropriately, the city's 
primary source for Hispanic collections and translation services. Sign 
language classes are also conducted on a regular basis to assist the 
deaf community. The Library's facilities are a significant resource for 
local organizations. The Main Library provides free meeting rooms and 
program space for many local organizations.
                        fiscal year 2003 request
    An appropriation of $5 million is sought to assist in the 
implementation of the Newark Public Library renovation and 
modernization.
                      nat turner field development
    Nat Turner Field is an undeveloped tract of land that the City of 
Newark acquired with NJ Green Acres funding so that it would be 
preserved as parkland rather than undergo development. It is surrounded 
by newer housing developments on the west, a City pool/recreation 
center and elementary school on the east, and an elementary school to 
the south. To the north was a large abandoned factory, which was a 
troublesome brownfield site for many years. It has recently been 
demolished, and has been selected by the Newark Public Schools as the 
site of a new high school, to be built through the State Abbott 
District program. This activity presents a unique opportunity for 
partnership between the Schools and the City.
    It is proposed that Nat Turner Field be developed into a 
recreational facility that will jointly serve the needs of the two 
elementary schools and the new high school, as well as the community 
at-large beyond school hours. The existing pool and recreation center 
could be renovated to be part of a larger, more comprehensive complex, 
and serve the schools as well. The schools will educate approximately 
1,800 students. The summer recreation program will serve over 2,000 low 
to moderate income families from the neighborhood.
                        fiscal year 2003 request
    The City of Newark is seeking $3,000,000 in order to take the 
conceptual design to an implementable plan, and construct the Nat 
Turner Field. It will serve as the recreation focus for thousands of 
students and families in a redeveloping neighborhood, as part of a 
comprehensive revitalization plan.
            john f. kennedy recreation center modernization
    The JFK Recreation Center was built in the 1960's, and serviced the 
population of several high-rise public housing projects. The Newark 
Housing Authority has proceeded with the demolition of those failed 
projects, and has recently received $35,000,000 for its HOPE VI 
Redevelopment plan. The 45 acre site is being completely renovated, 
with 755 new townhouse and low-rise public housing units, which will 
become a part of the fabric of the City. The State of New Jersey is 
committed to building new schools in the neighborhood through its 
Abbott District program, and new commercial facilities are planned 
nearby.
    The City of Newark proposes to modernize and improve its 
neighborhood recreation facility so that it can serve as the 
neighborhood center for the newly rehabilitated area. The JFK 
Recreation Center has, in two buildings, a full sized gymnasium, and an 
Olympic-sized swimming pool under a retractable roof. But the buildings 
are not connected children must walk outside to get from the pool to 
the gym. This causes difficulty in programming and management, as well 
as potential health problems for young, as well as elderly, program 
participants. In addition, the buildings present fortress-like brick 
walls to the street; rather than being a neighborhood beacon, the 
facility appears forbidding. There is no green space or outdoor play 
areas, and no parking facilities. Equipment modernization is also 
needed for the pool filtration and air systems, so that activities can 
go on 365 days a year. To date, the City of Newark has allocated 
Capital Budget funds of $6,731,173 to this project.
                        fiscal year 2003 request
    The City of Newark is seeking $3,000,000 in order to upgrade 
mechanical systems, construct a new entryway, and make other 
improvements to make the JFK, Jr. Recreation Center a full-service 
community facility for the HOPE VI neighborhood.
    The consideration of this committee will be greatly appreciated by 
the citizens of the City of Newark.
                                 ______
                                 

 Prepared Statement of the Coalition for Indian Housing and Development

    On behalf of the members and Board of Directors of the Coalition 
for Indian Housing and Development, I would like to thank Chairwoman 
Mikulski, Ranking Member Bond and other distinguished members of the 
Subcommittee for the opportunity to submit public witness testimony.
                          hud's budget request
    As Chairman of the Coalition for Indian Housing and Development and 
the National American Indian Housing Council, and Executive Director of 
the Navajo Housing Authority, I come to you representing Americans who 
daily endure the most deplorable housing conditions in the country. 
These are people within America's borders who commonly live 15 to 20 
people in one small house. These are people for whom proper sewage 
facilities, roads, and indoor plumbing is often a luxury, rather than a 
standard. These are people who, like many other Americans, dream of 
owning their own homes.
    Indian housing is at a crucial stage. Many of the housing problems 
that have long plagued Indian communities remain unresolved. The 
passage of the Native American Housing Assistance and Self-
Determination Act of 1996 (NAHASDA) has given tribes and Tribally 
Designated Housing Entities (TDHEs) incredible new opportunities, and 
with adequate funding, NAHASDA can be the most important tool in 
building sustainable, healthy communities in Indian Country.
    President Bush has requested roughly $646 million for the NAHASDA 
block grant for fiscal year 2003. This is four million dollars less 
than was proposed in fiscal year 2002, and roughly two million less 
than appropriated for fiscal year 2002. In light of current events, the 
Coalition recognizes the new priorities of the Federal government in 
terms of homeland security; however, it is important intrinsic needs 
like housing for Americans are not sacrificed for the wartime effort. 
In times of peace or conflict, homeland security begins with a home, 
and it is only through steady increases in the NAHASDA block grant that 
the Native American population may begin to realize a home life outside 
of third-world-like destitution.
                    funding needs for indian housing
    CIHD believes Indian housing could be in more need of federal 
support than any other housing program in this country. The lack of 
significant private investment and the dire conditions faced in many 
communities mean that federal dollars make up a larger portion of the 
total housing resources than in other areas. NAHASDA has been one key 
to housing improvement and homeownership in Indian country. By direct 
application of NAHASDA funds, or by leveraging their tribe's NAHASDA 
allocation for large-scale projects, tribal housing authorities have 
been able to use NAHASDA to dramatically improve the severe living 
conditions on their reservations.
    CIHD supports NAHASDA and believes it has been effective in 
providing better housing for American Indians and Alaska Natives. 
Housing production under NAHASDA has more than tripled since its 
passage in 1996. Before NAHASDA, there were only around 2000 homes 
being built per year, now more than 25,000 homes are complete or under 
construction.
    For NAHASDA to continue to be effective, however, an increase in 
funding is necessary to meet existing housing shortages. CIHD estimates 
71,000 units need renovation or replacement, with an average cost of 
$26,000 each. New housing needs are at least 4,500 new units per year 
at an average cost of $96,000 per unit. Finally, existing housing 
operation and program operating costs are expected to be over $300 
million.
    The Coalition for Indian Housing and Development estimates that, to 
meet the suitable housing shortage as presented to us now, we need at 
least $1.0752 billion in funding for the NAHASDA block grant. 
Increasing the size of the block grant given to the office of Housing 
and Urban Development through the Native American Housing Assistance 
and Self-Determination Act (NAHASDA) from $650 million per year to $1 
billion per year is necessary to provide the nearly 200,000 housing 
units currently needed in Indian Country.
    Native communities are in dire need of improved housing. The 
Coalition for Indian Housing and Development and the National American 
Indian Housing Council estimate more than 40 percent of the Native 
American population lives in over-crowded or physically inadequate 
housing. For the Navajo Nation alone, the immediate need is between 
20,000 and 30,000 housing units. Spanning over 18 million acres of 
land, the Navajo Nation suffers from chronic unemployment and massive 
housing need. Over 56 percent of Navajos live below the poverty level. 
As for many other tribes across the nation, this is a situation that 
requires drastically increased federal assistance to remedy.
    Indian housing needs are many and varied. Basic infrastructure, 
low-rent housing, homeownership and housing counseling services are all 
crucial. The NAHASDA block grant allows tribes to determine their own 
needs and their own course of action. In this respect, NAHASDA is a 
model program and should be supported. In supporting NAHASDA, however, 
the Congress must also support improved technical assistance for tribes 
seeking to efficiently and effectively utilize NAHASDA's unique 
features.
    Although fully funding NAHASDA to meet the existing needs would 
require an increase in funds of $350 million, Native Americans would be 
well served if the Congress chose to increase the program incrementally 
over the next 5 years. For fiscal year 2003, $700 million, for fiscal 
year 2004 $775 million, for fiscal year 2005 $850 million, for fiscal 
year 2006 $925 million and for fiscal year 2007 $1 billion.
    Without an increase in funding, tribes and tribally designated 
housing entities will not be able to provide housing for the 1.6 
million Native Americans and Alaskan Natives who live without proper 
shelter. CIHD urges you to support an increase in NAHASDA block grant 
funding to at least $1 billion over the next five fiscal years.
                     the effect of new census data
    Recently released census data for 2000 confirm a major increase in 
the Native American population. Data show a doubling of the number of 
Native Americans and Alaska Natives from 1.96 million to 4.1 million, 
including Americans of mixed-race Native descent. For Native Americans 
and Alaska Natives that are not of mixed-race, data show an increase of 
over 28 percent for a total of 2.5 million.
    For a population struggling intensely to provide adequate shelter 
for its families, an increase of this magnitude puts an incredible 
strain on the restricted funds tribes rely on. These census figures 
only confirm what tribal leaders and tribal housing administrators have 
known for some time--housing needs on reservations have outgrown 
available funding. While not all Native Americans live on reservations 
where housing needs are the most severe, tribal leaders attest to 
population increases across the board, including on reservations.
    In light of this new data, it is the Coalition's hope that Native 
communities will receive the funding increases outlined to offset 
hardship brought on by rapidly growing need.
                            toxic black mold
    The growth of black mold in tribal homes has been linked to health 
risks ranging from flu-like symptoms, skin rashes, fever, and headaches 
to inflammation of the respiratory tract, neurological problems and 
suppression of the immune-system. In more recent years, black mold is 
also suspected to blame for several deaths, particularly of children. 
As of August 1, 2001, HUD compiled a list of over 20 tribal areas 
experiencing mold problems, including 320 federally-subsidized homes on 
the Turtle Mountain Indian Reservation. Other areas affected are 
concentrated in the northeast, northwest, and northern plains where wet 
seasons and flooding have exacerbated the mold growth. Tribal housing 
officials say black mold is ravaging their homes, putting a terrible 
strain on already tight housing funds, since many homes with black mold 
must be remodeled or completely destroyed to remedy the situation.
    No specific funding currently exists for addressing black mold in 
tribal homes, but estimates are that $20 million is needed to fix the 
situation at Turtle Mountain alone. Tribes have been trying to address 
the problem with their NAHASDA block grant funds (approximately $650 
million for fiscal year 2002), but this block grant was not created for 
disaster relief. It was created for new construction and normal 
rehabilitation of aging homes. Under objection from CIHD, $5 million 
was taken from NAHASDA in fiscal year 2001 specifically for Turtle 
Mountain for black mold. NAHASDA is not large enough to support this 
sort of set-aside, particularly since so many other tribes across the 
country are experiencing the same problem.
    Black mold is not only a problem for tribes, however. It has also 
be causing problems for the rest of America, but to date, no particular 
agency or program has been able to fill in the gaps.
    Recently, HUD Secretary Mel Marinez authorized the use of a new 
weapon for tribes and other affected groups to battle Black Mold. 
Secretary Martinez is opening up the Lead Based Paint Hazard Control 
Grant Program and Healthy Homes Initiative to those homes and families 
being harmed by Black Mold. Having been highly successful program in 
dealing with the lead based paint crisis, the Coalition is excited by 
the prospect of a new awareness and remedy of Black Mold on 
reservations; with adequate funding, the incorporation of Black mold 
into the accepted uses of the Lead Based Paint Hazard Control Grant 
Program could mean its eradication. The Coalition for Indian Housing 
and Development supports budget increases for HUD's Lead Based Paint 
Hazard Control Grant Program and Healthy Homes Initiative to a total 
allocation of $30 million.
           public and indian housing drug elimination program
    Eliminating funding for the Public and Indian Housing Drug 
Elimination Program (PIHDEP) would abruptly halt successful efforts by 
tribes around the country to combat drug abuse and its resulting 
effects on tribal communities. The President has put an end to this 
important program with a redistribution of funds to increase operating 
subsidies for public housing authorities in hopes that PHAs will use 
the funds for more effective anti-drug activities or for other 
priorities.
    Tribes and TDHEs do not participate in public housing programs and 
therefore receive no public housing operating subsidies. The 
Administration claims the program should be eliminated because of 
general misuse of funds and ineffective anti-drug activities, but in 
Indian Country, these programs have seen remarkable success.
    According to an eleven-month study conducted by NAIHC in 1999 and 
2000, the PIHDEP has created an opportunity for TDHEs to develop 
innovative, creative, unique solutions to crime reduction in Native 
communities. A National American Indian Housing Council study noted 
that, prior to the Public and Indian Housing Drug Elimination Programs, 
tribes reported feeling overwhelmed with the burden of having to 
address these problems on their own, without knowledge of how to solve 
the problems or money with which to build an infrastructure of programs 
and services designed to address these community issues.
    HUD Secretary Mel Martinez has said that the PIHDEP is too open-
ended and that HUD has no business being involved in such a program. 
While it is not possible at this point to come to quantitative 
conclusions about the percentage of improvement in these communities in 
regard to any decrease in crime or substance abuse, the NAIHC study 
indicates that the PIHDEP is having a positive effect in tribal 
communities. Decreased crime and improvements in community values can 
do much to support sustainable housing conditions on reservations.
    The Coalition for Indian Housing and Development feels it was an 
oversight on the part of the Administration to end this program without 
arranging for supplemental funding for tribes elsewhere. A blanket 
verdict on the Drug Elimination Program does not take into account 
several successful programs around the country, including Indian Drug 
Elimination activities. If this is the direction the Department chooses 
to go, providing operating subsidies to take the place of PIHDEP, then 
the tribes must be compensated with an increase in the NAHASDA block 
grant to support drug elimination programs on reservations.
             rural housing and economic development program
    CIHD is also concerned with the elimination of the Rural Housing 
and Economic Development Program from the President's budget for the 
second year in a row. We are grateful to the Senate Appropriations 
Committee for insuring that the program was funded in fiscal year 2002 
despite it being left out of the President's budget and the House 
appropriations bill.
    Although funded at only $25 million for the past 2 years, a large 
portion of RHED grant recipients have been tribes and TDHEs. 
Furthermore, although RHED has been said to duplicate USDA programs, on 
the contrary, this program has been able to fill in for tribes where 
other programs have not. It has been a new and useful tool in capacity 
building and for supporting innovative housing and economic development 
activities. Taking into consideration the limited resources available 
in Indian Country, removing useful programs is counter-productive. If 
the goal is to increase the capacity of tribes and other rural 
communities in order to make them self-sustaining, this is just the 
sort of program that ought to be supported by the Congress and 
Administration.
                  funding for native hawaiian housing
    In 2000, Congress enacted the Native Hawaiian Housing Assistance 
program (Title II, Public Law 106-568). This is the first such effort 
to provide aid for Native Hawaiians since the Hawaiian Homes Commission 
Act of 1920. Modeled after the NAHASDA, the new Native Hawaiian Housing 
Assistance program provides tools desperately needed to improve Native 
Hawaiian housing.
    Although housing conditions for the greater Native American 
population are appalling, Native Hawaiians continue to have the 
greatest unmet need and the highest rates of overcrowding in the United 
States. Overcrowding is seen in Native Hawaiian homes at a rate of 36 
percent as opposed to 3 percent for all other homes in the United 
States. While housing problems are seen in 44 percent of American 
Indian and Alaska Natives homes, the number is actually higher at 49 
percent for Native Hawaiians, and only 27 percent for other homes in 
the United States. Right now there are 13,000 Native Hawaiians, or 95 
percent of those eligible to live on the Hawaiian Home Lands, who are 
in need of housing.
    In light of these desperate conditions in Hawaii, the President has 
authorized $10 million in fiscal year 2003 for the Native Hawaiian 
Housing Block Grant. The Coalition for Indian Housing and Development 
supports this request, and is encouraged by the Administration's 
support of this new program.
                   community development block grants
    The Community Development Block Grant (ICDBG) program is a crucial 
tool in the development of infrastructure and economic opportunities in 
tribal communities. The Indian set-aside under the CDBG program has 
been 1.5 percent of the total appropriation for several years. The 
Coalition for Indian Housing and Development believes that to both 
develop effective housing strategies and to stimulate economic 
development needed to support homeownership and necessary to job 
creation, this ICDBG amount should be expanded. The President's budget 
reflects an increase of $2.5 million to the Indian Community 
Development Block Grant program. While CIHD is encouraged by the 
President's recognition of the need to increase ICDBG, the Coalition 
feels that to adequately meet the basic needs of tribes, the fiscal 
year 2003 increase should be boosted to reflect at least 3 percent of 
the total CDBG program allocation, or $144 million.
                               conclusion
    In closing, I would again like to thank all the members of this 
subcommittee, in particular Chairwoman Mikulski and Ranking Member Bond 
for their continuing support for Indian housing programs and the 
tribes. CIHD looks forward to working with each of you in this and 
future sessions of Congress and I am happy to answer any questions you 
may have.
                                 ______
                                 

              Prepared Statement of College Partners, Inc.

    Madame Chairwoman and members of the subcommittee, thank you for 
opportunity to submit testimony on behalf of College Partners, Inc 
(CPI) regarding fiscal year 2003 appropriations for the Department of 
Housing and Urban Development. CPI is a not-for-profit organization 
comprised of Spelman College, Morehouse College, and the Morehouse 
School of Medicine in Atlanta, Georgia.
    CPI evolved out of a shared commitment to enhance the 
revitalization of Atlanta's West End community which sits at the 
boundary of the Atlanta University Center (AUC), and is less than three 
miles from downtown. Our principal objective is to acquire and 
revitalize an eleven acre plot of land in Atlanta's West End which 
holds tremendous potential for our institutions and the surrounding 
community. With the acquisition of this property we will blend the 
colleges with the community and create sustainable development through 
activities focused on quality housing, youth and adult education, job 
training, health services, and public awareness.
    We would like to express our appreciation for the $200,000 that was 
provided for this important initiative in the fiscal year 2002 VA-HUD 
appropriations conference report. With respect to fiscal year 2003, we 
request that the subcommittee provide $5 million from the Economic 
Development Initiatives account to support this innovate project.
    We would now like to discuss in greater detail the CPI partnership, 
and what we are trying to accomplish for our institutions and the West 
End community.
The West End Community
    The immediate West End includes the now-demolished Harris Homes 
public housing project, minor retail and commercial properties, an 
insurance field office, and a MARTA rail and bus line. Moving outward, 
the property is three miles southwest of prime commercial developments 
such as Phillips Arena, the Georgia Dome, and the World Congress 
Center. Despite the West End community's strategic location, however, 
the area has been unable to significantly capitalize on the current 
renewed interest in ``in town'' residential and commercial development. 
Recent reports profile the West End as a community with high 
unemployment, low educational attainment, deteriorating and/or vacant 
housing, and a preponderance of families that live at, or below, the 
federal poverty level. According to the 1990 U.S. Census data, 
statistics show that this community suffers from an unemployment rate 
of over 25 percent, while the median income of the Harris Homes 
community in particular was a staggering $5,912. Moreover, while 61 
percent of the families are living below the poverty level, over 70 
percent of the female-headed households are similarly situated. 
Additionally, these and other statistics significantly affect the 
health and mortality rates of city residents. Subsequently, the overall 
mortality rate of Atlanta African American residents, which are the 
overwhelming majority in the West End community, is almost one and one-
half times that of white residents.
The Vision
    Our vision includes transforming the under-developed property in 
the Lee Street Corridor into an inviting entrance to a vibrant learning 
and living environment. The development will integrate the colleges 
with the surrounding neighborhoods to create an educational corridor or 
``College Town'' and will provide an improved physical linkage between 
the neighborhoods and adjacent college campuses. Ashby Street, 
traditionally a dividing line between the Colleges and neighborhoods 
west of the campuses, will be redesigned with a fabric of public 
spaces, landscaping and local-serving retail uses. Ashby Street will 
become a ``seam'' joining the neighborhoods and the Colleges, as 
opposed to the divider it has been in the past.
    CPI is working in partnership with the Atlanta Housing Authority 
(AHA) to acquire the 11-acre tract of land in a value-for-value land 
swap. As part of an agreement signed in May 1999, CPI agrees to 
purchase real estate in other parts of southwest Atlanta in exchange 
for the 11-acre tract held by AHA. Acquisition of this property is 
critical to our efforts to expand the campuses for future growth. Such 
expansion is currently curtailed by Interstate Highway 20 and the 2,700 
public housing units that are within a one-mile radius of our campuses. 
The requested land will enable the surrounding community development 
process to continue and remain on target with the objectives of the 
city's Empowerment Zone, which already has improved the neighborhoods 
east and north of the campuses.
    With the acquisition of the requested land, the Colleges will be in 
a stronger position to expand their capabilities and establish and/or 
expand programs in our institutional areas of expertise and experience. 
For example;
    Spelman College, through its Education department, plans to provide 
local residents with training in early childhood development and 
childcare while simultaneously providing a hands-on laboratory for 
student education majors. Through the College's Continuing education 
program, Spelman would be able to work with single heads-of-households 
to transition from welfare to work. Additionally, Spelman would be able 
to expand it's Entrepreneurial Business Development Program, which 
already has provided nearly 200 local community residents with training 
on how to establish, maintain, and expand a home- based or micro-
enterprise in retail, service, and manufacturing industries.
    Morehouse College anticipates expanding its partnership with the 
Fannie Mae Foundation and HUD to provide leadership training to 
community organizers, local nonprofit organizations, and the members of 
the Neighborhood Planning Units (NPUs). The Fannie Mae project is 
designed to establish mutually beneficial relationships with adjacent 
communities that will result in sustained economic and social 
improvement and provide students with service- learning opportunities 
that cultivate civic growth and development. Additionally,
    Morehouse, in partnership with each of the other AUC institutions, 
has already taken the lead to work with the Atlanta Public Schools in 
the development of an application to establish a charter school, which 
will have an emphasis on mathematics and science and will provide 
clinical experiences for aspiring teachers from each of the AUC 
institutions.
    The Morehouse School of Medicine has made health services an 
integral part of its focus in developing primary care physicians and 
anticipates expanding its Community Health and Preventive Medicine 
Programs. Several components of the program include a Health Promotion 
Resource Center, a Center for Public Health Practice, and a Preventive 
Medicine Residency Program. Each of these programs is designed to 
partner with communities to provide services to assist with health 
related issues. Additionally, the School would like to expand its 
Benjamin Carson Science Academy, an initiative to introduce minority 
elementary and middle school students to health and science careers 
early in their education. The program, which has worked aggressively 
with youth from Harris Homes, consists of a Saturday academy and a 
four-week summer component.
    Additionally, the acquisition of the property will allow all three 
CPI institutions to expand their campuses, helping to alleviate 
problems associated with projected student enrollment increases and 
limited space within the AUC generally. The combined student enrollment 
for all six AUC institutions is approximately 12,700, up from 8,400 in 
1990, an increase of over fifty percent. Moreover, combined enrollment 
is expected to grow by approximately 2,000 students over the next 
twenty years. All six AUC institutions are in full support of CPI and 
this initiative.
    A study conducted by real estate appraisers Pritchett, Ball, & Wise 
comments on the West End community that, ``within the life cycle of a 
neighborhood, including growth, stability, decline, and revitalization, 
we place this neighborhood in the early stages of revitalization.'' The 
West End's geographic proximity to the downtown epicenter, coupled with 
its balanced set of land uses, lends the area to reap secondary 
benefits from housing to entertainment to small-, mid- and large-scale 
commercial development. CPI acknowledges and appreciates the academic, 
community, and municipal support that it has received from the City of 
Atlanta generally and the West End community specifically. By acquiring 
this land and utilizing it, CPI will be able to give back to the West 
End community and assist it in its development efforts.
    Madame Chairwoman, thank you for the opportunity to submit 
testimony to the subcommittee and for your support of this important 
initiative. If you have any questions or need additional information, 
please do not hesitate to contact us.
                                 ______
                                 

  Prepared Statement of the Consortium of Social Science Associations 
                                (COSSA)

    The Consortium of Social Science Associations (COSSA) represents 
over 100 professional associations, scientific societies, universities 
and research institutes concerned with the promotion of and funding for 
research in the social, behavioral and economic sciences (SBE). COSSA 
functions as a bridge between the research world and the Washington 
community. A list of COSSA's Members, Affiliates, and Contributors is 
attached.
    COSSA appreciates the Subcommittee's past strong support for NSF, 
particularly last year's substantial increase over the President's 
proposed budget. We are well aware that every year the Subcommittee 
confronts difficult choices among competing agencies under its 
jurisdiction in a budget constrained by the desires of some to limit 
Federal spending. COSSA hopes that NSF will remain an important 
priority for the Subcommittee.
    COSSA strongly believes that investing in NSF's research and 
education efforts will help ensure this country's future economic well-
being and national security. Therefore, COSSA finds the 
administration's proposal for a 5 percent increase for NSF in fiscal 
year 2003 inadequate. In agreement with Coalition for National Science 
Funding (CNSF), recommends a fiscal year 2003 budget for NSF of $5.5 
billion. COSSA strongly endorses this recommendation. This budget 
enhancement will return many-fold its value in economic growth, help 
save lives, promote prosperity, improve society, and provide more 
excellent science from more excellent scientists.
    Over the past half century science has been the engine that has 
driven the nation's economic success and quality of life improvements. 
Fundamental university-based science has clearly delivered the great 
technological advances that provided new methods and products that have 
advanced our nation forward. These include: geographic information 
systems, World Wide Web search engines, automatic heart defibrillators, 
product bar codes, computer aided modeling, retinal implants, optical 
fibers, magnetic resonance imaging, and composite materials used in 
aircraft.
    A substantial increase for NSF in fiscal year 2003 will help 
prepare us for the great advances in the 21st Century. It would provide 
NSF a much-needed boost for the size and duration of its research and 
education grants. It would also lead to improving the scientific 
literacy of the nation's students and general population. As our 
business leaders continually point out, without improvements in 
education and training and new innovations and scientific findings, 
economic growth stagnates. NSF needs a significant influx of new funds.
The Fiscal Year 2003 Budget and the Social, Behavioral, and Economic 
        Sciences (SBE)
    COSSA supports a substantial increase for the Research and Related 
Activities account, so that SBE and the other directorates can continue 
to fund important research seeking scientific breakthroughs to help 
secure a better life for people and society. A significant increase 
will also provide enhanced support of the fundamental research that 
social, behavioral, and economic scientists conduct to understand 
economic, social, and political behavior.
    COSSA is delighted with the substantial percentage increase in the 
President's proposed budget for the SBE directorate. However, because 
of its small base, the absolute dollar increase remains smaller than 
the research opportunities in the areas this directorate supports. In 
addition, for Fiscal 2003, NSF has designated the SBE directorate a 
``priority area,'' and provided it with a down-payment on significant 
increases in the future. As Norman Bradburn, the Assistant Director for 
SBE, told COSSA's 20th Anniversary symposium, new tools will enable the 
social and behavioral sciences to expand their research and produce new 
breakthroughs. These tools include: neuroimaging, collaboratories, 
wireless computers, web-based surveys, geographic information systems, 
and statistical techniques like data mining and hierarchical analysis. 
In particular, the importance of data mining techniques grows more 
important as the quantity and complexity of data grows immense.
SBE Research and Technological Change
    SBE will support research with the use of these new tools to study 
how technology and society advance through continual interactions. 
Rapid technological change impacts all areas of our lives. We need to 
know how this alters our economic, political and social systems. It has 
clearly led to the growth of new businesses in areas of biotechnology, 
geographic information systems, and now nanotechnology. Social and 
behavioral scientists continue to study how these new tools have 
impacted business organizations and the SBE's Innovation and 
Organizational Change program is at the forefront of supporting this 
research.
    As members of Congress know, the new technologies have changed how 
we communicate with our decision-makers, and have also raised the 
possibilities of voting through the Internet. We have also tragically 
learned that these tools also create opportunities for anti-government 
groups to communicate and plan acts of destruction. They also raise 
questions of how governmental policies regarding intellectual property 
and privacy can be sustained in the face of all this change. SBE 
continues to support research in all of these areas.
    Our educational system has been overwhelmed by the introduction of 
technologies in the classroom and their use as a pedagogical tool. Yet, 
we still know little about its impact on learning. The social 
consequences of the Internet and other new forms of interpersonal 
communication also need investigation. How individuals interact with 
each other and with their society are also being affected by 
technology. Robert Putnam in Bowling Alone suggests that Americans have 
become less community oriented. September 11 may have changed that. 
However, we need to study the manifestations of that change and whether 
it has staying power.
    SBE stands ready to support studies on the social, political, and 
economic consequences of all of these changes and needs a significant 
influx of funds to do it. We urge you to support the SBE priority with 
a substantial increase for the SBE directorate.
SBE Research and Terrorism
    The tragic events of September 11 have certainly changed how 
Americans look at the world and their country. Utilizing hypotheses and 
tools derived from research on reactions to earlier disasters, natural 
and man-made, SBE investigators have studied the reactions of people to 
the World Trade Center and Pentagon bombings.
    Using Small Grants for Exploratory Research (SGER), NSF's SBE 
directorate was able to rapidly fund post-September 11 research in 
Social Psychology, studying such issues as: predicting affective 
reactions to collective loss; how individuals respond to a salient and 
pervasive health threat such as anthrax; resiliency and coping in the 
wake of the attacks and ongoing threats. SGER awards were also made in 
other SBE programs: Human Cognition and Perception, Geography, 
Sociology, and Political Science. The sociology awards included one for 
a supplement to the General Social Survey for field work starting on 
September 13 to assess attitudes towards a number of issues, including 
confidence in government, civil liberties, and health issues. Another 
award was for a post-crisis analysis of attitudes and values of the 
Islamic public in Egypt, Iran and Morocco.
    The SBE directorate's long-term approach to research on terrorism 
includes the expectation of increased funding for basic research in a 
number of areas, including: the communication of risk; decision-making 
and responses of institutions, governments, organizations and social 
groups to extreme events including terrorism, natural and human-
generated disasters; the structure, formation, and behavior of social 
groups and networks; formation, mobilization, trajectories and 
consequences of social protest; social identities of immigrant, racial, 
and ethnic groups; experimental studies on the formation of status 
beliefs, trust and cooperation; fundamental research on 
democratization; multi-linguality (basic linguistic research on the 
structure of languages underlying natural language understanding, 
speech recognition and automatic translation); corpus linguistics, the 
statistical and linguistic analysis of bodies of text, including 
written documents e-mail correspondence to discover patterns and 
regularities that can be used for analysis, including source 
attribution; developmental research, including research on adolescence, 
to examine attitude formation, group behavior and the effects of 
mediators of learning, transfer of learning and environmental factors 
on behavior, emotion, cognition, and perception.
    Since terrorists are people, and terrorism is behavior, SBE 
scientists are participating in the National Academy of Sciences' 
efforts to help understand terrorism, terrorists, and how to stop 
further destructive actions. There is a sub-panel, chaired by Neil 
Smelser, of the Branscomb-Klausner committee, that is investigating the 
social/behavorial aspects of terrorism. In addition, the National 
Research Council's Committee on Law and Justice has instituted a 
roundtable chaired by Assistant Attorney General Michael Chertoff and 
former Deputy Attorney General Philip Heymann, which explored many 
issues at its first meeting on March 18. One of these used basic 
research on adolescent behavior to examine how young men are recruited 
into terrorist groups. The other focused on criminal deterrence 
research to look at disincentives for participating in terrorist 
activity. Also at the meeting Martha Crenshaw, a political scientist 
presented a history of terrorist activities in the past 30 years, that 
puts September 11 into perspective.
    NSF has also funded a workshop that helped geographers develop a 
research agenda on terrorism. Geographers were instrumental in helping 
New York City respond to the attacks on September 11 by using 
geographic information systems to dispatch rescue teams and disaster 
response units. The geographers will employ their experience in 
researching hazards and natural disasters, regional and international 
activities, and the tools of geospatial data and technologies to 
examine all aspects of terrorism. In the past few weeks, psychologists, 
political scientists and others have met with the FBI Behavioral 
Science Unit at Quantico, VA to their expertise from their research 
experiences to combating terrorism in the U.S. Much of the basic 
research that contributes to these activities has been supported by 
NSF's SBE directorate.
Social and Behavioral Science Research Contributions to Public Policy
    As part of the Consortium's 20th Anniversary, late last year we 
published Fostering Human Progress: Social and Behavioral Contributions 
to Public Policy. In the book, COSSA discussed how social and 
behavioral research has impacted six societal goals: Creating A Safer 
World; Increasing Prosperity, Improving Health, Educating the Nation, 
Promoting Fairness, and Protecting the Environment. Many of the 
research studies cited either had initial NSF support or grew out of 
the basic research supported by the Foundation. This includes the 
training of researchers and policy makers.
    One example of the NSF supported research under Creating A Safer 
World focuses on the difficulties nations have had with their 
transitions to democracy. Research conducted by James Gibson of 
Washington University, St. Louis, Donna Bahry of Vanderbilt, and Brian 
Silver of Michigan State have examined the struggles in Russia, while 
Gibson has also looked at South Africa.
    Another aspect of Creating A Safer World deals with reductions in 
personal violence. The NSF-supported National Consortium on Violence 
Research continues to research into the causes and correlates of crime 
and the impacts of various policies on big city crime reduction in 
recent years.
    Nobel Prizes validate research that helped Increase Prosperity. The 
2001 award went to three NSF supported economists--George Ackerlof, 
Michael Spence, and Joseph Stiglitz--for their fundamental 
contributions to the understanding of asymmetric markets. These are 
markets in which one side has more information than the other. The film 
and book ``A Beautiful Mind,'' illustrated that game theory and its 
applications have also played a significant part in our understanding 
of prosperity and markets. Robert Solow's Nobel winning work on 
economic growth and the importance of technology to that growth is 
still studied and refined today. Another Nobel prize winner, Robert 
Mundell, researched exchange rates, which helped lay the intellectual 
groundwork for Europe's common currency.
    Improving Health is not just a biomedical research endeavor, nor 
does it just result from discoveries in the physical sciences and 
engineering. Basic research in the social/behavioral sciences has 
examined the importance of lifestyle and behavior to good health. 
Interventions to change behavior stem from basic research in social 
psychology and other behavioral sciences. Studies of aging also utilize 
research in linguistics to examine how older people communicate and use 
language.
    Enormous contributions from the social and behavioral sciences 
influence how we Educate the Nation. The discoveries in basic cognitive 
science have determined how children learn. Research on childhood 
development focuses on the importance of early social relationships as 
a source of either support and adaptation or risk and dysfunction. The 
NSF support for Science of Learning Centers, Research on Learning and 
Education (ROLE), and the Interagency Education Research Initiative 
(IERI) carry on this research and merits support. In addition, the 
Children's Research Initiative deserves enhanced funding.
    In Promoting Fairness, the study of how our legal system works has 
been a province of NSF's Law and Social Science program for many years. 
Support for research of the jury system has resulted in landmark 
studies on how those bodies make their decisions. Research into police 
investigation practices has also discovered the difficulties of using 
eyewitness identifications and line-ups as evidence in criminal trials.
    In studies associated with Promoting the Environment, social 
scientists have played a significant role in researching various 
responses to environmental degradation. Economists, such as William 
Nordhaus of Yale, have developed models to examine the economics of 
global climate change. Geographers have demonstrated the importance of 
mitigation and adaptation strategies. The NSF-supported Center for 
Integrative Assessment at Carnegie Mellon University discovered that 
slowly changing environmental conditions did not tend to motivate 
adaptation and mitigation strategies. Other scientists have looked at 
societal responses to environmental challenges. Economists have 
developed cost/benefit analysis that has been an important tool in 
regulatory responses to environmental problems. Elinor Ostrom and her 
colleagues at Indiana's Center for the Study of Institutions, 
Population and Environmental Change have had NSF support to devise ways 
for institutions to equitably manage common pool resources such as 
fisheries, grazing grounds, and water supplies.
    On all these issues of public policy and others, NSF support for 
basic research in the social, behavioral and economic sciences has been 
vital. COSSA urges the Subcommittee to enhance that support.
Other Issues
    COSSA also supports increased funding for the Graduate Research 
Fellows program. It is time to provide the funds to increase the 
stipends to make them competitive with other Federal agencies' graduate 
fellows. Increasing the stipends should not occur as a trade off with 
the number of fellowships available. The stipends should be increased 
without a corresponding reduction in the number of these prestigious, 
portable, student controlled support for graduate training.
    The SBE directorates' Science, Resources and Statistics division is 
slated for a significant increase. This boost would allow for the once-
per-decade incorporation of the results of the decennial census to 
redesign the samples and surveys used to collect data on the scientific 
and engineering workforce. We urge the Subcommittee to support this 
increase.
    COSSA is concerned that the proposed project for neutrino research 
for the Homestake Mine in South Dakota, if funded without peer review 
and National Science Board approval, would create a dangerous precedent 
for NSF. The NSF budget must remain free of directed spending to a 
specific project that has not been through the merit review process. We 
are also concerned that the indemnification and liability costs, if 
incurred by NSF without large infusions of new funds, would dwarf NSF's 
other programs. We urge the Subcommittee to examine this project and 
ensure that NSF's integrity and budget are protected.
Conclusion
    The National Science Foundation remains the key funding agency for 
fundamental research in the social and behavioral sciences. Indeed, it 
is the premier funding agency in the world for basic research across 
all the sciences and engineering. The SBE community joins with the rest 
of the science community and the business and industrial community in 
supporting a substantial increase for NSF. We urge the Subcommittee to 
be as generous as it can in providing NSF with the support it needs to 
keep the U.S. on top in science and engineering to provide this nation 
and the world with the scientific and technological advances that will, 
as John Kennedy said, ``light the world,'' and bring us back from the 
darkness of September 11.
    Thank you for the opportunity to present COSSA's views on the 
fiscal year 2003 budget for the National Science Foundation and its 
Social, Behavioral, and Economic Sciences directorate.
                                 ______
                                 

           Prepared Statement of the Doris Day Animal League

    Mrs. Chairwoman and members of the Subcommittee, thank you for the 
opportunity to present testimony relevant to the fiscal year 2003 
budget request for the U.S. Environmental Protection Agency's (EPA) 
Office of Research and Development (ORD) and the Endocrine Disruptor 
Screening Program (EDSP). I hope the Subcommittee willconsider the 
concerns of the 300,000 members and supporters of the Doris Day Animal 
League and take steps to ensure the EPA recognizes the necessity of 
sound science approaches in its research, development and validation of 
non-animal, alternative toxicological test methods. These methods can 
significantly reduce the numbers of, and ultimately replace, animals in 
its testing programs.
Research, Development and Validation of Non-Animal, Alternative Test 
        Methods
    In recent fiscal years, the enacted budget for the ORD has hovered 
at approximately $500 million, comprising just 9 percent of EPA's total 
budget. In a report filed by the agency's own Science Advisory Board, 
fiscal year 2002 Presidential Science and Technology Budget Request for 
the Environmental Protection Agency: An SAB Review, the SAB urged 
Congress to increase the proportion to 12 percent by 2004. However, 
within these appropriations, we have found it difficult, if not 
impossible, to track funding by ORD for specific non-animal, 
alternative test methods to meet the EPA's needs in new testing 
programs. It is our contention that many emerging technologies, which 
often prove to be faster to run, less expensive and at least as 
predictive as current animal tests used for hazard and risk assessment, 
would benefit from research and development dollars.
    Thanks to the leadership of Chairman James Walsh, House 
Subcommittee on VA, HUD and Independent Agencies Appropriations, the 
House inserted a $4 million directive for the EPA to research, develop 
and validate non-animal, alternative test methods in the fiscal year 
2002 bill. Ultimately, the conference committee for the VA, HUD and 
Independent Agencies fiscal year 2002 bill agreed to the request.
    The animal advocacy community is greatly appreciative of this 
first-ever directive to the EPA. However, we have had significant 
difficulty in obtaining concrete information from the agency on the 
expenditure of funds to date and the plans for the rest of the fiscal 
year. Should this committee decide to champion a request for a 
directive for fiscal year 2003, I strongly urge you to include a 
reporting requirement in the language.
    I request that $10 million, from the current budget request, be set 
aside for research, development and validation for regulatory 
acceptance of non-animal, alternative test methods. Activities funded 
by these allocations shall be designed in consultation with the Office 
of Pollution Prevention and Toxic Substances. It is our preference that 
these test methods have direct relevance to new EPA testing programs, 
including the High Production Volume chemical testing program, EDSP and 
Children's Health initiative. Our request for $10 million represents 
just 2 percent of the total ORD budget and would be perceived by all 
stakeholders as a genuine commitment by EPA to new non-animal, 
alternative test methods.
    I also request that the Subcommittee require the EPA report to the 
Subcommittee by March 30, 2003 regarding expenditures and plans for 
additional expenditures for fiscal year 2003 funds.
Endocrine Disruptor Screening Program (EDSP)
    The Environmental Protection Agency has been mandated, under the 
Food Quality Protection Act and the Safe Drinking Water Act Amendments 
of 1996, ``to determine whether certain substances may have an effect 
in humans that is similar to an effect produced by a naturally 
occurring estrogen, or such other endocrine effects as EPA may 
designate.'' This statutory requirement was in response to concerns 
about abnormal reproductive and developmental effects in wildlife 
exposed to various chemicals in their natural environments. The EDSP is 
an effort to primarily assess the health effects to humans, with 
wildlife concerns a component of the program. On its face, it is a 
worthy endeavor.
    However, as currently proposed by the agency, thousands of 
chemicals may be tested by a protocol comprised of 16 test methods, 
most which are animal tests. It has been estimated that as many as 1.2 
million animals will be killed per every 1,000 chemicals tested under 
the current structure of the EDSP. These projections make this proposed 
program the largest use of animals in toxicological testing by a 
federal agency. For this reason, it is being carefully scrutinized by 
concerned animal protection organizations wanting to ensure that all 
concrete steps are taken with this new science to protect animals both 
wildlife and animals in the laboratories.
    The very language in the FQPA on which the EDSP is based can 
strongly address one of the concerns of the animal protection 
community. To my knowledge, this is the first time that the word 
``validation'' has been used as a requirement for sound science in 
developing test methods for a federal toxicological program. The 
statutory language required the screens and tests used in the EDSP to 
be validated to ensure appropriately relevant, reliable and 
reproducible tests and screens for the best science. The EPA, as co-
chair of the Interagency Coordinating Committee for the Validation of 
Alternative Methods, supports the following definition of validation: 
the process by which the reliability and relevance of a procedure are 
established for a specific purpose. (``Validation and Regulatory 
Acceptance of Toxicological Test Methods,'' NIH Report 97-3981).
    In 1996, when the Acts were passed, the Interagency Coordinating 
Committee for the Validation of Alternative Methods (ICCVAM) was in its 
infancy. Since then, federal regulatory and research agencies, 
including the EPA, have benefited from the effective assessment of 
validity of new screens and tests afforded by ICCVAM. The ICCVAM 
assesses the validity of new and revised test methods, including 
alternatives, that have cross-agency application. In light of the 
interagency agreements between EPA and the Food and Drug 
Administration's National Center for Toxicological Research and the 
National Institute of Environmental Health Sciences and the fact that 
the proposed test methods for the EDSP are new or revised for new 
endpoints, the ICCVAM could clearly provide a uniform assessment of the 
validity of all EDSP test methods. Indeed, the ICCVAM was permanently 
authorized by Congress in recognition of the continuing crucial role it 
can play to facilitate assessment of test methods that have cross-
agency application, while giving a level of confidence in the 
scientific assessment to various stakeholders.
    The Advisory Committee on Alternative Toxicological Methods for the 
National Toxicology Program, comprised of scientists from the public 
and private sectors, passed unanimous resolutions on two occasions 
strongly supporting the ICCVAM assessment. However, EPA continues to 
assert that the non-animal, alternative test methods can be reviewed by 
ICCVAM, while the animal test methods will solely be reviewed by the 
agency's Science Advisory Board/Scientific Advisory Panel (SAP/SAB). 
This approach gives animal protection advocates and other stakeholders 
cause to believe that two different standards of scientific validity 
may be applied. And while the agency claims it will use the same 
criteria for assessment of validation as the ICCVAM, the level of 
confidence in the ICCVAM is stronger. Also, any claim made by the 
agency that ICCVAM assessment may slow down implementation of the EDSP 
is simply hyperbole.
    I urge the Subcommittee to support the assessment of validation of 
tests and screens for the EDSP by the ICCVAM with appropriate fiscal 
support from the EPA. This interagency process can provide appropriate 
peer review of new tests and screens proposed for the EDSP. The ICCVAM 
should work with the EPA's SAB/SAP to avoid unnecessary delay in the 
program. Among other things, ICCVAM's assessment can serve to ensure 
due consideration is given for the replacement, reduction and 
refinement of the use of animals in these new tests and screens. This 
request should in no way be perceived as calling for a reduction of the 
President's request for activities in the Science and Technology 
account addressing endocrine disruption.
    I would also request that the Subcommittee require the Agency 
provide a report to the Subcommittee by March 30, 2003 regarding 
expenditures and plans for additional expenditures for fiscal year 2003 
funds under the EDSP.
Conclusion
    I respectfully request that the Subcommittee direct the EPA provide 
$10 million for the ORD to research, develop and validate non-animal, 
alternative toxicological test methods for regulatory acceptance.
    I also respectfully request that the Subcommittee direct the EPA to 
provide appropriate fiscal support to the ICCVAM for assessment of 
validation of all tests and screens to be incorporated into the EDSP.
                                 ______
                                 

    Prepared Statement of the Federation of American Societies for 
                          Experimental Biology

    Madam Chair and distinguished Members of the Subcommittee, I am 
Robert R. Rich, M.D., President of the Federation of American Societies 
for Experimental Biology (FASEB) and Executive Associate Dean at Emory 
University School of Medicine in Atlanta, GA.
    FASEB is the largest coalition of biomedical research associations 
in the United States and is comprised of 21 societies with more than 
60,000 scientist-members. FASEB's mission is to enhance the ability of 
biomedical and life scientists to improve, through, their research, the 
health, well-being and productivity of all people.
    It is my privilege to join my colleagues in other fields of science 
and engineering in thanking you for the Subcommittee's strong support 
for the National Science Foundation over the past years. Your 
commitment, Madam Chair, and that of Ranking Member Bond to a doubling 
of the NSF budget has inspired the research community to join with you 
in advocating such a worthy goal.
    We join with you, Madam Chair, and Senator Bond in urging the 
Subcommittee to recognize the vital contribution of NSF basic science 
research to our economy and our national security by increasing funding 
for NSF by at least $718 million, or 15 percent, over the $4.8 billion 
appropriated in Fiscal 2002.
                                mission
    NSF supports the ideas, people and tools necessary to maintain our 
leadership in science and engineering, which in turn significantly 
contribute to improvements in the nation's health, prosperity and 
welfare. NSF support has been central to the development of new 
technologies, promotion of national economic growth and establishment 
of the world's premier graduate research and education system. Although 
NSF's share of the federal research and development budget is less than 
4 percent, NSF provides nearly a quarter of all Federal support for 
basic research at academic institutions.
                         recent accomplishments
    Since its establishment in 1950, the NSF has served the nation by 
investing in the core disciplines of science, mathematics and 
engineering. Over the years, NSF's investments in research and 
education have helped the nation achieve an unmatched capability in 
scientific and technical fields. From 1960 to the present, a total of 
117 NSF-funded scientists have won the Nobel Prize. This prestigious 
group includes three physicists, three economists, a chemist and a 
biologist. One of the physicists, Eric Cornell, was awarded the NSF 
Alan T. Waterman Award for Outstanding Young Scientists in 1997. The 
biologist, yeast geneticist Leland Hartwell, was awarded the Nobel 
Prize in Physiology or Medicine for his contributions toward the 
discovery and understanding of genes that regulate cell division in all 
living organisms. This seminal research that began in the 1960s, paved 
the way for understanding how healthy cells divide and how errors in a 
cell division may lead to cancer and related diseases.
    Included below are a few examples of the bold and practical 
initiatives funded in the last year. These illustrate NSF's 
accomplishments in the generation, communication and translation of 
science in the United States.
  --An NSF-funded biomedical engineer at the University of Illinois at 
        Chicago has developed an implantable capsule that releases a 
        steady supply of insulin into the bloodstream of diabetics. The 
        capsule contains insulin-secreting cells that are protected 
        from the immune system by a silicon membrane containing 
        nanoscale pores that allow insulin to flow out while preventing 
        antibody access to the pancreatic cells.
  --The NSF investment in plant genomics has yielded a wealth of new 
        information about the genomes of economically important crop 
        plants, including corn, barley, soybean and tomato. Newly 
        funded projects focus on the complex gene networks that 
        regulate plant responses to drought, disease and changing 
        climate conditions.
  --Training professionals to handle cyber-threats that have the 
        potential to breach internet security is a national priority. 
        This year the NSF announced the establishment of the 
        Scholarships for Service Program to educate college students in 
        information assurance.
  --The program will offer Federal internships and will require a 
        commitment of working for the Federal Government for 1 year for 
        each year of scholarship received upon graduation.
  --Building on its longstanding sponsorship of basic research in 
        engineering, robotics, and social sciences, NSF was able to 
        respond promptly to the events of September 11, 2001. 
        Immediately after the terrorist attacks, NSF issued grants for 
        studies of structural failures, search robots and social 
        responses to the terrorist attacks.
                        scientific opportunities
    Recent investments in science, engineering and mathematics have 
given us revolutionary new products and technologies that will enhance 
our quality of life. The potential to create, improve and harness 
technology for the betterment of humankind has never been greater. We 
must continue our investments in basic research, instrumentation and 
education in order to ensure continued improvement in our quality of 
life.
Research and Related Activities
    The NSF Research and Related Activities budget supports fundamental 
research in science, engineering and mathematics through research 
grants awarded to scientists from research institutions across the 
nation on the basis of competition. NSF grants provide support for 
research in core disciplines as well as for interdisciplinary projects. 
Currently, the budget of the NSF is insufficient to support all of the 
meritorious proposals submitted. These unfunded proposals represent 
lost opportunities for advancing our knowledge in important fields of 
research. In order to maximize the number of proposals funded, NSF is 
forced to make smaller awards. Adjusting for inflation, the average 
size of an NSF grant is now worth less than it was 40 years ago. NSF 
grants are also shorter than those awarded by many other research 
sponsors. This means that NSF-supported scientists must apply for 
funding frequently, spending a higher fraction of their time seeking 
support and less time in the laboratory and classroom.
Research Instrumentation as Science Infrastructure
    Cutting edge technology and instrumentation have become far too 
expensive for many individual laboratories. Examples of such advanced 
instrumentation include mass spectrometers, DNA sequencers, and the 
computers and software for the analysis of data derived from use of 
this instrumentation. Extensive training in the use of this technology 
is necessary and costly. Complicated, state-of-the-art instrumentation 
also requires expensive maintenance and operation.
    The continued progress of science and engineering in the U.S. is 
dependent on the availability of advanced research equipment. NSF 
provides support to more than 2,000 colleges, universities and other 
research and education institutions for multi-user instrumentation, the 
development of new instrumentation and the improvement of research 
facilities at biological field stations and marine laboratories. NSF 
also invests in internet-based and other computer resources that 
advance research capabilities, allowing the U.S. to remain at the 
forefront of research.
Human Resources as Science Infrastructure
    At NSF, research and science education go hand in hand. Over 100 
U.S. Nobel laureates have had research funded by NSF and future Nobel 
laureates benefit from the many science education programs it sponsors. 
NSF provides educational support for almost 200,000 individuals, 
including teachers, students in primary and secondary schools, 
undergraduates, graduates and post-doctorates. NSF is a leader in 
reforming the science curriculum, and its innovative efforts are a key 
ingredient in the recipe for sustained progress in biomedical science.
    NSF support for science education programs is also critical for the 
general citizenry. Only a scientifically knowledgeable public will 
understand the social and cultural changes resulting from advances in 
science and technology. NSF continues its commitment to bring the best 
in science education to the general public, reaching over 150 million 
people through its programs.
                            recommendations
    FASEB supports a significant increase in the NSF budget to allow 
this agency to provide greater support for the fundamental research and 
interdisciplinary workforce training that has been its hallmark. Such 
an investment will allow larger and longer grants resulting in 
increased productivity and reduced administrative expenses. In 
addition, more proposals should be funded.
    To address these pressing needs, provide access to major research 
instrumentation and continue to educate Americans in the crucial fields 
of science, engineering and mathematics, we recommend that the NSF 
budget be increased by $718 million (15 percent) in fiscal year 2003.
    FASEB recommends a return to the commitment to double the NSF 
budget, in 5 years and therefore FASEB recommends that the NSF budget 
for fiscal year 2003 be increased by at least 15 percent, to $5.5 
billion.
                                 ______
                                 

       Prepared Statement of the Fleet Reserve Association (FRA)

    Madame Chairman: The Fleet Reserve Association (FRA) is grateful to 
have been invited to submit a statement on its request for funding the 
Department of Veterans Affairs for fiscal year 2003. On behalf of more 
than 140,000 shipmates, I extend gratitude for the concern and active 
interest generated by the Subcommittee in protecting, improving, and 
enhancing benefits that are richly deserved by our Nation's veterans.
    FRA was established in 1924 and its name is derived from the Navy's 
program for personnel transferring to the Fleet Reserve or Fleet Marine 
Reserve for the Marine Corps after 20 or more years of active duty but 
not 30 years to fully retire. During the required period of service in 
the Fleet Reserve, assigned personnel earn retainer pay and are subject 
to recall by the Secretary of the Navy.
    FRA is the oldest and largest professional military enlisted 
association exclusively serving and representing men and women of the 
three Sea Services. It continues to seek protection and equity for 
those who serve in or have retired from the United States Navy, Marine 
Corps, and Coast Guard, plus those veterans requesting assistance. The 
Association has been active over the past 78 years in pursuing 
Congressional and the respective Administration's support for enlisted 
quality of life and veterans' programs for Sea Services' personnel. FRA 
is also the leading enlisted association in The Military Coalition, 
which is compromised of thirty-two military and veterans' organizations 
representing 5.5 million Active Duty, Reserve, Guard, Retired, and 
Veterans, their families and survivors.
                       legislative goals in brief
    FRA's membership has an average age of 68 years, all veterans of as 
many as three wars, mostly retired and from the Sea Services. They have 
tasked the Association to seek Congressional action to authorize and 
fund the following:
  --Expand health care benefits for all veterans to include Medicare 
        Subvention.
  --Funds for the construction and leasing of additional nursing and 
        long-term care facilities.
  --Appropriate funds for the repeal of the statute requiring the 
        repayment of separation pay if the service member becomes 
        entitled to VA compensation.
  --Enhance educational programs and provide voluntary open enrollment 
        in the GI Bill for all current active duty military personnel, 
        including military personnel who never enrolled in VEAP or 
        MGIB.
         department of veterans affairs fiscal year 2003 budget
Fiscal Year 2003 Budget
    FRA continues its quest for a DVA budget that will provide adequate 
funding to care for the Nation's veterans, their families and 
survivors. Although the fiscal year 2003 budget is the largest increase 
ever for the DVA, FRA has listed the following veterans' programs it 
believes should be authorized and funded in full. The Association urges 
their consideration and adoption to assure America's veterans they will 
be fully compensated for their sacrifices while in the uniform of the 
Armed Forces of the United States, and that their families and 
survivors will be cared for as prescribed in the mission of the 
Department of Veterans Affairs.
                     veterans health administration
Expand Access to Veterans Health Care
    VA treatment facilities should be accessible to military retirees' 
use at no cost to the veteran. The Veterans Millennium Heath Care and 
Benefits Act (Public Law 106-117) Section 113 authorizes the Department 
of Defense (DOD) to reimburse the Department of Veterans Affairs (VA) 
for medical care provided to eligible military retirees. However, 
recent benefit changes under Public Law 106-398 with regard to TRICARE 
and Medicare eligible retirees have delayed retirees' who are enrolled 
as Priority Category 7 from utilizing the VA facilities without cost. 
This especially affects non-disabled military retirees under 65 years 
old, who do not have access to military treatment facilities (MTF).
    Eligibility Reform and the Uniform Benefits Package are appealing 
concepts offering our veterans a comprehensive health care plan that 
provides the care they need. However, the annual enroll ment 
requirement is of concern in addition to the uncertainty about what 
priority levels will be enrolled each year. FRA believes the Veterans 
Health Administration (VHA) medical treatment and care centers should 
be open to all veterans regardless of their ability to pay. The 
Association agrees there must be a system granting priority access for 
certain veterans; i.e., service-connected disabled at 30 percent or 
more; however, all veterans rated 20 percent or less, or non-rated, 
should be granted access on an equal basis first come, first served. 
FRA commends Secretary Principi for retaining Category 7 veterans in 
the VA Health system. Unfortunately, FRA strongly disagrees with the 
Department's proposal to change its policy to include a $1,500 yearly 
deductible for higher income, non-service-connected veterans. This 
would mandate forced choice between the VA and DOD Health systems. FRA 
opposes the forced choice proposal. Military retirees shouldn't have to 
choose, if they are eligible for both systems. The mission of these two 
systems is dissimilar in many ways, and focused on serving different 
populations with diverse needs.
    The Association supports continued collaborative efforts between 
the DOD and VA, to enhance the Defense Health System and provide the 
necessary care for a very deserving population. The Conference Report 
for the National Defense Authorization Act for fiscal year 2002 (H.R. 
2620), requests both the Secretaries of VA and DOD to submit to the 
Committees on Appropriations a credible plan to fully integrate 
facilities at three demonstration sites. FRA is opposed to a complete 
integration of these two Health systems, (per H.R. 2667). Before 
Congress considers this issue any further, it should wait until the 
President's Task Force to Improve Health Care for Our Nation's Veterans 
(PTF) issues its findings. (Please note that a copy of FRA's testimony 
to the PTF is available upon request.)
Medicare Subvention
    FRA is concerned about dwindling access to health care. When 
military retirees made decisions to retire in certain areas of our 
country, they did so with the thought of being close to a military 
installation or military treatment facility. Now because of BRAC 
actions, many of those military installations and MTF's are no longer 
available.
    In recent years, the House and Senate have passed VA Subvention in 
separate sessions of Congress, but have not been able to agree on a 
plan to test the use of Medicare funds in VA facilities. Medicare 
Subvention could prove beneficial to the government and stakeholders. 
For veterans, VA Subvention would mean improved access to care, as 
nearly 60 percent of enrolled veterans are Medicare eligible. These 
beneficiaries have paid into Medicare throughout their working lives. 
One important question that needs to be evaluated is whether the VA can 
deliver Medicare-sponsored services more efficiently than Medicare in 
the private sector.
    FRA recommends a demonstration project for the VA to test the 
feasibility of establishing Medicare Subvention programs within its 
health care facilities. FRA believes that VA Subvention could enhance 
older veterans' access to VA health care and determine whether 
government resources can be used more efficiently to pay for the care 
of growing numbers of older Medicare-eligible veterans. FRA also 
believes with Medicare Subvention, the VA can withdrawal its proposal 
for a $1,500 deductible for Category 7 veterans a proposal the 
Association strongly opposes.
Nursing Homes, Long Term Care, and other Health Care Programs
    FRA believes Public Law 106-117, Section 101, The Veterans 
Millennium Health Care Act makes great strides in providing the long-
term care our veterans deserve. However, this program is only 
authorized for a period of 4 years, and only for veterans who need care 
for a service-connected disability, and/or those with service-connected 
disability ratings of 70 percent or more. The Association urges the 
extension of this program and expansion to include veterans with 
service-connected disability ratings of 50 percent or more.
    Veterans of World War II and Korea are in their 60s or older, as 
are some Viet Nam veterans, and many require a greater level of long-
term care. As our veterans are aging, more will become dependent upon 
the VA to provide the necessary care in nursing homes, domiciles, state 
home facilities, and its underused hospital beds.
    The methodology used in collecting funds for the Millennium Act and 
then transferring the money over to the Treasury is flawed. VA's 
rationale for this practice is to allow more discretionary VA spending 
under the current caps set in the Balanced Budget Act. This is slight 
of hand rather than a reliable business practice and FRA firmly 
believes any money collected from veterans for veteran's health care 
should remain within the VHA.
Tobacco-related Illnesses
    In 1998, Congress changed the law prohibiting service-connection 
for disabilities related to smoking. Many veterans began using tobacco 
during their military service. It was a way of life and information on 
health risks associated with tobacco use and nicotine addiction was 
nonexistent. In earlier years it could be said that the Armed Services 
facilitated smoking by including cigarettes in meal rations, and 
selling cigarettes at discounted prices in military exchanges. FRA 
recommends that the Subcommittee urge the oversight panel to repeal the 
1998 decision not to review tobacco-related claims and, if adopted, to 
provide the necessary appropriations.
Medical and Prosthetic Research
    VA is widely recognized for its effective research program. FRA 
continues to support adequate funding for medical research and for the 
needs of the disabled veteran. In particular, FRA supports the fiscal 
year 2002 Senate Appropriations Committee report language that states, 
``Prostate cancer research has not kept pace with scientific 
opportunities and the proportion of the male population who are 
afflicted with the disease.'' FRA urges Congress to fund new research 
opportunities through inter-institutional collaboration.
TRICARE
    The VA's role as a TRICARE network provider is a potential source 
for increased access to quality health care for all DOD beneficiaries. 
If VA's capacity allows, and its core mission is not compromised, then 
the VA should play a vital role in offering primary and specialized 
care to TRICARE beneficiaries as a network provider.
    In a June 1995 Memorandum of Understanding, TRICARE contractors 
were authorized to include VA medical centers (VAMCs) in provider 
networks and, therefore, TRICARE contrac tors were encouraged to use VA 
facilities. Due to persistent billing and reimbursement problems, VA's 
potential as a network provider has not been fully realized. Despite 80 
percent of VAMC's currently being considered TRICARE network providers, 
three-quarters of the activity occurs in only 26 facilities and the 
total level-of-effort was miniscule according to the GAO (May 2000).
    Current TRICARE contracts will begin to expire over the next few 
years, and FRA is pleased that the VA is represented in the new 
contract development. TRICARE Management Activity (TMA) has 
acknowledged the importance of considering the VA in the next 
generation of contracts. In light of the growth of VA's Community Based 
Outpatient Clinics (CBOCs), the VA could be a service delivery 
alternative for TRICARE beneficiaries where capacity exists.
    The Association supports greater utilization of VA networks in 
partnership with TRICARE. Although many VA providers are also TRICARE 
network providers, actual usage has been marginal. Some reasons why 
this partnership has not been fully realized include:
  --VA providers are not qualified in specialties most in demand by DOD 
        beneficiaries. I.e. pediatrics and obstetrics and gynecology.
  --VA providers often cannot meet TRICARE Prime access standards.
  --Business practices in the areas of claims processing, IM/IT 
        systems' incompatibility, conflicts over pricing of services, 
        various administrative limitations and a lack of aligned 
        incentives impede use of VA providers by TRICARE Managed Care 
        Support Contractors.
    Expanding the use of VA providers as TRICARE-authorized providers 
to care for all TRICARE beneficiaries may improve active duty and 
retirees' access to care in areas where TRICARE Prime is not available.
                    veterans benefits administration
Separation Pays
    Under current law, service members released from active duty who 
fail to qualify for veterans' disability payments and are not accepted 
by the National Guard or Reserve, never have to repay any portion of 
separation pay. If, however, qualified for either, it's time for 
payback. FRA can not understand why an individual awarded service-
connected disability compensation should have to repay the Federal 
government for that privilege.
    FRA is totally opposed to the repayment requirement. The 
Association recommends the Subcom mittee to seek repeal of the 
applicable provisions in Chapters 51 and 53, 38 USC, to terminate the 
requirement to repay the subject benefits and, if necessary, to provide 
the required funding.
Court-Ordered Division of Veterans Compensation
    Service-connected disability payments are intended to financially 
assist a veteran whose disability may restrict his or her physical or 
mental capacity to earn a greater income from employment. FRA believes 
this payment is exclusively that of the veteran and should not be a 
point at issue in any States' Civil Actions. If a Civil Court finds the 
veteran must contribute financially to the support of his or her 
family, let the court set the amount allowing the veteran to choose the 
method of contribution. If the veteran chooses to make payments from 
the VA compensation award, then so be it. The Federal government, 
however, should not be involved in enforcing collections ordered by the 
states. Let the states bear the costs of their own decisions. FRA 
recommends the Subcommittee seek the adoption of stronger language 
offsetting the provisions in 10 USC, now authorizing Federal 
enforcement of state court ordered divisions of veterans' compensation 
payments.
Montgomery GI Bill (GI Bill)
    The Montgomery GI Bill is one of the major enticements for 
enlisting in the United States Armed Forces. FRA believes that 
continued improvements to the GI Bill are necessary in order to 
continuously attract new recruits per congressionally mandated 
recruitment levels each year.
    The Association is grateful for the passage of Public Law 106-419 
during the first session of the 107th Congress, which included the 
enhancement of MGIB benefits. However, FRA believes Congress should 
increase MGIB annually based on a benchmark of the current average cost 
of a 4-year state run college education.
    Would be participants in the MGIB are not permitted to enroll into 
the new MGIB because they never enrolled in the VEAP program. During 
the VEAP era, that program was considered to be insufficient in 
providing adequate funding for a college education. Therefore, current 
active-duty military personnel that never enrolled in VEAP or MGIB 
should be given an opportunity to participate. FRA recommends that if 
authorized, the Subcommittee provide the necessary funding.
    The Association continues to believe that veterans who take 
advantage of the GI bill will eventually return more money to the U.S. 
Treasury than was spent by the Federal government for their education. 
A concept once offered by the Treasury Department.
Disability Compensation Claims Processing
    Among veterans, VA's inability to process claims in a timely, 
accurate fashion continues to be one of its most serious problems and a 
primary source of dissatisfaction with the Federal government.
    The Veterans Benefits Administration (VBA) reports the average 
processing time for initial claims is 225 days. If that claim is 
appealed to the Board of Veterans Appeals (BVA), as many are, the 
average time for a decision is 620-plus days. Speed is an issue. More 
important is accuracy, a component of processing ignored for years and 
the cause of many delays in finalizing claims.
    As then Chairmen of the VA Claims Processing Task Force, Daniel L. 
Cooper stated on 8 November 2001, ``I must say that I think the VA has 
the necessary resources right now to do the job the Agency can't 
justify asking for more people right now.'' To improve quality, VBA 
must devote adequate resources for training personnel. It needs 
additional staff to conduct quality reviews of the work of each of its 
claims adjudicators in order to assess performance, impose 
accountability, and remedy deficiencies on the individual employee 
level. FRA believes the recommendations and changes proposed by the 
Task Force should be implemented and funded in order to improve the way 
VA does business.
                 national cemetery administration (nca)
Cemetery Systems
    The NCA has undergone many changes since its inception. Currently, 
the administration maintains more than 13,850 acres of developed and 
undeveloped land containing more than 2.3 million grave sites as well 
as 33 soldier's lots and monument sites. That equates to 120 cemeteries 
throughout 39 states, the District of Columbia, and Puerto Rico. One 
quarter of the nation's 26 million veterans alive today are over the 
age of 65. Rapidly aging veteran populations coupled with the death 
rate of World War I, World War II, and Korean veterans create resource 
chal lenges within the NCA. It was estimated that the number of deaths 
in 2001 were 674,400 veterans, and by 2006 that number will increase to 
687,000 annually, or an average of 1,900 funerals a day. During this 
time period, the interment rate will continue to rise thereby placing 
even greater strain on NCA's workforce and equipment.
    FRA is grateful to Congress for its increased funding for the new 
construction of future cemeter ies. The NCA is doing much to meet 
resource challenges and the demand for burial spaces for aging 
veterans. It could do more, but without sustained additional funding, 
the system will never meet the demand. FRA urges increased funding, so 
the NCA has exclusive rights for the purchase of land, preparation, 
construction and operation of new cemeteries, the maintenance of 
existing cemeteries, and the expansion of grants to states to construct 
and operate their own cemeteries.
    As part of the Veterans Education and Benefits Act of 2001, the 
government also will provide grave markers for veterans whenever 
requested, even if there is another marker on the grave. However, as it 
stands the law only applies to new burials, FRA believes the grave 
marker rule should be amended and funds appropriated to include the 
thousands of families denied grave markers in the past decade.
                other recommendations for consideration
    The following miscellaneous goals are offered for your support.
  --Continue to monitor implementation and ensure adequate funding of 
        military health care program enhancements.
  --Amend SBP to increase the annuity to 55 percent and shift the paid 
        up coverage effective date from 2008 to 2003.
  --USFSPA Support legislation eliminating inequities in the Uniformed 
        Services Former Spouses Protection Act (USFSPA).
  --Increase military manpower commensurate with demanding operational 
        commitments.
  --Improve compensation for career noncommissioned and petty officers 
        of the U.S. Armed Forces.
  --Provide adequate funding for military commissaries and continue 
        supporting its exchange systems.
  --Support equity in cost-of-living adjustments for all beneficiaries.
  --Protect personnel benefits for retirees and families residing at or 
        near BRAC sites.
  --Authorize and fund construction and maintenance of family and 
        bachelor housing, child care centers, and MWR facilities.
  --Support permanent change of station (PCS) process reform.
  --Support full funding for the Impact Aid Program for schools 
        enrolling children of military personnel.
  --Ensure parity for Coast Guard personnel with DOD pay and benefits.
  --Amend the tax code to exclude taxation on residential sales for 
        active duty members returning from overseas assignments.
  --Support enactment of a Flag desecration statute.
                               conclusion
    Madame Chairman. In closing, allow me to again express the sincere 
appreciation of the Association's membership for all that you, the 
Subcommittee, have done for our Nation's veterans over these many 
years.
    FRA is grateful to address its recommendations for funding of the 
Department of Veterans Affairs. Granted, not all veterans' issues are 
cited in this statement; however, the Subcommittee does have the 
Association's support for the improvement or enhancement of any 
veterans programs not addressed herein.
                                 ______
                                 

    Prepared Statement of the Friends of VA Medical Care and Health 
                                Research

    The Friends of VA Medical Care and Health Research (FOVA), a 
coalition of 78 medical research, specialty, physician, academic, 
patient advocacy and industry organizations committed to quality care 
for veterans, is pleased to provide recommendations regarding fiscal 
year 2003 funding for the Department of Veterans Affairs (VA) medical 
and prosthetics research program. FOVA strongly encourages the Senate 
Subcommittee on Veterans, Housing and Urban Development to support VA 
research by recommending an fiscal year 2003 appropriation of at least 
$460 million.
    FOVA's fiscal year 2003 recommendations build on the $20 million 
increase provided for the current year. The Administration's fiscal 
year 2003 budget request for a $38 million (10 percent) increase in 
research program dollars is notable for being the first time in many 
years that an administration has proposed funding sufficient to 
maintain VA's current level of effort in advancing treatments for 
conditions particularly prevalent in the veteran population including 
prostate cancer, diabetes, heart diseases, Parkinson's disease, mental 
illnesses, spinal cord injury and aging related conditions. We applaud 
the Administration and Department of Veterans Affairs Secretary Anthony 
J. Principi for recognizing the invaluable contribution VA research 
makes to delivering high quality care for veterans and toward improving 
the health of veterans and the nation.
    Please note that the Administration's budget request for a $38 
million increase for VA research includes a shift from OPM to VA of $15 
million in accrued government health and retirement benefit funds. 
Consequently, the Administration's budget proposes a $23 million (6 
percent) increase in research program funds plus $15 million in federal 
employee benefit expenses previously paid by an OPM account, for a 
total increase of $38 million (10 percent) over current year funding of 
$371 million. FOVA strongly recommends that the entire $38 million 
increase be allocated to VA research's programmatic needs and that 
accrued benefits continue to be paid out of the OPM trust fund.
    However, even a $38 million increase would not allow VA to address 
all of the opportunities it has to improve care for veterans, nor to 
meet the new challenges presented by the tragedies of September 11 and 
subsequent events. FOVA strongly encourages the VA-HUD Subcommittee to 
recommend an fiscal year 2003 appropriation of at least $460 million 
for the VA medical and prosthetics research program. This represents 
growth in program dollars of $89 million (24 percent).
    Four core needs justify the FOVA recommendation of $460 million:
    Investments in investigator-initiated research projects at the VA 
have led to an explosion of knowledge that promises to advance our 
knowledge of disease and unlock new strategies for prevention, 
treatment and cures. Attachment 1 is a list of just a few of VA's 
recent achievements and initiatives. However, many health challenges 
still confront the veteran community. Additional funding is needed to 
take advantage of the burgeoning scientific opportunities and to 
improve quality of life for our nation's veterans as well as the 
general public. FOVA urges the Committee to support additional funding 
for the following research priority areas identified by the VA for 
fiscal year 2003:
  --Quality of Care.--Additional funding for the Quality Enhancement 
        Research Initiative (QUERI) program would be used to fund 
        centers in prostate cancer and dementia/Alzheimer's.
  --Special Populations.--VA would expand research in quality of care, 
        community access and restoration of function to achieve greater 
        understanding of existing racial, ethnic and gender disparities 
        in health care.
  --Diseases of the Brain.--Additional studies are needed on the impact 
        of different classes of psychiatric drugs on cognitive and 
        behavioral function.
  --Treatment Strategies in Chronic Progressive Multiple Sclerosis.--
        Recent studies have shown that immunotherapy of acute MS can 
        reduce disability. More studies are needed to determine the 
        optimal therapy for patients.
  --Micro Technology.--In the area of low vision, work in retinal 
        prostheses is an emerging science and may restore sight lost as 
        a result of a variety of disorders including age-related 
        macular degeneration and retinal pigmentosa.
  --Patient Outcomes in Rehabilitative Care.--Specific areas of 
        emphasis include long-term care strategies to enhance patients' 
        independence and activities of daily life, consequences of 
        community reintegration and the impact of assistive technology 
        on quality and functionality of life.
  --Chronic Disease Management.--VA is proposing two major initiatives 
        in comparing clinical efficacy of (1) vascular surgery 
        conducted on and off cardiopulmonary bypass machines, and (2) 
        open versus endovascular surgery for abdominal aortic 
        aneurysms.
    The complexity of research combined with biomedical research 
inflation has increased the costs of research. The average cost of each 
VA research project is now $150,000, a 9 percent increase in just 2 
years. As a result, VA requires an increase of at least $15 million 
just to maintain a stable number of programs.
    In response to the events of September 11, VA seeks to establish a 
research portfolio to address the threats of bio-terrorism. This 
objective is consistent with VA's statutory obligation to provide 
medical back-up services in times of national emergencies. VA has an 
established history of research accomplishments in the areas of 
infectious diseases and immunology, including vaccine development. The 
laboratories of VA research scientists are disseminated nationwide, and 
are affiliated with top-flight universities. VA research provides a 
unique national resource that can be readily adapted and quickly 
mobilized in response to diverse biological threats.
    To meet this emerging challenge, consistent with H.R. 3253, the 
National Medical Emergency Medical Preparedness Act of 2001, FOVA 
strongly supports VA's proposal to establish four new centers of 
research excellence focusing on fundamental issues critical for 
responding to chemical, biological and radiological threats to public 
safety. The targeted research portfolio would include pathogen 
detection, disease diagnosis and treatment, protection, and vaccine 
development. The mission of these centers would also encompass the 
evaluation and management of illnesses consequent to military service, 
especially in our current conflict.
    VA's career development programs are a national resource for 
training the next generation of clinician scientists, those doctors who 
treat patients and address questions that have a direct impact on 
patient care. Additional funding is needed to expand this program in 
order to address the growing national shortage of clinician-
investigators.
    Separate from its recommendations for the VA research 
appropriation, FOVA strongly encourages the Committee to address the 
increasingly urgent need for improvements in VA's research facilities.
    In 1997, NIH conducted site visits of six VA research facilities 
and concluded that, ``VA has had increasing difficulty in providing 
sufficient resources via its congressional appropriation to 
satisfactorily fund the infrastructure necessary to support research at 
the VAMCs.'' It is FOVA's understanding that VA has made no 
significant, centrally administered investment in its existing research 
facilities since this finding. Ventilation, electrical supply and 
plumbing appear frequently on lists of needed upgrades along with space 
reconfiguration. Substandard facilities make VA a less attractive 
partner in research collaborations with affiliated universities; reduce 
VA's ability to leverage the R&D appropriation with other federal and 
private sector funding; and make it difficult to attract cutting edge 
researchers, both clinician investigators and laboratory scientists, to 
careers in VA. Facility R&D Committees regularly disapprove projects 
for funding consideration because the facility does not have the 
necessary infrastructure and has little prospect of acquiring it.
    Under the current system, research must compete with other medical 
facility and clinical needs for basic infrastructure and physical plant 
support. Unfortunately, the minor construction appropriation is 
chronically inadequate to meet facility needs for clinical improvements 
much less research upgrades, and year after year the list of urgently 
needed research repairs and upgrades grows longer. VA has identified 18 
sites in urgent need of minor construction funding to upgrade their 
research facilities. These sites plus the many facilities with smaller, 
but no less important needs, provide more than sufficient justification 
for an appropriation of $45 million specifically for research facility 
improvements.
    FOVA recommends that a new funding mechanism, such as a minor 
construction appropriation specifically for research facilities, be 
developed to provide a permanent, steady stream of resources dedicated 
to upgrading and renovating existing research facilities. State-of-the-
art research requires state-of-the-art facilities.
    FOVA thanks the Committee for consideration of its views. For 
questions or additional information, please contact any member of the 
FOVA executive committee listed on this letterhead. Thank you for your 
consideration.
    Organizations that have endorsed FOVA's fiscal year 2003 
recommendations: Administrators of Internal Medicine; Alliance for 
Aging Research; Alzheimer's Association; American Academy of Child and 
Adolescent Psychiatry; American Academy of Neurology; American Academy 
of Opthalmology; American Academy of Orthopaedic Surgeons; American 
Association of Colleges of Osteopathic Medicine; American Association 
of Colleges of Pharmacy; American Association of Neurological Surgeons; 
American Association of Spinal Cord Injury Nurses; American Association 
of Spinal Cord Injury Psychologists and Social Workers; American 
College of Clinical Pharmacology; American College of Physicians-
American Society of Internal Medicine; American College of 
Rheumatology; American Dental Education Association; American 
Federation for Medical Research; American Gastroenterological 
Association; American Geriatrics Society; American Gold Star Mothers of 
America; American Heart Association; American Lung Association; 
American Military Retirees Association; American Nurses Association; 
American Optometric Association; American Osteopathic Association; 
American Paraplegia Society; American Physiological Society; American 
Psychiatric Association; American Psychological Association; American 
Society for Pharmacology and Experimental Therapeutics; American 
Society of Hematology; American Society of Nephrology; American 
Thoracic Society; American War Mothers; Association for Assessment and 
Accreditation of Laboratory Animal Care International; Association for 
Research in Vision and Ophthalmology; Association of Academic Health 
Centers; Association of American Medical Colleges; Association of 
Pathology Chairs; Association of Professors of Medicine; Association of 
Program Directors in Internal Medicine; Association of Schools and 
Colleges of Optometry; Association of Subspecialty Professors; 
Association of VA Chiefs of Medicine; Blinded Veterans Association; 
Blue Star Mothers of America; Clerkship Directors in Internal Medicine; 
Coalition for American Trauma Care; Coalition for Heath Services 
Research; Congress of Neurological Surgeons; Digestive Disease National 
Coalition; Gerontological Society of America; Independence Technology, 
Inc.; Johnson & Johnson; Juvenile Diabetes Research Foundation 
International; Legion of Valor; Medicine-Pediatrics Program Directors 
Association; National Alliance for the Mentally Ill; National 
Association for Biomedical Research; National Association for the 
Advancement of Orthotics and Prosthetics; National Association for 
Uniformed Services; National Association of State Universities and Land 
Grant Colleges; National Association of VA Dermatologists; National 
Association of VA Physicians and Dentists; National Association of 
Veterans' Research and Education Foundations; National Mental Health 
Association; National Multiple Sclerosis Society; National Organization 
of Rare Disorders; Nurses Organization of Veterans Affairs; Paralyzed 
Veterans of America; Partnership Foundation for Optometric Education; 
Research Society on Alcoholism; Research!America; Society for 
Investigative Dermatology; Society for Neuroscience; Society of General 
Internal Medicine; Veterans Affairs Physician Assistant Association; 
and Veterans of the Vietnam War.
     Attachment 1--VA Research--Recent Achievements and Initiatives
    Promise for TB Vaccine.--Researchers at the Portland VA have found 
a unique mechanism by which human T cells recognize cells infected with 
Mycobacterium tuberculosis, the bacteria that cause TB. They have found 
that the molecule HLA-E can present TB antigens to cytotoxic T cells. A 
further understanding of this mechanism may facilitate the development 
of an improved TB vaccine. Worldwide, over 2 million people die each 
year from TB. Advancement towards an effective TB vaccine has 
significant potential to improve both national and global health.
    New Centers to Study Parkinson's Disease.--VA created six new 
centers specializing in research, education and clinical care for 
Parkinson's disease. The centers--in Houston, Philadelphia, Portland 
(Ore.), Richmond (Va.), San Francisco and West Los Angeles--will 
conduct research covering basic biomedicine, clinical trials, 
rehabilitation, and health services. In addition, each center will take 
part in a major VA clinical trial to assess the effectiveness of 
surgical implantation of deep brain stimulators to reduce symptoms. 
(Feb. 2001)
    Key to Wasting Syndrome Discovered.--Researchers at the San Diego 
VA Medical Center have unraveled the biological chain of events that 
causes wasting syndrome in mice, and identified the same process in 
liver and tissue from cancer patients. Wasting syndrome or cachexia, 
affects about half of all cancer and HIV/AIDS patients, as well as 
those with bacterial and parasitic diseases, rheumatoid arthritis, and 
chronic diseases of the bowel, liver, lungs and heart. By noting the 
similarities between animal and human models, researchers hope to 
expedite the development of treatments to help patients. (Dec. 2001)
    VA Evaluating Robotic Walker for Vision-Impaired.--VA researchers 
in Pittsburgh and Atlanta are testing a new high-tech walking frame 
designed to promote mobility and independence for the vision-impaired 
frail elderly. Using laser range finders, sonar sensors, steering 
motors and a motion controller, the Personal Adaptive Mobility Aid 
(PAM-AID) seeks to build the functionality of a guide dog into a robust 
walking frame. (Oct. 2001)
    VA Establishes New HIV Research Center.--VA is the nation's largest 
single provider of health care to HIV-infected persons. A new Center of 
HIV Research Resources at the Palo Alto VA Health Care System seeks to 
improve health care for veterans by assessing research and clinical 
trials throughout VA and other agencies and determining their potential 
for further research and clinical application. (Oct. 2001)
    Rehab Researchers Collaborate in Artificial Retina Trials.--VA 
researchers from the Rehabilitation Research and Development Service 
have recently collaborated with colleagues at the Louisiana State 
University Medical Center on studies to implant silicon-chip retinas in 
the eyes of patients blinded by retinal disease. About the size of a 
pinhead, the artificial silicon retinas are completely self-contained 
and require no wires or batteries. They contain 3,500 microscopic solar 
cells that generate electrical current in response to light. The 
implants stimulate healthy retinal cells underneath the retina in a 
pattern that resembles the light images focused on the chips. These 
images are then transmitted to the brain via the optic nerve. The 
implants are designed to treat retinitis pigmentosa and macular 
degeneration. (Sept. 2001)
    New Blood Test Speeds Diagnosis of Heart Attacks.--Researchers at 
the San Diego VA Medical Center have developed a simple, inexpensive 
blood test to increase the speed at which heart attacks are diagnosed 
in hospital emergency rooms. The new blood tests can rule out a heart 
attack with 100 percent accuracy within 90 minutes by looking for three 
cardiac enzymes released by distressed heart tissue during an attack. 
Ruling out a heart attack by traditional methods usually takes 6 to 24 
hours. As a result, critical care admissions dropped 40 percent and 
overall hospital admissions dropped 20 percent. (Sept. 2001)
    Chronic Lymphocytic Leukemia May Be Underestimated.--VA researchers 
at the Central Arkansas Veterans Healthcare System have found that the 
true incidence of Chronic Lymphocytic Leukemia (CLL) is substantially 
higher than estimated from the tumor registry database. Researchers 
credited the VA's Computerized Patient Record System (CPRS) as making 
the study possible by allowing researchers to review data from a large 
patient population without handling paper records. Revision in the data 
may show CLL to be the most common lymphoid malignancy in the United 
States. (Sept. 2001)
    Friendly Virus May Slow Replication of HIV.--VA researchers at the 
University of Iowa have shown that a form of the hepatitis virus called 
GPV-C may prolong the life of patients with HIV by preventing the HIV 
from replicating. GPV-C does not appear to cause any symptoms and may 
provide future therapy options for HIV. Specifically, the VA team 
showed that infecting human blood cells with GPV-C in the laboratory 
slowed the rate at which HIV multiplies. (Sept. 2001)
    Higher Estrogen Doses May Enhance Memory for Alzheimer's 
Patients.--VA researchers have found that higher doses of estrogen may 
enhance memory and attention for post-menopausal women with Alzheimer's 
Disease. Building on previous research showing the positive effects of 
estrogen administered by a skin patch, the researchers showed that a 
short-term administration of a higher dose of estrogen was found to 
significantly improve verbal and visual memory as well as attention in 
post-menopausal women. Although estrogen therapy does not show improved 
brain function for patients with mild to moderate Alzheimer's, it may 
slow the progression or prevent the disease. (Aug. 2001)
    Diet and Exercise Reduce Risk and Delay Onset of Type 2 Diabetes.--
As part of the Diabetes Prevention Program (DPP), researchers at the VA 
Puget Sound Health Care System and the University of Washington have 
collaborated in a major clinical trial that showed at least 10 million 
Americans can reduce their risk of contracting Type 2 diabetes with a 
regimen of diet and exercise. Funded by a wide group of federal 
agencies, private associations, pharmaceutical companies and product 
manufacturers, the DPP was ended a year early because the data had 
clearly answered the major research questions. (Aug. 2001)
    VA Researcher Identifies Breast Cancer Gene.--A VA researcher at 
the San Francisco VA Medical Center and the University of California at 
San Francisco led a study that showed that women who have a specific 
sequence of a transforming growth-factor gene have a 60 percent lower 
risk of developing breast cancer. (June 2001)
    Increased ``Good'' Cholesterol Reduces Rate of Strokes.--A VA 
Cooperative Study at 20 VA Medical Centers has found that treatment 
aimed at raising levels of high-density lipoproteins (HDL), commonly 
called ``good'' cholesterol, substantially reduces the incidence of 
strokes in some patients. Patients who received the drug Gemfibrozil 
had a 31 percent lower incidence of stroke. The result is part of a 
larger study aimed at showing that higher HDL levels reduce the risk of 
major cardiovascular events. (June 2001)
    Brain Development Continues into Late 40's.--An inter-agency study 
led by a VA researcher at the Central Arkansas Veterans Healthcare 
System has shown that the brain continues to develop in late 40-year 
olds. This view contradicts the current view that brain maturation ends 
before age 20 and may shed light on brain ailments such as Alzheimer's 
Disease, schizophrenia and drug addiction. Using magnetic resonance 
imaging (MRI) to measure brain development, the study showed that so-
called white matter--where memory, higher reasoning, and impulse 
functions take place--continues to develop until the age of 48, on 
average. (May 2001)
    Reduced Opiate Treatment May Increase Efficacy of Chronic Pain 
Treatment.--Researchers at the Tampa VA Medical Center have found that 
patients taking opiates for chronic pain conditions reported no greater 
pain intensity than those not taking the drugs. Those receiving opiate 
treatment did report increased impairment. The program gradually phased 
out opiate use and those who remained off the drugs reported less pain 
and increased functionality and reduced depression. (May 2001)
    New Technique to Evaluate Corneal Tissue for Implants.--Researchers 
at the Central Arkansas Veterans Healthcare System and the Jones Eye 
Institute at the University of Arkansas for Medical Sciences have 
developed a new technique to evaluate the surface of a cornea to 
determine suitability for transplantation. The new technique allows for 
evaluation of the entire surface of the cornea; current inspection is 
done visually or by methods that detect only large lesions. (May 2001)
    Old Drug Resists Pull of Cocaine.--Researchers at the Philadelphia 
VA Medical Center and the University of Pennsylvania report that 
Propranolol, a drug currently used to treat high blood pressure, helps 
addicts remain in treatment when the withdrawal effects of cocaine are 
especially high and treatment dropout rates are otherwise high. The 
research suggests that the drug reduces withdrawal symptoms by lowering 
the anxiety causing effects of adrenaline. (April 2001)
    New Method to Treat Osteoporosis, Grow Bone Tissue.--By using a 
synthetic form of estrogen that promotes bone growth without affecting 
the reproductive system, researchers at the Central Arkansas Veterans 
Healthcare System and the University of Arkansas for Medical Sciences 
may have discovered a new way to treat osteoporosis. Existing estrogen 
replacement therapy for osteoporosis is associated with several side 
effects including uterine cancer. This conceptual breakthrough could 
lead to a new generation of drugs and hormone therapies. (March 2001)
    Natural Recovery from Spinal Cord Injury Shown in Rats.--
Researchers at the San Diego VA Medical Center have found that rats 
with spinal cord injuries develop some spontaneous re-growth of nerves 
leading to increased motor function. In rats where 97 percent of the 
spinal cord connections are severed, rats were able to regain function 
within four weeks of surgery. Further research in continuing to 
determine how this process of ``sprouting'' can be enhanced. (March 
2001)
    Flu Vaccines Could Save the Nation $1.3 Billion Annually.--Routine 
influenza vaccinations of all working adults could save the nation as 
much as $1.3 billion each year according to a study led by researchers 
at the Minneapolis VA Medical Center and the University of Minnesota 
Medical School. By examining both the direct and indirect costs 
associated with influenza, researchers estimated that health care costs 
could be reduced by an average of $13.66 per person vaccinated. (March 
2001)
    Implanted Electrodes Help Stroke Patients Walk.--Using a technique 
known as Functional Neuromuscular Stimulation (FNS), VA scientists 
implanted electrodes in the leg muscles of stroke patients and used 
sophisticated software to electrically stimulate the muscles over a 6-
month course of treatment. The patients experienced significant 
improvements in gait and other abilities, with no adverse effects. The 
research was described in the Journal of Rehabilitation Research and 
Development and other journals. (Feb. 2001)
                                 ______
                                 

Prepared Statement of the Great Lakes Indian Fish & Wildlife Commission

    Environmental Protection Agency Appropriations.--GLIFWC seeks 
$310,000 from various EPA programs for its ceded territory treaty 
rights environmental protection program:
    Ceded Territory/Crandon Mine Assessment Project.--$160,000 for 
hydrological modeling, contaminant transport analysis, baseline 
biomonitoring studies, and participation as a ``cooperating agency'' in 
the preparation of a Federal EIS by the Army Corps of Engineers for a 
proposed zinc and copper mine near Crandon, Wisconsin.
    Lake Superior Bi-National Program, Great Lakes Strategy for 2002, 
and Lake Superior LaMP.--$80,000 for continued GLIFWC participation in 
the Bi-National Program, in the recently announced U.S. Policy 
Committee's Great Lakes Strategy for 2002 A Plan for the New 
Millennium, in the preparation and implementation of the Lake Superior 
LaMP, and in IJC, SOLEC and other Great Lakes forums.
    Habitat and Human Health Research.--$70,000 for research projects 
on invasive species, including zebra mussels, on potentially 
contaminated whitefish and lake trout spawning grounds in Lake 
Superior, and on contaminant levels in Lake Superior lake trout.
    EPA Budget Categories and Priorities.--Over the past 7 years, 
Congress and EPA have funded GLIFWC's treaty rights environmental 
protection program under a variety of budget categories, including: 
wetlands (Section 104(b)(3) funds), coastal environmental management 
(CEM), the Great Lakes National Program Office (GLNPO), the Office of 
Pollution Prevention and Toxics, and environmental justice grants.\1\ 
The Clean Water Act (33 U.S.C. Sec. 1268) requires the EPA and GLNPO to 
integrate tribal agencies in the development and implementation of 
action plans to carry out the United States' responsibilities under the 
Great Lakes Water Quality Agreement. In addition, GLIFWC and its member 
tribes are among the partners that will be implementing the Great Lakes 
Strategy for 2002 A--Plan for the New Millennium.
---------------------------------------------------------------------------
    \1\ The Administration casts its proposed fiscal year 2003 budget 
in terms of the EPA strategic plan's goals. For GLIFWC's ceded 
territory purposes, the relevant goals and related funding categories 
appear to be: Goal 2: Clean and Safe Water; Goal 4: Preventing 
Pollution and Reducing Risk in Communities, Homes, Workplaces and 
Ecosystems; Goal 6: Reduction of Global and Cross-Border Environmental 
Risks; Goal 7: Quality Environmental Information; and Goal 8: Sound 
Science, Improved Understanding of Environmental Risk and Greater 
Innovation to Address Environmental Problems.
---------------------------------------------------------------------------
    Ceded Territory Treaty Rights and GLIFWC's Role.--GLIFWC was 
established in 1984 as a ``tribal organization'' within the meaning of 
the Indian Self-Determination Act (Public Law 93-638). It exercises 
authority delegated by its member tribes to implement Federal court 
orders and various interjurisdictional agreements related to their 
treaty rights. GLIFWC assists its member tribes in:
  --securing and implementing treaty guaranteed rights to hunt, fish, 
        and gather in Chippewa treaty ceded territories; and
  --cooperatively managing and protecting ceded territory natural 
        resources and their habitats.
    For the past 15 years, Congress and Administrations have funded 
GLIFWC through the BIA, EPA and other agencies to meet specific Federal 
obligations under: (a) a number of U.S./Chippewa treaties; (b) the 
Federal trust responsibility; (c) the Indian Self-Determination Act, 
the Clean Water Act, and other legislation; and (d) various court 
decisions, including a 1999 U.S. Supreme Court case, affirming the 
treaty rights of GLIFWC's member Tribes. GLIFWC serves as a cost 
efficient agency to conserve natural resources, to effectively regulate 
harvests of natural resources shared among treaty signatory tribes, to 
develop cooperative partnerships with other government agencies, 
educational institutions, and non-governmental organizations, and to 
work with its member tribes to protect and conserve ceded territory 
natural resources.
    Under the direction of its member tribes, GLIFWC operates a ceded 
territory hunting, fishing, and gathering rights protection/
implementation program through its staff of biologists, scientists, 
technicians, conservation enforcement officers, and public information 
specialists. Its activities include: natural resource population 
assessments and studies; harvest monitoring and reporting; enforcement 
of tribal conservation codes into tribal courts; funding for tribal 
courts and tribal registration/permit stations; development of natural 
resource management plans and tribal regulations; negotiation and 
implementation of agreements with State, Federal and local agencies; 
invasive species eradication and control projects; biological and 
scientific research; and development and dissemination of public 
information materials.
    Tribal members rely upon fish, wildlife, and plants for religious, 
cultural, medicinal, subsistence, and economic purposes. Their treaty 
rights mean little if contamination of these resources threatens the 
health, safety, and economy of tribal members, or if the habitats 
supporting these resources are degraded.
    GLIFWC Programs Currently Funded by EPA.--GLIFWC currently 
administers EPA funding for a variety of ceded territory environmental 
protection programs and studies.
  --Study of Proposed Crandon Mine in Wisconsin.--GLIFWC's work related 
        to the proposed mine includes hydrological modeling, 
        contaminant transport analysis, and baseline biomonitoring 
        studies. In fiscal year 2002, GLIFWC will administer $68,700 in 
        EPA wetlands (Section 104(b)(3)) funds to continue its 
        technical studies and assessments.
  --Participation in the Lake Superior Bi-National Program.--Since 
        fiscal year 1996, EPA has provided CEM funds for a 1 FTE 
        equivalent to facilitate GLIFWC's participation in the Bi-
        National Program to Restore and Protect Lake Superior, 
        including preparation of the Lake Superior LaMP and 
        participation in various International Joint Commission (IJC) 
        and State of the Lake Ecosystem Conference (SOLEC) forums. In 
        fiscal year 2002, GLIFWC will administer $76,800 in EPA CEM 
        funds to facilitate participation in these forums as well as in 
        the implementation of the Great Lakes Strategy for 2002 A Plan 
        for the New Millennium.
  --Research and Special Projects.--Since fiscal year 1997, EPA has 
        provided a combination of CEM, GLNPO, and Environmental Justice 
        funds for GLIFWC to conduct scientific research to produce data 
        relevant to the Bi-National Program/Lake Superior LaMP and to 
        human health. In fiscal year 2002, GLIFWC will administer 
        $62,400 from EPA's Pollution Prevention and Toxics program to 
        test several Lake Superior fish species for dioxin.
    Fiscal year 2003 Funding Needs/Rationale.--GLIFWC would use fiscal 
year 2003 funds for these same purposes.
  --Work on the Proposed Crandon Mine.--$160,000 for GLIFWC's review, 
        analysis and GIS mapping related to the mine, particularly as 
        to completion of an ongoing baseline biomonitoring project, 
        participation as a ``cooperating agency'' in the preparation of 
        the Federal EIS, and maintenance of hydrological and 
        contaminant transport expertise.
    --Rationale.--The mine will impact ceded territory natural 
            resources that are subject to the tribes' treaty rights to 
            hunt, fish, and gather. State and Federal permit processes 
            are moving toward Environmental Impact Statements (EIS), 
            with the State EIS expected within a year and the Federal 
            EIS about 6 months later. GLIFWC needs to be ready to fully 
            participate both in the State and Federal EIS processes and 
            in the permit hearings that will follow. With the requested 
            fiscal year 2003 funds, GLIFWC will:
        --Complete Baseline Biomonitoring Studies ($53,000).--GLIFWC 
            must complete the final year of its 3-year study to 
            establish baseline data for contaminants found in surface 
            water, plants and animals near the proposed mine site. 
            GLIFWC used EPA funds provided pursuant to Congress' fiscal 
            year 2001 $168,000 Crandon mine appropriation and EPA 
            wetlands (Section 104(b)(3)) funds to collect data in the 
            study's first 2 years. It does not have funding for the 
            third year.
        --Serve as a ``Cooperating Agency'' in the Federal EIS Process 
            ($67,000).--GLIFWC is participating as a ``cooperating 
            agency'' from the ceded territory perspective for its 
            member tribes in the preparation of the Federal EIS under 
            Sec. 404 of the Clean Water Act. As such, GLIFWC has the 
            opportunity to develop and present independent analyses of 
            a variety of potential mine impacts for inclusion in the 
            Federal draft EIS. This will require a substantial amount 
            of staff time for computer modeling and analysis, 
            preparation of written comments and assessments, and 
            attendance at various meetings.
        --Maintain Hydrological and Contaminant Transport Expertise 
            ($40,000).--Through Congress' fiscal year 2001 Crandon Mine 
            appropriations, GLIFWC received funds to enlist the help of 
            outside experts in specific technical areas, including: (1) 
            The hydrology of water flowing through the mine and methods 
            (such as grouting) to slow down that flow; (2) The 
            uncertainty associated with various impact predictions and 
            monitoring programs proposed by the mining company; (3) 
            Contaminant transport issues related to water flowing 
            through the mine and potential contamination of the 
            groundwater; and (4) Mercury contamination that may result 
            from wetlands drying up. This initial funding is not 
            sufficient to cover the costs of the much more in-depth 
            analyses that will be necessary as the mine's design and 
            engineering proposals are finalized and fully scrutinized 
            during the EIS processes and permit hearings.
  --Participation in the Lake Superior Bi-National Program.--$80,000 
        for continued funding of GLIFWC staff (1 FTE equivalent, and 
        related travel and other expenses) who will participate in the 
        Bi-National Program, in the preparation and implementation of 
        the Lake Superior LaMP, in IJC and SOLEC forums, and in the 
        implementation of the recently announced Great Lakes Strategy 
        for 2002 A Plan for the New Millennium.
    --Rationale.--GLIFWC has been actively involved in the Bi-National 
            Program since 1993. However, it was not able to adequately 
            participate until EPA first provided CEM funds for this 
            purpose in fiscal year 1996. As a result, GLIFWC currently 
            serves on the Bi-National Program's Task Force and 
            Workgroup, and on the Workgroup's chemical, terrestrial and 
            habitat committees. It is participating in the preparation 
            of the LaMP 2002. It also helps to liaison with other 
            relevant Great Lakes institutions, such as the Great Lakes 
            Fishery Commission, on issues of mutual concern between 
            environmental and natural resource managers.
        As for IJC forums, GLIFWC staff regularly attend the biennial 
            IJC meetings and provide periodic comments when issues 
            arise in the interim, such as on the matter of Great Lakes 
            water diversions. As for SOLEC, GLIFWC staff addressed the 
            2000 plenary session on the topic of wild rice and 
            organized a breakout session on wild rice.
        This funding is necessary for GLIFWC to live up to its 
            partnership responsibilities under the Great Lakes Strategy 
            for 2002 A Plan for the New Millennium.
  --Continuing Research and Special Projects.--$70,000 for Lake 
        Superior habitat and human health research projects related to 
        the Bi-National Program and the Great Lakes Strategy for 2002 A 
        Plan for the New Millennium.
    --Rationale.--GLIFWC has undertaken a number of studies over the 
            years related to the Lake Superior ecosystem. For example, 
            with GLNPO and CEM funds, GLIFWC is preparing a report on 
            the threat of wetland and terrestrial exotic plants to Lake 
            Superior, has studied sturgeon in the Lake Superior basin, 
            and has prepared GIS maps of fish spawning and nursery 
            locations for both native and exotic species. In addition, 
            as part of its ongoing natural resource contaminant/human 
            health research, GLIFWC used Environmental Justice grants 
            to update its fish consumption advisory database and to 
            undertake wild rice contaminant research for heavy metals.
    For fiscal year 2003, GLIFWC would explore EPA funding for four 
projects:
  --Assess impacts from mining waste (stamp sands) dumped into Lake 
        Superior during the late 1800s, map an important whitefish and 
        lake trout spawning reef in Keweenaw Bay, and determine the 
        distribution of stamp sands in relation to the spawning reef.
  --Assess whether seed mixtures currently used in northern upland 
        forest re-vegetation projects contain exotic invasive species, 
        and identify and recommend native plant species that would be 
        appropriate substitutes.
  --Inventory zebra mussels in Chequamegon Bay and establish an 
        interagency workgroup to inventory, monitor, and develop 
        strategies to minimize the spread of zebra mussels in Lake 
        Superior and inland waters.
  --Assess mercury, PCB and organochlorine levels in lake trout 
        harvested by tribes in the 1842 ceded territory waters of Lake 
        Superior, and evaluate how the new data compares to the 
        advisories currently being issued by the States of Wisconsin, 
        Minnesota and Michigan.
                                 ______
                                 
     Prepared Statement of The Humane Society of the United States
    On behalf of our 7 million members and constituents, The Humane 
Society of the United States (HSUS) appreciates the opportunity to 
submit testimony regarding fiscal year 2003 appropriations for the 
Environmental Protection Agency (EPA). We wish to thank the 
Subcommittee for directing the EPA to spend $4,000,000 for the 
research, development, and validation of non-animal, alternative 
chemical screening and prioritization methods. Prioritizing funding for 
non-animal test methods is a critical step, encouraging the EPA to 
promote and support these more humane, often faster, less expensive, 
and more scientifically sophisticated procedures. We wish to commend 
the Subcommittee for improving federal regulatory decision-making 
processes on chemical safety and for helping to reduce needless animal 
suffering. Our testimony for fiscal year 2003 focuses on the EPA's 
Office of Research and Development (ORD) and the agency's Endocrine 
Disruptor Screening Program (EDSP).
    The EDSP is the largest of several chemical testing programs 
administered by the EPA. These programs will collectively subject 
millions of animals to suffering and death in painful toxicity tests. 
Indeed, the EDSP itself is perhaps the largest government-sponsored 
animal testing program in history. Yet without the Subcommittee's 
intervention, the EPA's ORD budget has no identifiable program to 
develop alternative tests that can replace, reduce, or refine existing 
animal-based tests. Eli Lilly and Company eliminated its cat test for 
glucagon, replacing it with an alternative test, and calculated that it 
was saving $1 million a year as a result of the new test. However, 
there may need to be some up-front investment--it cost Eli Lilly $2 
million to develop and validate the alternative. We are still not 
seeing sufficient commitment from EPA to provide the initial 
investments needed to produce alternatives (or batteries of 
alternatives) to address issues such as the Endocrine Disruptors.
    The EPA, moreover, is not taking full advantage of an existing 
interagency committee with expertise in assessing new testing methods 
to evaluate their acceptability for regulatory use. The Interagency 
Coordinating Committee on the Validation of Alternative Methods 
(ICCVAM) is the federal government's focal point for assessing the 
validation and regulatory acceptability of new test methods. The EPA is 
a participating member of ICCVAM and was very involved in developing 
and approving the ICCVAM structure. Yet the EPA is bypassing the 
ICCVAM's review mechanism for many of the new tests in its EDSP, 
instead relying on in-house assessments. This move has worried many 
animal protectionists as well as other stakeholders.
    The HSUS respectfully urges this Subcommittee to request that the 
ORD establish a substantial program to research and develop alternative 
methods (as it already committed to do for the High Production Volume 
chemical testing program but has not yet pursued), and that the EPA 
take full advantage of ICCVAM's expertise in evaluating new testing 
methods of multi-agency interest.
  research and development of alternative testing methods at epa's ord
    The ORD budget in recent years has been approximately $500 million. 
Within these appropriations, it has been nearly impossible to identify 
funding by the ORD for non-animal alternative testing methods to meet 
EPA's specific needs in new testing programs. We believe that 
innovative non-animal alternative testing technologies would benefit 
from research and development funding. Therefore, we respectfully 
request that at least $10 million either from the existing budget or 
over and above the President's budget request be appropriated for 
research, development and validation of non-animal, alternative testing 
methods. Given the potential long-term benefits of such investment in 
alternatives development, it is surprising to us that the EPA is not 
already actively pursuing this approach. Activities funded by these 
allotments should be designed in consultation with the Office of 
Pollution Prevention and Toxic Substances.
    It would be appropriate for this funding to be targeted at testing 
methods with direct application to recent and new EPA testing programs, 
which include the EDSP, High Production Volume (HPV) chemical testing 
program, and the Voluntary Children's Chemical Evaluation Program 
(VCCEP). For example, there is a specific rat neurological development 
test that is widely regarded as inadequate but is still being proposed 
as one of the battery of tests under the VCCEP.
    The HSUS also asks that the Subcommittee require the EPA to submit 
a report to the Subcommittee by March 30, 2003 regarding expenditures 
and plans for additional expenditures for fiscal year 2003 funds under 
the EDSP.
    The request for $10 million represents approximately 2 percent of 
ORD's total budget, a modest but nonetheless significant commitment by 
EPA to alternative test methods. The HSUS would like to emphasize that, 
in making this request, we believe this course of action would also be 
in the best interests of human and environmental safety.
            the endocrine disruptor screening program (edsp)
    Under the 1996 Food Quality Protection Act (FQPA) and the Safe 
Drinking Water Act Amendments, Congress mandated that EPA determine 
whether certain substances may have an effect in humans that is similar 
to an effect produced by a naturally occurring estrogen, or such other 
endocrine effects as EPA may designate. The congressional mandate came 
as a response to public concern that exposures to synthetic chemicals 
in the everyday environment may be adversely affecting the endocrine 
systems of wildlife and humans, thereby causing reproductive and 
developmental anomalies.
    In response to Congress' mandate, the EPA formed the Endocrine 
Disruptor Screening and Testing Advisory Committee at the close of 
1996. This entity devised the testing framework for the EDSP. 
Currently, the proposed EDSP testing scheme consists of a battery of 16 
tests designed to assess the toxicity of up to 80,000 chemicals. These 
tests are largely animal-based. Some scientific estimates have 
projected that between 600,000 and 1.2 million animals will be killed 
for every 1,000 chemicals tested.
    Animal protection organizations and members of the public have 
serious concerns about the process by which the proposed EDSP tests 
will be evaluated. The FQPA stated that all screens and tests used in 
the EDSP should be properly validated, to ensure the their relevance 
and reliability for assessing endocrine disruption. The proposed EDSP 
testing methods are all either new or revised for new endpoints, and 
therefore each should be evaluated for the EDSP as a matter of sound 
science. The natural entity to conduct this evaluation is the ICCVAM. 
Since its creation in 1994, the ICCVAM has benefited EPA and many other 
federal agencies, as well as research entities, by successfully 
evaluating the validity of new and revised testing methods 
(alternatives included) that have cross-agency relevance.
    In December of 2000, Congress upgraded ICCVAM from an ad hoc 
committee to a standing body, thereby solidifying its crucial role. It 
is clear that ICCVAM can provide a standardized assessment of the 
validity and regulatory acceptability of all EDSP tests and screens. 
This would be particularly appropriate given the level of interest in 
these methods by other federal agencies such as the Food and Drug 
Administration and other national and international organizations, 
including the Organization for Economic Cooperation and Development.
    However, EPA has developed a bifurcated validation plan for the 
EDSP that calls upon its own Science Advisory Board (SAB)/Science 
Advisory Panel (SAP) to review all the animal-based tests and screens, 
while asking the ICCVAM to review only the non-animal testing methods. 
This approach has many observers worried that the animal-based methods 
will be evaluated using lower standards than the non-animal methods. In 
addition to qualms voiced by animal protection advocates, the Advisory 
Committee on Alternative Toxicological Methods (ACATM) for the National 
Toxicology Program passed two unanimous resolutions questioning the 
EPA's plan and supporting the mission of ICCVAM. The Committee's 
primary concern is that both in vitro and in vivo methods be subjected 
to the same rigorous peer review and validation process to ensure the 
highest likelihood of acceptance by the regulatory agencies, the 
scientific community and the public.
    The HSUS strongly urges the Subcommittee to call on the EPA to use 
ICCVAM's expertise to assess the validity and regulatory acceptability 
of all EDSP tests and screens, with appropriate fiscal support from the 
EPA. Furthermore, ICCVAM should collaborate with EPA's SAB/SAP to avoid 
any unnecessary delay in the program. Among other things, ICCVAM's 
review of the EDSP testing methods can serve to ensure that proper 
consideration is granted for the replacement, reduction, and refinement 
of the use of animals in these proposed tests and screens.
                               conclusion
    The HSUS respectfully requests that the VA-HUD Appropriations 
Subcommittee provide funding to the EPA with the direction that the ORD 
expand its research and development activities to include alternative 
methods. We also urge the Subcommittee to ensure that any new or 
revised testing methods with multi-agency or international interest be 
evaluated through the Congressionally-established ICCVAM for sound 
science and consistency with the replacement, reduction, or refinement 
of animal use.
                                 ______
                                 

            Prepared Statement of the Joslin Diabetes Center

                              introduction
    Mr. Chairman, thank you for this opportunity to provide a status 
report on the Diabetes Project conducted jointly by the Joslin Diabetes 
Center in Boston, MA and the Department of Veterans Affairs (Medical 
Care account), for which you provided $5 million each in the fiscal 
year 2001 and the fiscal year 2002 Appropriations Acts.
    Our request for fiscal year 2003 to continue this project with the 
VA is $5 million in the Medical Care account, of which the VA's costs 
represent approximately 50 percent.
    I am Dr. Sven Bursell, Principal Investigator of the project and 
Associate Professor of Medicine at the Harvard Medical School.
                               background
    Joslin Diabetes Center has been involved with the Department of 
Defense and the Department of Veterans Affairs in a pilot demonstration 
project for the advanced detection, prevention, and care of diabetes. 
The Joslin Vision Network (JVN) has been deployed in VA sites in VISN 
21 in Hawaii (Honolulu, Hilo and Maui), VISN 1 in New England (Boston, 
Brockton in Massachusetts, and Togus, Maine) and VISN 19/20 (Seattle 
and Tricities in Washington, Anchorage in Alaska and Billings in 
Montana). The JVN employs telemedicine technology to image the retina, 
through an undilated pupil, of patients with diabetes, and produces a 
digital video image that is readable in multiple formats.
    This project was funded initially through the Department of Defense 
Appropriations Act. The Department of Veterans Affairs medical staff 
was eager to expedite the deployment of this advanced diabetes 
technology beyond the limited resources available through participation 
in the DOD funded project. We petitioned this Subcommittee for 
additional resources to be made available to the VA for discretionary 
diabetes detection and care.
    This Committee provided $2 million in fiscal year 2000 and $5 
million each in fiscal year 2001 and fiscal year 2002 for expansion of 
this project within the VA. The VA has indicated a desire to continue 
expansion, citing the JVN as the model of the future telemedicine in a 
recent conference of the Association of Military Surgeons-General of 
the U.S. (AMSUS). We are seeking $5 million to continue this expansion, 
and are supported by the VA medical policy staff.
    The leadership shown by this Subcommittee has enabled the VA to 
provide its patient population the best diabetes care, prevention, and 
detection in the world. We extend our sincere appreciation to you for 
your response to that request.
                      fiscal year 2002 activities
    The policy and program officials of the VA have established the 
appropriate contracts and statements of work that resulted in consensus 
with respect to deployment of the Joslin Vision Network (JVN) 
technology to three sites: Anchorage, Alaska, TriCities, Washington, 
and Billings, Montana. A Reading Center will be created and utilized in 
Seattle, Washington. In addition, the refinement of JVN technology, 
both hardware and software, will move toward developing a scalable 
system that is capable of widespread deployment agency-wide. This 
system was completed and it is anticipated that this next generation of 
the system will be completely integrated into the VA's VISTA Medical 
Records System and the VA communications infrastructure.
    Results from our various demonstration installations have shown 
that appropriate clinical resources can be efficiently allocated with 
respect to appropriate ophthalmology referral. For example, the 
installation in Togus Maine where there is no ophthalmology resources 
on site has shown that the use of the JVN system can effectively 
prioritize patients that need to be seen by the opthalmologist at the 
time when the ophthalmologist plans to visit that clinic. This site is 
imaging approximately 10 patients per day and they find the JVN program 
extremely resource efficient in providing the appropriate eye care to 
their patients.
    The same experience was noted from the VA clinics in Hilo and Maui 
where the Optometrist from the Honolulu VA visits these island clinics 
once a month and was able to effectively focus his time on the patients 
that really needed his expertise for managing their diabetes eye 
complications.
    An equally important concentration of resources in fiscal year 
2001-2002 was focused on refining the technical core using outcomes 
based medical and case management scenarios to develop a diabetes 
healthcare model that is modular, customizable and that can be 
seamlessly integrated into the existing VA telemedicine systems. This 
is the stated goal of the medical leadership in the VA, DOD and HIS 
health care systems. The overarching vision for the VA/JVN project is a 
web-based comprehensive diabetes health care system that can be 
interactively used by both patients and providers, that incorporates 
diagnosis specific education and training modules for patients and 
providers and that incorporates software applications that allow 
outcome measures to be statistically assessed and individual treatment 
programs to be interactively adjusted based on these outcome measures. 
The JVN Eye Health care system exists as a component of a comprehensive 
diabetes management system, incorporating other clinical disciplines 
such as endocrinology, vascular surgery and internal medicine.
    The effort for fiscal year 2002 will result in the development of 
modular applications associated with different aspects of total 
diabetes disease management such as clinical risk assessment, outcomes 
assessments, behavior modification in an interactive electronic 
environment, and education programs. These applications will be 
designed in collaboration with participating VA sites to provide an 
ultimate product that appropriately assesses the clinical diabetes risk 
and provides treatment plans and behavior modifications that are 
tailored to any particular patients needs. The programs will also be 
designed so that they can realize a significant cost and resource 
efficiency with respect to support and maintenance of the JVN component 
and the diabetes management programs that will facilitate an 
accelerated deployment in the future.
    Technologically, we will be providing an application that 
automatically detects retinal pathology from the JVN images. Using this 
first step approach it is anticipated that we can reduce the load on 
the reading center by as much as 50 percent. This is achieved through 
the use of a computer application that scans the images and detects any 
abnormalities that may be associated with the development of diabetic 
retinopathy. In those cases where the computer detects pathology a 
reader will be notified to perform the appropriate reading for 
retinopathy assessment. In the case where the computer does not detect 
any pathology the patient can be assigned to a low risk priority where 
the computer findings can be rapidly confirmed by the reader and the 
patient asked to return for repeat JVN imaging in a year.
                        fiscal year 2003 request
    For fiscal year 2003, we request that in the VA Medical Account $5 
million be allocated to continue and expand this project. The positive 
response within the VA system indicates that with sufficient resources, 
the JVN technology would be deployed in a number of sites with the 
ultimate goal of incorporating the JVN technology throughout the VA 
Medical Care system. The VA Budget Request by the fiscal year 2004 
cycle will include provisions for full deployment for the JVN 
throughout the VA Medical Care system. As the technology, systems and 
production of equipment are standardized to off the shelf 
specifications, the expense per site will decrease.
    The specific goals for fiscal year 2003 include the following:
    --Establish specific medical codes that will allow the VA to track 
performance with respect to these JVN examinations and to ensure that 
it conforms with VA performance criteria in multiple remote VA 
outpatient settings;
    --Improve adherence to scientifically proven standards of diabetes 
eye care and diabetes care;
    --Improve/promote access to diabetes eye care;
    --Increase number/percentage of patients with Diabetes Mellitus 
obtaining eye care;
    --Provide education patients and providers in the clinical setting.
    The use of the JVN equipment and expansion of screening 
opportunities are a continuing major focus for fiscal year 2003 
activities. The actual number of sites deployed to will be determined 
on the locales with the greatest need for diabetes care in conjunction 
with the telecommunications infrastructure at the identified sites and 
the ease and costs associated with interfacing the JVN technology into 
the existing infrastructure.
    We have expended considerable effort in migrating the JVN 
demonstration technology platform into an application that is totally 
compliant with existing medical informatics infrastructures and the 
existing VISTA infrastructure of the VA system. This will encompass the 
integration of hardware and software in close collaboration with 
available resources from the VA VISTA program that will allow a highly 
scaleable transparent integration of the JVN Diabetes Eye Health Care 
system into the existing health informatics infrastructures of the VA 
system.
    For the fiscal year 2002-2003 project phase, we have established 
the following tasks, targets, and activities:
    --Deployment of a viable, sustainable, and refined operating JVN 
Diabetes Eye Health Care model and Comprehensive Diabetes Management 
program.
    --Develop a modularized medical outcomes based telemedicine 
diabetes management program in continued collaboration with the VA with 
outcome measures incorporated into software based on clinical results 
and research experiences of the fiscal year 2001 efforts.
    --Develop curriculum based patient and provider educational 
modules.
    --Integrate internet based portals that are accessed by patients 
for reporting of glucose values and receiving feedback with respect to 
goals for self management of their diabetes and adjustments of their 
treatment plans based on these goals. These portals will also provide 
regular education modules for the patients that are customized to their 
particular needs and clinical diabetes risk assessment.
                               conclusion
    We request continuation and maintenance of this Committee's policy 
of support for the improvement of the diabetes care in the VA medical 
system. Through funding of
    This $5 million request, the benefits by the close of fiscal year 
2003 will include:
    --Deployment of JVN detection and care at 5 different VA centers 
where each center will provide services for 6 different remote sites 
for a total 35 sites;
    --JVN accessibility to increase VA capability to achieve patient 
compliance to eye examinations to at least 95 percent of the diabetic 
patient population in any area being serviced. From an estimate of the 
VA diabetic patient population we would estimate that the JVN would be 
accessing an estimated patient population of 196,000, or an estimated 
11 percent of the total VA Diabetic population after completing 
anticipated 2002 deployments.
    --The model for VA's deployment of the JVN as a diabetes detection 
and Disease management platform for expansion to availability for the 
entire VA Patient population.
    Thank you for this opportunity to present this request for $5 
million for fiscal year 2003 and status report for fiscal year 2002 on 
a medical technology breakthrough for the patients and health care 
system within the Department of Veterans Affairs.
                                 ______
                                 

   Prepared Statement of the Metropolitan Water District of Southern 
                               California

    The Metropolitan Water District of Southern California (MWD) is 
pleased to submit comments for the record regarding programs contained 
in the U.S. Environmental Protection Agency's (EPA) fiscal year 2003 
budget for your Subcommittee's hearing.
    MWD is responsible for meeting the supplemental water requirements 
of 17 million people living in the Southern California coastal plain 
and the economy which supports them. Our sources of water supply are 
the Colorado River and surface waters from Northern California. Of 
particular interest to MWD and our 26 member agencies are those federal 
programs that provide assistance and facilitate partnerships for 
addressing critical water resources issues.
    One of the most challenging water resource issues in Southern 
California is ensuring adequate supply of high quality water. To 
increase our ability to achieve these goals, we strongly urge that you 
designate $2 million of funding appropriated for State and Tribal 
Assistance Grants (STAG) to ensure the continuation of the Desalination 
Research and Innovation Partnership (DRIP). DRIP is a major applied 
research program which seeks to develop and demonstrate next-generation 
desalination and disinfection technologies to economically treat large 
volumes of water for potable and non-potable uses.
    MWD also asks that you support adequate funding for another STAG 
program, the Drinking Water State Revolving Fund (DWSRF). The 
President's budget request of $850.0 million falls short of the $1 
billion authorized by Congress in the 1996 Amendments to the Safe 
Drinking Water Act. We urge that you support funding at the authorized 
level. Water supplies, treatment facilities, and distribution systems 
also require adequate protection from terrorist activities. We strongly 
urge you to support the President's request of $5.0 million for 
homeland security for public water systems.
    We further ask that you fully support the $49.5 million request for 
safe drinking water research in the President's budget. Lastly, we ask 
that you designate $7 million for the American Water Works Association 
Research Foundation (AWWARF) for research and studies, including those 
related to the protection of drinking water supplies from terrorist 
acts. These and several other requests to support funding are discussed 
in more detail below.
State and Tribal Assistance Grants (STAG)
    Desalination Research and Innovation Partnership (DRIP) Funding.--
Water quantity and quality are priority issues in Southern California 
where approximately half of the water used is imported. Much of our 
imported supply is from the Colorado River, a source that is high in 
salinity (i.e., mineral content). Although not a health concern, high 
salinity can cause scaling and corrosion of plumbing fixtures, 
adversely affect salt-sensitive agricultural crops, and limit the 
ability to recycle water. Local groundwater supplies cannot always be 
utilized, in part because of high salinity.
    Several years ago, MWD and its partners embarked on a public-
private partnership (DRIP) to develop innovative technologies for cost-
effectively reducing salinity in Colorado River and other non-
traditional sources such as brackish groundwater, municipal wastewater 
and agricultural drainage water. The program was subsequently expanded 
to evaluate new technologies for the inactivation of pathogens 
resistant to commonly used disinfectants. In its first 5 years, DRIP 
has investigated pretreatment to optimize the performance of reverse 
osmosis for reducing salinity in Colorado River water and municipal 
wastewater, the use of ultra-low pressure membrane technologies to 
improve the economics of salinity removal from a variety of water 
sources, brine minimization and disposal strategies, and the 
effectiveness of ultraviolet light as a disinfectant for resistant 
pathogens like Cryptosporidium. In part because of these early 
successes and to address the statewide concern with high salinity, the 
partnership now includes water utilities from Northern California. MWD 
asks that you identify $2 million of the STAG appropriation to support 
the continuation of DRIP. This funding will leverage the financial 
commitments made by the DRIP partners and support near-term activities 
aimed at demonstrating large-scale desalination and ultra-violet light 
technologies for Colorado River water and municipal wastewater, 
increasing the amount of water recovered from RO processes, and 
improving methods for concentrating brine.
    Drinking Water State Revolving Fund.--STAG funding is also critical 
for the DWSRF. In California, water suppliers have identified drinking 
water infrastructure projects totaling in excess of $17.5 billion that 
could benefit from low-cost DWSRF financing. This amount likely 
understates the true needs since these estimates do not take into 
account the infrastructure costs of complying with a maximum 
contaminant standard nor the costs of other drinking water standards 
likely to be promulgated over the next several years. Low-cost 
financing for projects which ensure safe drinking water supplies is 
critical for protecting the health of the more than 240 million 
Americans served by public water systems, and MWD strongly urges that 
you provide $1 billion, the amount authorized by Congress for fiscal 
year 2003. This amount, while greater than the amount requested in the 
President's budget, is still only a small fraction of the funding 
needed by drinking water suppliers to meet existing Safe Drinking Water 
Act requirements.
    Clean Water State Revolving Fund.--Significant investments are 
needed to repair and replace aging municipal wastewater infrastructure 
and combined sewer systems. Low-cost financing is necessary to support 
substantial municipal water quality infrastructure needs over the next 
20 years. The President has requested $850.0 million for fiscal year 
2003 for the CWSRF to support these activities, many of which are vital 
for ensuring protection of drinking water sources. MWD asks that you 
support funding at least at the level in the President's budget.
    Non-point Source Grants.--Another critical source of funding for 
source water protection projects is grants under the Clean Water Act's 
Section 319 Non-point Source Program (NPS). The President has requested 
$180.4 million for NPS grants for fiscal year 2003 and MWD requests 
your support at the level in the President's budget. Non-point source 
pollution is the primary cause of impairment of our nation's waterways.
Homeland Security
    We are pleased that the President's budget provides for funding to 
protect public water systems from terrorist attacks through support of 
a public-private partnership to safeguard the nation's water supplies 
and wastewater systems. We urge you to support funding at least at the 
$5 million level requested in the President's budget.
Safe Drinking Water Research
    Scientifically sound research provides the underpinnings for 
effective drinking water quality programs. EPA's fiscal year 2003 
budget, under its strategic goal of clean and safe water, includes 
$49.5 million for safe drinking water research. Of particular interest 
to Metropolitan is EPA's research on emerging pathogens, including the 
development of dose-response relationships and evaluation of cost-
effective treatment technologies for removal and inactivation. Several 
pathogens are on the Contaminant Candidate List (CCL), and further 
research is needed to support decisions of whether or not to proceed 
with the rulemaking process. We ask that you fully support the 
President's request of $49.5 million.
Drinking Water--Public Water Systems Supervision Program Grants
    EPA's 2003 budget allocates $93.1 million for Public Water Systems 
Supervision Program grants. This funding is necessary for states with 
primary enforcement responsibilities to carry out their duties, 
including implementation of the 1996 SDWA regulations, and we ask that 
you support this funding level.
Designation of Funding for AWWARF
    EPA has an opportunity to leverage its research budget through 
designating part of EPA's appropriation for AWWARF. Any EPA funding 
will be matched up to 100 percent from AWWARF and participating public 
water suppliers. We ask that you designate $7 million for AWWARF for 
research, including research that will lead to better protection of 
public drinking water supplies from acts of terrorism.
    We look forward to working with you and your Subcommittee. Please 
contact Brad Hiltscher, MWD's Legislative Representative in Washington, 
D.C. at (202) 296-3551, if we can answer any questions or provide 
additional information.
                                 ______
                                 

    Prepared Statement of the National Council for Science and the 
                              Environment

                                summary
    The National Council for Science and the Environment (NCSE) 
strongly supports bipartisan efforts to double the budget of the 
National Science Foundation (NSF). To that end, we encourage Congress 
to appropriate at least $5.5 billion for NSF in fiscal year 2003, an 
increase of $718 million or 15 percent relative to the fiscal year 2002 
level.
    We encourage Congress to strongly support full and effective 
implementation of the National Science Board (NSB) report, 
Environmental Science and Engineering for the 21st Century: The Role of 
the National Science Foundation, within the context of efforts to 
double the budget of the NSF. The NSB report calls for significant 
improvements in the way that NSF supports environmental research, 
assessment and education, and proposes that the Foundation invest an 
additional $1 billion per year in these areas, to be phased in over 
five years. NSF has begun to implement the NSB report and deserves full 
support from Congress. We also emphasize the need for increased funding 
for NSF's priority area on Biocomplexity and the Environment. In 
addition, we recommend full funding for two large projects the National 
Ecological Observatory Network (NEON) and EarthScope which are included 
in NSF's budget request for Major Research Equipment and Facilities 
Construction. These projects would create unprecedented opportunities 
for environmental research.
    We urge Congress to restore full funding for the Environmental 
Protection Agency's (EPA) Science to Achieve Results (STAR) graduate 
fellowship program. EPA's budget request for fiscal year 2003 would 
eliminate funding for new STAR fellowships.
                              introduction
    The National Council for Science and the Environment thanks the 
Senate Appropriations Subcommittee on VA, HUD and Independent Agencies 
for the opportunity to provide testimony on the National Science 
Foundation's budget request for fiscal year 2003.
    NCSE is a nonprofit, nonpartisan organization that has been working 
since 1990 to improve the scientific basis for environmental 
decisionmaking. Our work is endorsed by nearly 500 organizations, 
ranging from the U.S. Chamber of Commerce to the Sierra Club, including 
the National Association of Attorneys General, National Association of 
Counties, some 300 colleges and universities, and more than 80 
scientific and professional societies. As a neutral science-based 
organization, NCSE promotes science and its relationship with 
decisionmaking but does not take positions on environmental issues 
themselves.
    We greatly appreciate the Subcommittee's sustained support for the 
National Science Foundation. We are especially grateful for the 
Subcommittee's support over the past six years for NCSE's efforts to 
encourage the NSF to expand scientific activities that can help to 
improve environmental decisionmaking.
                federal investments in environmental r&d
    Federal investments in R&D and science education are essential to 
the future well-being and prosperity of the nation and deserve the 
highest priority of the Congress. The long-term prosperity of the 
nation and the maintenance of our quality of life depend on a steady 
and growing commitment of Federal resources to science and technology.
    Environmental R&D is a critical component of the nation's R&D 
portfolio. Based on NCSE's Handbook of Federal Funding for 
Environmental R&D, we estimate that Federal funding for environmental 
R&D in fiscal year 2002 is approximately $7.5 billion, an increase of 
$315 million or 4.4 percent relative to fiscal year 2001 (Table 1). 
Federal funding for environmental R&D grew at less than one-third the 
rate of total R&D, which increased by 13.5 percent to $103.7 billion in 
fiscal year 2002.
    Appended to our testimony is a letter signed by more than 120 
university and college presidents, as well as business, scientific and 
environmental leaders calling for significantly increased funding for 
scientific programs about the environment at the National Science 
Foundation, EPA, NASA, and other Federal agencies. We encourage 
Congress to support this initiative.

                                  TABLE 1.--ENVIRONMENTAL R&D BY FEDERAL AGENCY
----------------------------------------------------------------------------------------------------------------
                                                  Environmental R&D (millions of dollars)    Change from fiscal
                                               --------------------------------------------  year 2001 (percent)
                                                                                           ---------------------
                    Agency                        Fiscal     Fiscal     Fiscal     Fiscal     Fiscal     Fiscal
                                                year 2000  year 2001  year 2002  year 2002  year 2002  year 2002
                                                  actual    estimate   request    enacted    request    enacted
----------------------------------------------------------------------------------------------------------------
National Aeronautics and Space Admin..........     $1,690     $1,716     $1,515     $1,573      -11.7       -8.3
Department of Energy..........................      1,502      1,774      1,398      1,862      -21.2        5.0
National Science Foundation \1\...............        671        752        829        829       10.2       10.2
Environmental Protection Agency...............        558        609        569        702       -6.5       15.4
Department of Defense.........................        399        450        382        410      -15.1       -9.0
Department of Commerce--NOAA..................        643        726        772        836        6.4       15.3
Department of the Interior....................        618        631        593        673       -6.1        6.5
U.S. Department of Agriculture................        370        410        411        451        0.2        9.9
National Institutes of Health.................         60         63         70         81       11.7       28.4
Department of Transportation..................         37         41         61         71       47.0       72.2
Smithsonian Institution.......................         14         14         14         14        1.4        1.4
Corps of Engineers............................         11         10         11         11        1.4        1.4
                                               -----------------------------------------------------------------
      Total...................................      6,573      7,197      6,624      7,512       -8.0       4.4
----------------------------------------------------------------------------------------------------------------
\1\ NSF Environmental R&D provided by NSF.
Source: AAAS/NCSE estimates of environmental R&D based on enacted appropriations bills, OMB R&D data, Budget of
  the United States Government, agency budget documents, and information from agencies.

    national science foundation budget request for fiscal year 2003
    The National Council for Science and the Environment strongly 
supports bipartisan efforts to double the budget of the National 
Science Foundation. We commend the Chair and Ranking Minority Member of 
the Subcommittee for their leadership. We encourage Congress to 
appropriate at least $5.508 billion for NSF in fiscal year 2003, an 
increase of $718 million or 15 percent relative to the fiscal year 2002 
level. This level of support is recommended by the Coalition for 
National Science Funding, which includes NCSE and 70 other scientific 
organizations and academic institutions.
    Biocomplexity in the Environment Priority Area.--NCSE is 
particularly supportive of NSF's priority area on Biocomplexity in the 
Environment. This initiative provides a focal point for investigators 
from different disciplines to work together to understand complex 
environmental systems, including the roles of humans in shaping these 
systems. The resolution of many important environmental and societal 
problems is lagging, in part, because of insufficient scientific 
understanding of complex issues that span the boundaries of traditional 
scientific disciplines.
    NSF is already a leading Federal sponsor of peer-reviewed research 
regarding the environment, with a portfolio exceeding $700 million. 
Most of this investment is directed at scientific advances within 
particular disciplines. An interdisciplinary approach is needed to 
build on this base to truly understand the environment and the 
relationships between people and the environment. The Biocomplexity in 
Environment priority area is an important step towards a comprehensive 
understanding.
    NSF proposes to increase funding for its priority area on 
Biocomplexity in the Environment by 35.6 percent to $79 million. This 
priority area would be expanded to include research in two new areas 
this year microbial genome sequencing and ecology of infectious 
diseases to help develop strategies to assess and manage the risks of 
infectious diseases, invasive species, and biological weapons. We urge 
Congress to support this critical initiative and to consider funding it 
at a level of $136 million, as proposed in fiscal year 2000 budget 
request for NSF.
    Major Research Equipment.--The NSF budget request includes initial 
funding for two large projects, the National Ecological Observatory 
Network (NEON) and EarthScope, under its account for Major Research 
Equipment and Facilities Construction (MRE). These projects would 
provide major new opportunities for environmental research.
  --National Ecological Observatory Network.--NEON would be a 
        continental scale research instrument consisting of 10 
        geographically distributed observatories, networked via state-
        of-the-art communications, for integrated studies to obtain a 
        predictive understanding of the nation's environments. In 
        addition, NEON would serve as a ``biological early detection 
        system'' that is designed to provide an invaluable resource and 
        a front line of homeland defense both for its scientific 
        potential and for enabling rapid detection of chemical and 
        biological terrorist threats. NSF is requesting $12 million in 
        initial funding for this project for proof of concept 
        prototyping and for construction and networking of two initial 
        sites.
  --EarthScope.--EarthScope would be a distributed, multi-purpose 
        geophysical instrument array that is designed to make major 
        advances in our knowledge and understanding of the structure 
        and dynamics of the North American continent. Three components 
        of the project would be the United States Seismic Array 
        (USArray), the San Andreas Fault Observatory at Depth, and the 
        Plate Boundary Observatory. NSF is requesting $35 million for 
        initial funding of this project.
    Both NEON and EarthScope were included in NSF's budget request for 
fiscal year 2001 but funding for the projects was not included in the 
enacted appropriations bill. NSF's budget request for fiscal year 2002 
did not contain any new starts for the MRE account. We urge Congress to 
provide full funding for NEON and EarthScope.
 national science board report on environmental science and engineering
    The National Council for Science and the Environment is the primary 
proponent of an effort to expand, improve and enhance the relevancy of 
the scientific efforts of the National Science Foundation regarding the 
environment. We believe that NSF as an independent, non- regulatory 
science-funding agency is an important source of credible scientific 
knowledge about the environment.
    NCSE's efforts have had considerable support from Congress. The 
House Appropriations Committee report accompany the fiscal year 1998 
appropriations bill directed NSF to study how it would establish and 
operate a National Institute for the Environment that, ``provides a 
major role for stakeholders in defining questions needing scientific 
attention and which funds ongoing knowledge assessments, extramural 
research, on-line information dissemination, and education and training 
through a competitive peer reviewed process.''
    The National Science Board responded to Congress by unanimously 
approving a report, Environmental Science and Engineering for the 21st 
Century: The Role of the National Science Foundation, on February 2, 
2000. The NSB report sets out a bold, ambitious set of recommendations 
that could dramatically improve the scientific basis for environmental 
decisionmaking. The first keystone recommendation is as follows:
    ``Environmental research, education, and scientific assessment 
should be one of NSF's highest priorities. The current environmental 
portfolio represents an expenditure of approximately $600 million per 
year. In view of the overwhelming importance of, and exciting 
opportunities for, progress in the environmental arena, and because 
existing resources are fully and appropriately utilized, new funding 
will be required. We recommend that support for environmental research, 
education, and scientific assessment at NSF be increased by an 
additional $1 billion, phased in over the next 5 years, to reach an 
annual expenditure of approximately $1.6 billion.''
    The National Council for Science and the Environment encourages 
Congress to support full and effective implementation of the National 
Science Board's report, Environmental Science and Engineering for the 
21st Century: The Role of the National Science Foundation, within the 
context of a doubling of the budget for the NSF.
    NSF has begun to implement the recommendations of the NSB. It has 
appointed an environmental coordinator and created a new position in 
the Office of the Director. NSF has formed an Advisory Committee on 
Environmental Research and Education. It has established a priority 
area on Biocomplexity and the Environment that provides new 
opportunities for multidisciplinary research on the interactivity of 
biota and the environment.
    The NSB recommendations are consistent with the direction provided 
by the Appropriations Committee. Full implementation of the NSB report 
will require strong support from Congress and a significant increase in 
funding for NSF's portfolio of environmental science, engineering and 
education.
                           epa's star program
    NCSE urges Congress to restore full funding for the Environmental 
Protection Agency's Science to Achieve Results (STAR) graduate 
fellowship program. EPA's budget request for fiscal year 2003 budget 
request for EPA would eliminate funding for new STAR fellowships. This 
is the only Federally supported fellowship program specifically aimed 
at graduate students in the environmental sciences and policy areas. 
From 1995 to 2001, EPA funded over 800 STAR fellows at 168 colleges and 
universities, including 28 STAR fellows in Maryland and 8 STAR fellows 
in Missouri. The STAR program is highly competitive, with a success 
rate of only 10 percent. Like the environmental programs at NSF, the 
STAR fellowship program suffers from a serious imbalance between 
resources and highly qualified applicants. Investment in environmental 
scientists, engineers, policymakers and professionals is essential for 
the nation to reap the benefits of scientific advances.
                homeland security and environmental r&d
    Environmental R&D is a critical component of homeland security. For 
example, understanding the dispersal of toxic substances in water and 
air is directly relevant to counterterrorism. NSF has supported 
research in these areas for many years. NSF is requesting funding for 
new environmental projects that could strengthen homeland security. For 
example, NSF Director Rita Colwell said that NSF's proposed National 
Ecological Observatory Network (NEON) could detect abrupt changes or 
long-term trends in the environment and could also serve as ``an early 
warning and detection system for a wide array of chemical and 
biological warfare agents.'' We encourage Congress to explore the role 
of environmental R&D in homeland security and counterterrorism and to 
recommend actions that would improve the nation's capacity in this 
area. Thank you very much for your interest in improving the scientific 
basis for environmental decisionmaking.
                               Attachment
    Letter calling for significant funding increases for environmental 
science, engineering, and education programs signed by more than 120 
national leaders of academic, scientific, environmental, and business 
organizations.

            National Council for Science & the Environment,
                                     Washington, DC, March 8, 2001.
President George W. Bush
The White House, 1600 Pennsylvania Avenue NW, Washington, DC 20500.
    Dear President Bush: During your recent election campaign, you 
talked about the importance of basing environmental decisions on 
science. We, as a diverse coalition of academic, business, 
environmental, governmental and community leaders, working with the 
National Council for Science and the Environment agree with you in this 
regard.
    We are writing to urge you to implement your campaign commitment by 
making investment in science for environmental decisionmaking a 
priority in your administration. In particular, we are asking you to 
provide significantly increased funding for scientific programs to:
  --Assess what is known about the environment;
  --Better understand the environment;
  --Provide scientific information about the environment; and
  --Support science-based education about the environment.
    These programs include:
  --National Science Foundation's biocomplexity in the environment 
        initiative and portfolio of environmental science, engineering 
        and education programs
  --U.S. Geological Survey's biological, geological, hydrological, and 
        mapping divisions
  --U.S. Environmental Protection Agency's Office of Research and 
        Development, especially the Science To Achieve Results (STAR) 
        research and fellowship programs
  --National Oceanographic and Atmospheric Administration
  --U.S. Department of Agriculture's environmental research programs 
        through CSREES and the Agricultural Research Service, 
        particularly the Natural Resource Initiative
  --U.S. Forest Service forestry research
  --Department of Energy's environmental science programs
  --National Aeronautics and Space Administration earth exploration 
        programs.
  --National Institute of Environmental Health Sciences
    We hope that your initial budget will support science as an 
investment that will lead to a stronger economy, healthy people, and a 
healthy environment.
            Sincerely,
                                   Peter D. Saundry, Ph.D.,
Executive Director, National Council for Science & the Environment.
                                 ______
                                 

  Prepared Statement of the National Emergency Management Association

                              introduction
    Thank you Chair Mikulski, Ranking Member Bond, and distinguished 
members of the Committee for allowing me the opportunity to provide you 
with testimony on the Federal Emergency Management Agency (FEMA) fiscal 
year 2003 budget. I am Dale Shipley, the Director of the Ohio Emergency 
Management Agency and I am here today representing the National 
Emergency Management Association (NEMA). Currently, I am the Chairman 
of the NEMA Legislative Committee and I come before you today to 
represent the state emergency management directors in the 50 states and 
the U.S. territories who are its core members. NEMA's members are 
responsible to their governors for emergency preparedness, mitigation, 
response and recovery activities.
    The FEMA budget provides critical support to State and local 
emergency management programs through actual dollars, grants, and 
program support. This year, NEMA would like to address three main 
issues with the proposed Federal budget for FEMA.
  --The first is our concern for the lack of attention to building 
        emergency management capabilities through the Emergency 
        Management Performance Grant (EMPG) program and our request for 
        supplemental assistance;
  --The second is our support for the First Responder Grant program and 
        the intention to coordinate these grants through the States; 
        and
  --The third is our concern about the proposal to fold the Hazard 
        Mitigation Grant Program (HMGP) into the pre-disaster 
        competitive mitigation grant program.
                  supplemental appropriations and empg
    The existing national emergency increases demands on State and 
local governments to provide heightened preparedness and response for 
domestic terrorism and has stretched or exhausted emergency management 
functions in local jurisdictions. While States had been contributing 
significantly more towards emergency management over the last decade, 
the national emergency declaration and State and local budget demands 
and deficits make that continued effort impossible.
    Emergency management is heartened by the proposal to make $3.5 
billion available to the nation's first responders, but we cannot wait 
until Fall to address these immediate needs. Building a statewide 
emergency management capability is key to ensuring national 
preparedness. Resources for personnel both at the State and local level 
to manage the programs are critical to completing the preparedness 
mission.
    NEMA and emergency management directors from the States and 
territories respectfully request that Congress provide additional 
funding for State and local emergency management programs through FEMA 
in the Spring fiscal year 2002 supplemental appropriations bill. We ask 
that $200 million be added to the Emergency Management Performance 
Grant Program (EMPG) in the FEMA budget to address unmet needs and to 
assist in capacity building.
    A recent NEMA survey revealed total program support needs in the 
amount of $2.1 billion. The $200 million urgent request specifically 
represents a $117 million EMPG shortfall and $83 million to address 
facilities and communications needs. NEMA's Report on Local Emergency 
Management Program Capability Requirements and Shortfalls details the 
survey results identifying shortfalls in emergency management. The $117 
million shortfall identified represents data from 38 States. It will 
likely increase as the remaining State data is received.
    The current Emergency Management Performance Grant system of 
funding State/territory and local governments has its history dating to 
World War II Civil Defense programs and through the Cold War years. As 
the threat was perceived we funded Civil Defense and Disaster Services 
programs to the level needed to meet the threat. As the Cold War 
diminished and the threat was perceived as lessening, the funding 
system was kept in place, but the funding levels did not keep pace with 
expanding programs and capability requirements.
    Now the nation is faced with a new threat of terrorism and the 
necessity for increased planning and coordination with public health, 
law enforcement, agriculture and other State and local organizations 
plus significant grants management responsibilities with all response 
organizations cannot be accomplished effectively with current 
capabilities. An additional $200 million in funding for EMPG in the 
Spring supplemental appropriations package would essentially be a down 
payment for addressing emergency management needs.
    The Emergency Management Performance Grant (EMPG) are ``pass 
through'' grants to State and local governments to provide a foundation 
for basic emergency capabilities. EMPG is intended to be a 50/50 
matching contribution program for Federal and State Governments. 
Unfortunately, EMPG funds have been virtually the only area where FEMA 
has not received an increase in the past 8 years, thus eroding State 
and local emergency management capabilities. EMPG funding is the 
lifeblood for State and local governments to prepare for, respond to, 
recover from, and mitigate losses from future disasters.
                     first responder grant program
    Long before September 11, 2001, NEMA had established itself as a 
leader in providing input to Congress and Federal agencies on issues of 
domestic preparedness. States have been in the forefront of preparing 
for and responding to all types of disasters, both natural and man-
made. We take an all-hazards approach to disaster preparedness and have 
integrated our domestic preparedness efforts into the proven systems we 
already use for dealing with both man-made and natural disasters. We 
also recognize clearly the value of prevention and mitigation in 
minimizing the consequences of disasters and we incorporate those 
considerations in all our efforts.
    NEMA supports Federal efforts to increase emergency management 
capacity building at the State, territory, and local level for 
personnel, planning, training, equipment, coordination, and exercising. 
A significant Federal commitment must be made to give State, 
territorial, and local governments the tools to ensure adequate 
preparedness. While States have significantly increased their 
commitment to emergency management over the last decade, States are 
struggling with budgetary issues and the increased investments 
necessary to meet new demands.
    There are five issues that we would like to bring to your attention 
as you address the proposed First Responder Grant program:
  --All efforts need to be coordinated through the States;
  --State and local governments need funding to be flexible enough for 
        personnel to manage the program;
  --Standards must be developed to ensure interoperability of 
        equipment, communications, and training;
  --Mutual aid both intrastate and interstate--is a key component to 
        capacity building; and
  --State and local government must be fully, directly and continuously 
        involved and consulted in the development of the National 
        Domestic Preparedness Strategy.
State Coordination
    All efforts to increase emergency management capacity building must 
be coordinated through the States to ensure harmonization with the 
State emergency operations plan, ensure equitable distribution of 
resources, and to synthesize resources for intra-state and inter-state 
mutual aid. Also, the Stafford Act, which governs the way disaster 
assistance is allocated, successfully uses States and Governors as the 
managers of Federal disaster relief funds for local governments which 
are over-taxed and need assistance when disasters occur. States 
understand the need to get funding to the first responders and have 
long coordinated statewide and regionally to ensure adequate State 
assistance to local governments for emergency preparedness and 
response. There is no question that most of the $3.5 billion proposed 
first responder grant funds need to get to police, fire fighters, 
emergency medical workers, and other front-line local responders after 
all, disasters are local in nature. The health community must not be 
forgotten and must be integrated into all planning, training, and 
exercising under the State emergency operations plan. We can 
effectively ensure this by working through the States to build on the 
needs identified in the plans that FEMA, the Department of Justice, and 
other agencies have required statewide.
    Further, because this is a national emergency and States and local 
governments are in difficult fiscal situations, we must we wary of 
programs that would require significant matches. In fact, for local 
governments to meet the match would be even more difficult given their 
fiscal constraints. If a significant match is required, the application 
of this initiative will only go to those agencies and governments that 
can fiscally afford the match and not necessarily where the need is 
greatest. If a match is necessary, we would suggest that the match be 
non-fiscal or in the form of a deliverable as opposed to soft or hard 
dollars.
Flexibility for Personnel to Manage the Program
    State emergency managers need to have a commitment for sustained 
Federal resources and the flexibility to insure the hiring and training 
of sufficient professional personnel to manage the expanding 
antiterrorism programs. We are concerned that an influx of funding 
programs from the Federal Government could detract from the ``all 
hazards'' approach and we will have to turn our focus away from natural 
disaster preparedness and response and thereby actually reduce overall 
preparedness and efficiency. Building a statewide emergency management 
capability is key to ensuring preparedness across the board. 
Flexibility to use some of the first responder grants for personnel 
both at the State and local level to manage the programs is critical to 
completing the preparedness mission.
    NEMA has long advocated an increase in the only flexible source of 
federal emergency management funding, the Emergency Management 
Performance Grant (EMPG). EMPG is the only line item in the FEMA budget 
that has not received an increase in the last decade, yet it is the 
only consistent source of Federal funding for State and local capacity 
building. As an existing funding stream, EMPG could be used to hire 
State and local staff to manage critical programs and build the 
incremental emergency management capacity to prepare for the first 
responder grants and the coordination that will be required to 
effectively execute the program. State and local government emergency 
management is already over-stressed and working to capacity.
Standards
    Standards must be developed to ensure interoperability of 
equipment, communications, and training across state, regional, and 
local jurisdictions. In terms of establishing voluntary minimum 
standards for the terrorism preparedness programs of State and local 
governments, NEMA offers itself as a resource in this area. Our 
organization, along with other stakeholder groups such as the Federal 
Emergency Management Agency, the International Association of Emergency 
Managers, National Governors' Association, National League of Cities, 
International Association of Fire Chiefs, and others, has developed and 
is implementing an Emergency Management Accreditation Program (EMAP). 
EMAP is a voluntary standards and accreditation program for State and 
local emergency management that is based on NFPA (National Fire 
Protection Association) 1600 Standard for Disaster/Emergency Management 
and Business Continuity Operations (an ANSI or American National 
Standards Institute approved standard) and FEMA's Capability Assessment 
of Readiness (CAR). Consequence management preparedness, response and 
recovery standards are being developed in conjunction with those for 
the traditional emergency management functions. NEMA suggests that 
these standards already being collaboratively developed through EMAP be 
considered in the development of minimum standards for training, 
exercises and equipment. Additionally, EMAP acceptance would provide 
the natural mechanism for Federal and State agencies to meet the 
requirements of the Government Performance Results Act (GPRA). EMAP has 
already completed a pilot phase in North Carolina and North Dakota and 
will begin receiving State program applications in April. Pilot 
assessment of county and city programs will begin this Spring. Mutual 
Aid Mutual aid is one key to capacity building. A proven system we need 
to take advantage of for all domestic preparedness planning is the 
Emergency Management Assistance Compact (EMAC). EMAC is an interstate 
mutual aid agreement that allows States to assist one another in 
responding to all kinds of natural and man-made disasters. EMAC offers 
a quick and easy way for States to send personnel and equipment to help 
disaster relief efforts in other States. There are times when State and 
local resources are overwhelmed and Federal assistance is inadequate, 
inappropriate, too far away or unavailable. Out-of-state aid through 
EMAC helps fill such shortfalls. There are 46 States and two 
territories that are members of EMAC and other States and territories 
are planning to join. In response to the September 11 tragedy, 
emergency managers from several States provided technical assistance 
and personnel support to New York through EMAC. A system like this 
enables experts and specialized equipment to be used across 
jurisdictions and regions based on the nature of a particular event. 
NEMA and FEMA are currently working together to standardize resource 
typing. By having commonly understood descriptions of resource 
packages, impacted jurisdictions will know just what they are going to 
get when they request each standard package.
National Domestic Preparedness Strategy
    NEMA has long requested for Congress to put in place an inclusive 
national framework for developing a National Domestic Preparedness 
Strategy and a single point of contact within the Federal Government 
that is accountable to Congress to coordinate the Federal efforts in 
implementation of that strategy. Please also note that we espouse a 
collaboratively developed national strategy, not just a Federal one. We 
now look forward to working with the Office of Homeland Security 
towards the development and implementation of that strategy. In 
addition to NEMA's ``Ten Principles for a National Domestic 
Preparedness Strategy'' adopted in 2000, we also developed a White 
Paper on Domestic Preparedness in the aftermath of 9/11 that is also 
supported by the Adjutants General Association of the U.S., the Council 
of State Governments, International Association of Emergency Managers, 
and the National Guard Association of the U.S. A copy of this White 
Paper is attached, along with NEMA's ``Ten Principles''.
    In any way possible, the Federal Government needs to coordinate 
efforts for domestic preparedness and avoid duplication of efforts and 
programs. The Office of Homeland Security assured that State emergency 
managers and first responders from the State and local level will be 
invited to participate in development of the national preparedness 
strategy.
        hazard mitigation grant program & predisaster mitigation
    The Administration's budget proposal includes a request to create a 
new pre-disaster mitigation program that will combine the predisaster 
mitigation program authorized by the Disaster Mitigation Act of 2000 
and the post-disaster Hazard Mitigation Grant Program (HMGP). While 
Federal costs towards disasters remain a concern, significant 
commitments must be made towards both pre-disaster and post-disaster 
mitigation in order to lower overall disaster costs in the long run.
    Replacing the HMGP program, which may provide up to 20 percent of 
total disaster costs towards post-disaster mitigation grants, would 
prevent the lessons learned from disasters from being immediately 
incorporated into mitigation projects to prevent losses of life and 
destruction of property.
    The HMGP was authorized under Section 404 of the Stafford Act, and 
administered by FEMA. The program provides grants to States and local 
governments to implement comprehensive and long-term hazard mitigation 
measures after a major disaster. Examples of risk reduction measures 
include: acquisition, relocation or elevation of flood damaged homes 
and businesses; relocation and fortification of critical public 
infrastructure; rebuilding at a higher building code level, for 
purchasing repetitive loss properties, and for the development of local 
mitigation plans, projects and strategies to make communities more 
disaster resistant and resilient. The months immediately following 
disasters provide unique opportunities to efficiently incorporate risk 
reduction measures in a very cost-effective manner, in many cases 
lowering the overall cost of the project by leveraging other funding 
sources including insurance settlements.
    The HMGP has proven to be a highly effective tool in steering 
communities toward risk reduction measures, in many cases breaking 
repetitive loss cycles that have cost other Federal disaster relief 
programs multiple times. Cost-benefit analysis is currently a 
requirement for predisaster mitigation programs.
    In a purely competitive grant program, lower income communities, 
often those most at risk to natural disaster will not effectively 
compete with more prosperous cities. Also, disasters graphically and 
vividly expose the need for and value of mitigation projects. We must 
not lose these opportunities to initiate projects to enhance our 
communities and reduce future disaster costs. Damage caused by 
disasters would go largely unrepaired thereby further impacting the 
economic and social recovery of particular areas. There are not enough 
mitigation dollars available to address all of the vulnerabilities that 
exist in this country.
    Making mitigation funds available only in a predisaster competitive 
environment will set this country's mitigation efforts back by removing 
the prime motivation factor, the disaster itself, as the motivation. 
The proposal is not a cost-savings initiative, as disaster costs to the 
Federal Government would be expected to significantly increase. HMGP 
could be modified to include performance measures, but HMGP should not 
be rolled into the predisaster mitigation program.
    Probably the best recent example of post-disaster hazard mitigation 
in the recent years is the $836 million appropriated by the North 
Carolina General Assembly after Hurricane Floyd. This funding was 
nearly equal to the entire Federal contribution. Without State level 
funding to provide all the non-Federal cost share for programs, and the 
financing of innovative risk reduction programs to compliment Federal 
programs, mitigation techniques would never have been incorporated into 
the rebuilding process. In excess of $200 million in State funds was 
committee to relocate over four thousand families, dozens of businesses 
and agricultural operations from the floodplain, thus guaranteeing they 
will not be devastated by future floods. In addition, North Carolina 
and other States are now undertaking the task of updating Flood 
Insurance Rate Maps, a traditional Federal responsibility and expense, 
to ensure communities have the best available information on where 
flood hazards exist.
    By the same token, predisaster mitigation is also a key component 
to effective disaster mitigation. Over the last 5 years, predisaster 
mitigation programs and initiatives have proven their value in not only 
saving lives and property in recent disasters, but also in many cases 
have negated the need for any emergency response and recovery. Pre-
disaster mitigation is essential, but we need to ensure that pre-
disaster mitigation corresponds with the Disaster Mitigation Act of 
2000 that was passed overwhelmingly by the House and Senate and signed 
into law. NEMA worked with Congress to draft the Disaster Mitigation 
Act of 2000 (DMA2K), which authorized predisaster mitigation; works 
with small impoverished communities to lessen their vulnerability to 
natural disasters; established a National Pre-disaster Mitigation Fund 
in the Treasury of the United States; and provided for the development 
of multi-hazard advisory maps. It took many years for Congress to agree 
on language to amend the Stafford Act and we are so grateful that the 
Disaster Mitigation Act was signed into law. As FEMA implements DMA2K, 
we must not lose the opportunity to prevent the loss of life and 
destruction of property prior to disasters.
    NEMA calls on Congress to maximize the benefits of both HMGP and 
predisaster mitigation, while including provisions for increased 
accountability. NEMA supports increasing funding for predisaster 
mitigation, but maintains that HMGP should be retained as a separate 
and funded post-disaster program.
                              other issues
    Congress should support funding for modernization of floodplain 
mapping, since many of the flood plain maps are 15-30 years old and 
considered out of date. Any updates to flood maps should be made with 
the coordination of State and local governments. Flood maps play a key 
role in disaster reduction, mitigation, and community planning and 
development activities. Many of the flood maps in place do not reflect 
recent development, and may contain inaccurate information about the 
floodplains as a result. FEMA has estimated the cost of a comprehensive 
multi-year map modernization plan at $750 million over a 7-year period. 
Congress has recognized the need to update the floodplain maps in the 
fiscal year 2002 budget and the commitment should continued in fiscal 
year 2003 and beyond to insure currency in our mapping. NEMA supports 
the proposed $300 million for flood mapping modernization included in 
the President's Budget
    NEMA is currently looking closely at the proposal in the 
Administration's budget that would end State taxation of insurance 
premiums to the National Flood Insurance Program. Current estimates 
from FEMA anticipate that eliminating the tax would reduce State 
revenue nationwide by $29 million. We would like to reserve the right 
to report back to you with information on how this proposal may impact 
the States as you consider the FEMA appropriations bill in the coming 
months, but we see no rationale for the Federal Government to eliminate 
this tax revenue to States.
                               conclusion
    While emergency management has been the driving force in our 
nation's preparedness, we must not forget the lessons learned on 
September 11, 2001 that translate into the need for increased 
preparedness and response capabilities. If in fact we want to truly 
commit our nation to preparedness, we must tale advantage of the 
memories still fresh in our mind of both man-made and natural 
disasters. Retaining the ``all-hazards'' approach will prevent our 
nation from losing focus on the daily perils that we face and translate 
into double value in preparedness.
    Whether it is a hurricane in Florida, earthquakes in the pacific 
northwest, or tornadoes in Maryland, States need a Federal commitment 
to recognize that each State and local government has unique disaster 
preparedness and response needs that require flexible, predictable, and 
adequate funding assistance that is coordinated with the State 
emergency management plan.
    While we cannot completely prevent events and natural disasters 
from occurring we can be prepared for them and help our communities 
minimize the impact of lives lost and destruction of our critical 
infrastructure. I ask that you please consider our recommendations as 
you consider difficult budget decisions this year.
    I thank you for the opportunity to testify on behalf of NEMA and 
welcome any questions that you might have. Only through a partnership 
of Federal, State, and local governments, can our country prepare and 
respond to emergencies and disasters. Thank you for your consideration.
         White Paper on Domestic Preparedness--October 1, 2001
Background
    Emergency management as a discipline has been shaped by historical 
events, both nationally and internationally. During World War II, it 
became apparent for the first time that our nation was susceptible to 
enemy attack. As a result, the first organization and function of what 
is called Civil Defense was established. The majority of civil 
preparedness and disaster response capability at the local level had 
its foundation in the Civil Defense program. Federal financial 
assistance to State and local jurisdictions for civil defense programs 
was begun in 1958 and provided Federal matching funds (50/50) for 
personnel and administrative expenditures for civil defense 
preparedness. Attack preparedness was mandated as a joint Federal-
State-local responsibility. This funding base provided the very 
foundation upon which civil preparedness (what we now refer to as 
emergency management) was built.
    The recent terrorist attacks demonstrate the fact that the nation 
needs to develop a capability reminiscent of the past when there 
existed a robust State and local emergency management and response 
capability. A strengthened national program incorporating today's all 
hazards approach to emergency preparedness is imperative. Congress, 
Federal agencies, governors, State and local emergency management 
directors, other local officials and all disciplines of emergency 
responders must work together to develop a strategy for standardized, 
bottom-up national capabilities to effectively respond to catastrophic 
disaster situations.
    In addition to the States Principles for a National Domestic 
Preparedness Strategy, adopted in February 2000, NEMA thinks it 
critical that the following enhancements be incorporated into a 
nationwide strategy for catastrophic disaster preparedness. Items are 
listed by category and not necessarily by priority.
Emergency Preparedness and Response
    Congress should provide to the States immediate Federal funding for 
full-time catastrophic disaster coordinators in moderate and high-risk 
local jurisdictions of the United States, including the 120 largest 
cities where training and equipment was provided under the Nunn-Lugar-
Domenici domestic preparedness programs. These personnel will have 
responsibility for developing and maintaining terrorism consequences 
plans, procedures, exercises, and resources. For those states with 
appropriate jurisdictional staffing levels already in place, the 
flexibility to utilize Federal funds to enhance the overall emergency 
preparedness program based on identified priorities is critical. 
Measures should be implemented to ensure this funding does not supplant 
existing State and local emergency management funding commitments.
    States need financial assistance to improve catastrophic response 
and Continuity of Operations Plans (COOP) and Continuity of Government 
(COG) for States. FEMA should be provided additional funding to 
develop, construct and/or retrofit Federal/State/local command and 
control centers (Emergency Operating Centers) for NBC events. These 
coordination centers must exist at each level of government. Alternate 
EOC locations must be available should the primary center be damaged or 
destroyed by the event.
    Interstate and intrastate mutual aid assistance must be recognized 
and supported by the Federal Government as an expedient, cost-effective 
approach to disaster response and recovery. The Emergency Management 
Assistance Compact (EMAC) has been adopted by 41 States and two 
territories with additional States planning to join. EMAC is an 
interstate mutual aid agreement ratified by Congress, passed by state 
legislatures and signed into law by governors, and is well coordinated 
with the Federal Response Plan. Other States utilize the existing 
Interstate Civil Defense and Disaster Compact as well as regional 
compacts that are similarly coordinated with existing plans. These 
complementary operational systems should be linked as the framework and 
procedures for all response and recovery activities.
    The Emergency Management Accreditation Program (EMAP) should be 
implemented and recognized by Federal agencies as a strategic tool to 
build greater multi-discipline/all-hazards capabilities at the state 
and local level, including domestic terrorism. EMAP is a voluntary, 
national standards and accreditation program for state and local 
emergency management programs. The initiative is being developed in 
partnership by NEMA, FEMA and the International Association of 
Emergency Managers and is currently in the pilot phase.
    FEMA, State and local emergency managers must implement renewed 
emphasis on family and community preparedness to ensure Americans have 
necessary skills to survive a catastrophic disaster.
    A standardized national donations management protocol is needed to 
address the outpouring of food, clothing, supplies, and other items 
that are commonly sent to impacted states and localities following a 
disaster. If not handled properly, large amounts of unnecessary or 
inappropriate donations can add another level of complication to the 
disaster itself. We believe the shoring up of State and local emergency 
management agencies will provide the necessary organization to improve 
this system; however, additional planning and an information management 
capability are desperately needed.
Health and Medical
    The medical surge capacity must be strengthened. The emergency 
management, medical and public health professions must work with 
lawmakers to ensure each region of our nation has a certain minimum 
surge capacity to deal with mass casualty events. Hospitals should 
agree to provide defined and standardized levels of resources, 
capabilities and assistance to handle mass casualties, especially those 
contaminated by chemical/biological agents. Funding for equipment and 
supplies to accomplish this mission should be provided to develop this 
additional capability, in exchange for their agreeing to participate as 
a local receiving hospital and as part of the U.S. Public Health 
Service's National Disaster Medical System (NDMS). Funding for the 
health care system for emergency planning and extraordinary operation 
response costs that are not available from any other means must be 
provided by the Federal Government. Additionally, the Federal 
government needs to provide the equipment and supplies to accomplish 
this mission and develop this additional capability; also, states need 
assistance to complete the National Pharmaceutical Stockpile 
distribution response plan.
    State-Local Disaster Medical Assistance Teams should be developed 
across the country with standardized equipment, personnel and training. 
These teams would serve as the first line of response to support 
impacted communities within impacted states, and could be required to 
respond outside the state as a mutual aid resource upon request. Self-
contained capability to respond outside their jurisdiction should be 
provided by military Reserve Component assets available in each state.
    The current sixty U.S. Public Health Service NDMS Disaster Medical 
Assistance Teams (DMAT) should be uniformly enhanced for Weapons of 
Mass Destruction (WMD) response, including focus on personnel 
protection and training for WMD. Currently only four of the teams have 
been upgraded and equipped to serve as National Medical Response Teams 
(NMRTS).
Additional WMD Recommendations
    The Department of Justice should immediately release the fiscal 
year 2000 and fiscal year 2001 equipment funds in order to begin 
implementation of these recommendations, and then require a basic 
statewide strategy in order to receive fiscal year 2002 funds; and 
further, provide funding to states to administer the equipment program. 
Also, allow greater flexibility with the approved equipment list in 
order to accomplish any of these recommendations. Specifically, this 
should include the use of funds for the purchase of necessary equipment 
for hospitals and the health care industry, regardless of the private 
sector ownership of these critical first receiver response system 
components. In addition, Congress should increase funding to DOJ to 
provide detection, personnel protection and decontamination equipment 
for the nation's emergency response agencies. Lastly, Federal training 
and maintenance money must be included in any national terrorism 
response program.
    Congress and the Department of Defense should authorize homeland 
defense as a key Federal defense mission tasking for the National 
Guard. By providing this authorization and removing restrictive 
language and funding on utilization of National Guard assets and 
personnel, the civil-military integrated response will be dramatically 
improved. In addition, Congress should provide funding to DOD for full-
time staffing of state joint civil-military emergency operations 
centers. Further, Congress should provide funding to National Guard 
Bureau to complete fielding of National Guard Civil Support Teams in 
additional states and territories.
    State-Local Urban Search and Rescue capabilities should be 
developed across the country with standardized equipment, personnel and 
training. These teams would serve as the first line of response to 
support impacted communities within impacted states, and may be 
required to respond outside the state as a mutual aid resource upon 
request. Self-contained capability to respond outside their 
jurisdiction should be provided by National Guard assets available in 
each state. Further, standardization of the national USAR format and 
approach should be accomplished in such a way that there is a gradation 
in the USAR response teams to enhance overall national capability.
    The Department of Defense should undertake a review of the 
distribution of aviation assets to the National Guard in each state, 
territory and District of Columbia.
    National interagency and intergovernmental information management 
protocols are needed to support information sharing (ie. Damage/
Situation Reports, Warning/Intelligence Reports, Resource 
Coordination). Further, an unclassified version of INTELINK needs to be 
developed for use by the greater emergency response community.
    Better Federal interagency coordination is needed to assist states 
in identifying and accessing the full range of Federal resources and 
assistance available to them. Currently, states are left on their own 
to identify individual agency programs and then contact each agency to 
determine programs and resources available.
    Security clearances must be more standardized and reciprocal 
between agencies and levels of government. Use of a compartmented, 
need-to-know system would greatly facilitate secure sharing of critical 
intelligence. Additionally, a critical need exists to enhance the 
ability of local and state officials to receive Federal security 
clearances more expediently.
    FEMA's fire grant program should be expanded and modified to 
strengthen regional and national, not just local, fire protection 
capabilities to respond to catastrophic disasters. State level 
involvement in the program would allow increased coordination and 
prioritization of resource needs within each state. A comprehensive 
national strategy would ensure best use of available funding provided 
to local fire departments to enhance regional and national response 
capabilities.
    The National Warning System (NAWAS), maintained by FEMA, has been 
downsized in recent years. This system was designed to provide rapid 
communications and warning capabilities between Federal, State and 
local emergency management agencies. The Congress should provide 
funding to rapidly upgrade and expand a sustainable national 
intergovernmental communication and warning system.
    FEMA, in collaboration with state, local, private and other Federal 
agency emergency response partners, should rapidly develop a 
standardized emergency responder identification and accounting system 
to improve personnel credentialing and accountability at scenes of 
catastrophic disasters.
    The Environmental Protection Agency should be provided funding to 
develop additional guidance on shelter in-place strategies for nuclear/
biological/chemical (NBC) events, especially in urban centers.
    There is a need for technology transfer from the Federal Government 
and its contractors to state and local governments to support an 
automated decision support system. Several Federal agencies have data 
that is unclassified that could be used for planning, response and 
recovery activities. These Federally developed systems would contribute 
immensely to accomplishing many of the recommendations set forth in 
this paper and do so in a cost effective manner.
 Resolution on States Principles for a National Domestic Preparedness 
                                Strategy
    WHEREAS, The National Emergency Management Association (NEMA), 
represents the state emergency management directors in the 50 states, 
territories and District of Columbia who are responsible to their 
governors for preparing for, responding to and recovering from natural 
and manmade disasters, as well as consequence management for incidents 
of domestic terrorism; and
    WHEREAS, NEMA believes the following principles provide the 
necessary framework for a National Domestic Preparedness Strategy:
    1. The United States needs to have a viable national vision to 
guide the development of a clear, comprehensive and integrated national 
domestic preparedness strategy to prepare for and manage the 
consequences of terrorism--one that utilizes the nation's existing all 
hazards emergency management and response system. The strategy must 
clearly define federal, state and local government roles and 
responsibilities and articulate a clear direction for federal 
priorities and programs to support state and local responders. The 
strategy must be developed in coordination with state and local 
entities, include measurable performance objectives, and address 
sustainable infrastructure.
    2. There must be increased and productive coordination of all 
federal domestic preparedness programs and resources and improved 
interface with governors and states. A single, visible point of 
coordination is essential at the federal level with the appropriate 
degree of authority to ensure that all federal agency resources, 
programs, and policies are consistent with and supportive of the 
national strategy. A mechanism must be provided to this coordination 
point in order to influence federal agency budgets and program 
authorizations to ensure consistency with the national strategy. This 
entity must be codified in authorizing legislation rather than the 
current practice of appropriations language, and the entity must be 
appropriately resourced to fulfill its mission.
    3. All federal resources, programs, and activities must be 
coordinated through the nation's governors and their state emergency 
management agencies to ensure a comprehensive state-wide domestic 
preparedness strategy that reflects the unique characteristics and 
needs of each individual state.
    4. Government at all levels must ensure that the protection of 
civil liberties and states' rights remain the highest priority within 
the context of national security as the United States prepares for and 
addresses the consequences of terrorism.
    5. There are at least fifteen different Congressional committees 
with jurisdiction over components of the domestic preparedness issue. 
There should be a special committee on domestic preparedness to better 
ensure the coordination of federal programs, coordination of funding, 
avoid duplication of programs, and to provide centralized, coordinated 
oversight.
    6. Credible, timely threat information is needed by state and local 
governments that is based upon solid research, analysis, and sound 
science rather than worst-case scenarios.
    7. The issue of increased tactical and strategic capabilities for 
communication and information sharing between and among all levels and 
disciplines of government is essential to effective domestic 
preparedness. Information sharing by law enforcement must be addressed 
to allow emergency responders at the state and local level the ability 
to deter, interdict or respond to a potential terrorist incident.
    8. The nation's public health and medical system capabilities, 
including that of private hospitals, must be substantially enhanced and 
fully integrated into the domestic preparedness program with increased 
and improved coordination between emergency management, law enforcement 
and the fire community.
    9. National standards should be developed for responders at all 
levels of government, particularly in the areas of planning, training, 
equipment and communications, in order to ensure common approaches 
between communities and states. In addition, a standardized approach to 
preparing for and respond to terrorist events, including cyber 
terrorism, is critical to local, state and the federal government's 
ability to work effectively as a team and therefore NEMA recommends 
that all states and all federal agencies adopt the incident command/
management system as a way to ensure an integrated and coordinated 
local, state and Federal response.
    10. The National Emergency Management Association offers to partner 
with Congress and the federal government to develop the national 
domestic preparedness strategy--one that can be implemented effectively 
by all levels of government. NEMA has the ability to facilitate the 
input of all state and local responder groups into the development of 
such a strategy.
    NOW THEREFORE BE IT RESOLVED, that NEMA encourages Congress and the 
federal government to adopt these ten principles in developing a 
National Domestic Preparedness Strategy.
    MOVED: Keven Leuer (MN)
    SECOND: Ed Gleason (WI)
    DISPOSITION: Passed unamiously
    Authenticated: Myra Thompson Lee, NEMA Secretary NEMA 2000 Annual 
Conference, August 20-25, 2002, Palm Beach, Florida
                                 ______
                                 

 Prepared Statement of the People for the Ethical Treatment of Animals 
                                 (PETA)

    Chairwoman Mikulski and Members of the Subcommittee: People for the 
Ethical Treatment of Animals (PETA) is the world's largest animal 
rights organization, with more than 750,000 members and supporters. We 
greatly appreciate this opportunity to submit testimony regarding 
fiscal year 2003 appropriations for the Environmental Protection Agency 
(EPA).
    My testimony will focus on the EPA's use of animals in chemical 
testing programs. We are grateful to the Subcommittee for providing the 
first-ever appropriation for the development of non-animal test methods 
by the EPA in fiscal year 2002. We cannot overstress the importance of 
this initiative, as the EPA requires more chemical toxicity tests on 
animals than any other federal agency. Each year thousands of animals 
are subjected to painful procedures in which pesticides and industrial 
chemicals are forced into their lungs, throats, or stomachs. These 
animals include pigs, dogs, rabbits, rats, guinea pigs, hamsters, mice, 
birds, turtles, frogs, and fish.
    Frequently, non-animal test methods are more economical, more 
reliable, and more relevant to human health than animal tests. They are 
obviously more humane. Despite its rhetoric to the contrary, the EPA 
has steadfastly refused to spend funds on the development of methods 
that could replace the animal tests it currently requires. In the 
international arena, the United States (as represented by the EPA) has 
been a main obstacle to the acceptance of alternative methods by the 
Organization for Economic Cooperation and Development.
    In one example of needless animal testing, the EPA spent more than 
$400,000 to fund studies in which pigs were fed toxins in an attempt to 
estimate human exposures to arsenic and lead from the soil of sites of 
former mines, mills, and smelter waste facilities. Non-animal test 
methods utilize a simulated gastrointestinal tract in which 
contaminated soils are ``incubated'' in acidic solutions that mimic 
gastrointestinal fluids. The fraction of the metals that dissolve 
represents the fraction capable of causing toxicity. These approaches 
to the assessment of metal bioavailability have been available and in 
widespread use since 1994, and can be conducted for a small fraction of 
the cost of animal tests. Yet the EPA chooses to use animals.
    The EPA's Office of Pesticide Programs requires at least 14 
individual tests for pesticide active ingredients, some of which kill 
thousands of animals at a time. The EPA's high production volume (HPV) 
chemical testing program will kill more than 1 million animals. And the 
agency's proposed Endocrine Disruptor Screening Program (EDSP) is the 
largest animal-testing plan in U.S. history. Tens of thousands of 
chemicals are slated to be included in the EDSP, and scientific 
estimates are that between 600,000 and 1.2 million animals will be 
killed for every 1,000 chemicals tested.
    These programs require a variety of animal tests including assays 
for genetic toxicity, acute toxicity, reproductive toxicity, and 
hormone ``disruption.'' Amazingly, not one of these tests has ever been 
formally validated for its relevance to human health effects.
    There is tremendous potential for non-animal methods to replace 
animal tests in these programs. Several non-animal test methods have 
recently been formally validated as total replacements for animal 
studies, including four skin corrosion assays, in vitro tests for skin 
penetration and phototoxicity, and three in vitro/ex vivo tests for 
embryotoxicity. Basic genetic toxicity can also be studied entirely 
without the use of animals. Three methods in particular (the Bacterial 
Reverse Mutation Test, In Vitro Cell Gene Mutation Test and In Vitro 
Chromosomal Aberration Test) have been accepted by government 
regulators worldwide as valid alternatives to using animals.
    There is also a great deal of work under way to develop and 
validate non-animal methods for assessing other health effects. For 
example, acute toxicity can be studied using cell culture systems, 
since the actions of toxic chemicals are often focused at the cellular 
level. For example, a series of four cell culture tests can predict 
toxicity in humans with nearly 85 percent accuracy (compared to an at 
best 65 percent in acute toxicity studies using animals). This method 
should, within several years, be able to replace the horrendously cruel 
use of animals in acute lethal poisoning testing.
    Reproductive toxicity studies, which are required under all of the 
EPA's animal-testing programs, can kill anywhere from 800 to several 
thousand animals per test. Computer models are currently the most 
promising prospects for replacing animals in these studies. For 
example, the MULTICASE expert system, which is currently undergoing 
development and prevalidation by the Food and Drug Administration 
(FDA), reduces a compound to all possible 2- to 10-atom fragments and 
identifies ``structural alerts'' associated with chemical reactivity. 
The model then applies a weight-of-evidence approach to evaluate the 
toxic potency of structural alerts, both individually and collectively, 
to determine the likelihood of toxic effects in a living system. The 
results of FDA prevalidation studies have been promising, but 
additional development, in collaboration with the EPA, will be needed 
before this model is likely to achieve widespread regulatory 
acceptance.
    For estrogen, androgen, and thyroid hormones, receptor binding and 
transcriptional activation assays are rapid, non-animal methods of 
detecting and measuring chemical interactions with cellular receptors. 
Many endocrine-disrupting chemicals function by binding to hormone 
receptor sites on cells, often out-competing the body's naturally-
occurring hormones for access to these receptor sites. Receptor binding 
assays model this activity in vitro. Transcriptional activation assays 
measure the presence of ``gene products,'' which are created as a 
result of receptor binding. Both types of assays are rapid, inexpensive 
and highly effective in detecting chemicals that mimic estrogen and 
androgens and interact with their receptors in the cell. In fact, one 
receptor binding assay was found to be five orders of magnitude more 
sensitive than the uterotrophic animal test currently proposed by the 
EPA.
    High throughput screens (HTPS) are automated systems capable of 
rapid screening of thousands of chemicals. One particularly promising 
example of an HTPS model is the CALUX (Chemically Activated Luciferase 
Expression) assay. This method is based on a genetically engineered 
cell line that responds to specific compounds by producing a chemical 
called firefly luciferase. For example, when a target chemical enters 
the cell, it binds to the cellular receptor, which turns on the 
luciferase, lighting up like a firefly. This assay is currently being 
adapted to screen for androgen and thyroid active hormones in addition 
to estrogenic chemicals.
    A HTPS could screen out many chemicals from further testing in the 
EDSP. Without it, millions of animals will be killed to test chemicals 
that would have been eliminated early on in the program. Congress 
appropriated $4 million in fiscal year 1999 to develop and implement 
the EDSP, including a HTPS. After spending only $70,000 and conducting 
one feasibility study, the EPA is not applying the balance of the funds 
to develop a HTPS. The EPA appears to have abandoned further 
development of a HTPS, despite the ongoing progress being made on this 
technology by researchers in Japan. Although the EPA claims it will use 
structure activity relationship (SAR) modeling in place of a HTPS, the 
agency fails to recognize that SAR models rely on data generated by a 
HTPS.
    Another area of research that the EPA ignores is the very valuable 
discipline of epidemiology. Epidemiological studies do not involve 
experiments or tests on people. They are observational studies of 
people who have been (or are likely to have been) exposed to an agent 
to see if they March 22, 2002 People for the Ethical Treatment of 
Animals Page 4 have differential rates of a given outcome than people 
who have not been exposed to the agent. There are generally two types 
of studies: (1) prospective--when researchers know a population has 
been exposed, and then they follow the population over time to see 
whether the rates of an adverse outcome happen in the population that 
has been exposed more than it happens to a population that has not been 
exposed; and (2) retrospective--if researchers have a suspicion of the 
kind of health problem associated with exposure to a particular agent, 
they find a population with that problem, and compare its rate of 
exposure to that agent with that of a population that does not have the 
problem.
    Epidemiological studies are the premiere method of gathering 
medical information. It is through epidemiological studies that we have 
learned most of what we know about public health--that smoking causes 
cancer (contrary to many conclusions from animal experiments), that 
cholesterol causes heart disease, that fruits and vegetables prevent 
disease, that obesity leads to diabetes, that lead paint leads to 
developmental problems in children, and that chromium in water causes 
cancer, to cite just a few examples.
    The irony is that animal experimentation often impedes the ready 
acceptance of evidence found through epidemiology. The chemical 
industry has long approved of the EPA's near-exclusive reliance on 
animal testing, since the results of these tests are always subject to 
interpretation. The controversy over arsenic is a perfect example of 
how animal studies delayed regulation of a dangerous chemical. For 
years, epidemiological studies have shown that arsenic in drinking 
water causes cancer in humans. Yet the EPA dragged its feet for more 
than 20 years while thousands of animals were killed in tests that 
attempted to reproduce the effects already seen in humans.
    As a case in point, take the fact that the EPA paid the National 
Institute of Environmental Health Sciences (NIEHS) $400,000 to 
immobilize rats in small bottle-like devices and conduct inhalation 
studies with mercury vapor. Scientists have known the hazards of 
mercury for decades and have seen reproductive effects illustrated in 
epidemiological studies of dental hygienists exposed to mercury in 
fillings.
    Yet the EPA spent our tax dollars unsuccessfully attempting to 
duplicate these effects that have already been seen in epidemiological 
studies of humans by forcing rats into contraptions that resemble 
medieval torture devices. As stated in the researchers' own words in a 
feature article in NIEHS' publication Environmental Health Perspectives 
(April 2000):
    Says NIEHS toxicologist Dan Morgan, ``The first mercury study we 
did was in response to studies . . . that showed that female dental 
hygienists, who are exposed to mercury quite often in preparing 
fillings, had more problems conceiving than women who were not exposed. 
So in order to study the mechanism of this effect, we tried to 
duplicate the results in animals.'' Of the results, Morgan says, ``We 
weren't able to reproduce any of those effects in our animal model.'' 
(our emphasis)
    What possible purpose did this experiment and gross waste of funds 
serve?
    In addition to the ethical and scientific problems associated with 
animal tests, another issue is whether or not they are being 
appropriately validated. At present, none of the animal tests planned 
for the EDSP are being validated for their relevance to human health 
effects. Therefore, the resulting data will not prompt any meaningful 
regulatory action to protect human health. The same is true with 
respect to ``ecotoxicity'' tests, which examine chemical effects in one 
species of wildlife and extrapolate these observations to hundreds, or 
perhaps thousands, of other species. Many scientists now agree that 
such broad and sweeping generalizations are simply not credible or 
valid scientifically (i.e. what is true in Mallard ducks may not be 
relevant to other species of ducks, let alone to songbirds or birds of 
prey).
    It is also important to recognize that Congress' intent for the 
EDSP, as articulated in the Food Quality Protection Act (FQPA), was for 
the EPA to examine chemical effects on human health, not ecotoxicity. 
Therefore, the EPA's inclusion of ecotoxicity effects in the EDSP 
represents both an unnecessary and useless massive amount of additional 
animal testing. Moreover, it is simply unrealistic to believe that the 
detection of adverse health effects in wildlife will lead to the 
regulation of a chemical where adverse health effects in humans have 
not. Given the profound scientific and practical limitations associated 
with ecotoxicity studies, and the lack of a Congressional mandate for 
their inclusion in the EDSP, it is inappropriate for the EPA to 
continue its development of such studies at this point in time.
    The EPA does not plan to require the rigorous validation of the 
animal tests that is required of all non-animal tests. Indeed, the 
agency awarded a $34 million contract to a laboratory for the 
development and validation of tests for the EDSP from a proposal in 
which validation experience was barely even mentioned.
    The Advisory Committee on Alternative Toxicological Methods (ACATM) 
for the National Toxicology Program (NTP) has expressed ``grave 
concern'' over the EPA's double standard in validation and has twice 
unanimously recommended that all proposed test methods for the EDSP be 
validated through the Interagency Coordinating Committee on the 
Validation of Alternative Methods (ICCVAM).\1\ However, the EPA 
rejected this recommendation. Although it does indeed require the 
validation of all non-animal tests to be assessed through ICCVAM with 
very rigorous and thorough standards, the EPA follows a dangerous 
double standard by not requiring this same validation assessment of the 
animal tests. Allowing quicker and less rigorous validation procedures 
for animal tests not only creates a bias against non-animal tests, it 
compromises the reliability of the resulting data as well.
---------------------------------------------------------------------------
    \1\ National Toxicology Program Advisory Committee on Alternative 
Toxicological Methods, resolution passed unanimously at its meeting on 
28 November 2000.
---------------------------------------------------------------------------
    We were pleased to see that last year's appropriations for the EPA 
included a $4 million earmark in the Science and Technology account for 
the research, development, and validation of non-animal, alternative 
chemical screening and prioritization methods. We respectfully make the 
following requests for the EPA's fiscal year 2003 appropriations:
  --that $10 million in the Office of Research and Development budget 
        be allocated for the research, development, and validation of 
        non-animal screens and tests;
  --that the EPA be required to report to Congress on how the above 
        funds are utilized;\2\
---------------------------------------------------------------------------
    \2\ This reporting mechanism is critical due to the fact that the 
EPA has repeatedly ignored requests from the animal protection 
community regarding expenditures for non-animal methods. A coalition of 
animal protection groups is identifying and prioritizing the non-animal 
tests that are close to being ready for use and which desperately need 
funding and other resources. We hope the Subcommittee will encourage 
the EPA to meet with us to discuss the manner in which funds can best 
be put to use to effect the most rapid and substantial reduction 
possible in animal suffering and death at the EPA.
---------------------------------------------------------------------------
  --that no funds for the EDSP be used for animal tests until the 
        development of a HTPS has been completed, and no funds be used 
        to conduct animal testing on a chemical until that chemical has 
        been analyzed by a HTPS;
  --that because the current state of the science precludes 
        ``appropriate validation,'' as required by the FQPA, for 
        ecotoxicity tests (which are not covered by the FQPA), no funds 
        be used for ecotoxicity test development at this point in time;
  --that the EPA provide to Congress an analysis of the cost 
        requirements for the epidemiological studies recommended as 
        part of the EDSP by the National Academy of Sciences in its 
        1999 report ``Hormonally Active Agents in the Environment'' 
        along with an explanation as to why the EPA decided on an 
        animal-testing program instead of epidemiological studies;
  --that the EPA provide the necessary funds to ICCVAM for the 
        validation assessment of all screens and tests proposed for the 
        EDSP.
    These steps will promote the sound scientific practices needed for 
the tangible protection of human health and the environment, as well as 
a significant reduction in the use of animals. Thank you for your 
consideration of our request.
                                 ______
                                 

           Prepared Statement of the Society for Neuroscience

    Mr. Chairman and members of the Committee, I am Dr. Fred H. Gage, 
the president of the Society for Neuroscience and a professor at the 
Salk Institute for Biological Studies, a private, non-profit research 
organization located in La Jolla, California. I am here today to 
testify on behalf of the Society for Neuroscience, the largest 
scientific organization in the world dedicated to the study of the 
brain and nervous system. Neuroscience forms the fundamental basis of 
the medical specialties of psychiatry, neurology, neurosurgery, and an 
important portion of many other medical specialties.
    The Society for Neuroscience is comprised of more than 29,000 basic 
and clinical researchers affiliated with universities, hospitals and 
scientific institutions throughout North America and in other 
countries. The Society's primary goal is to promote the exchange of 
information among researchers. We are also devoted to education about 
the latest advances in brain research and the need to make neuroscience 
research a funding priority.
    Mr. Chairman, the Society appreciates this opportunity to testify 
and to discuss some of the important VA and NSF-sponsored research 
being conducted in the field of neuroscience. We thank the members of 
this Subcommittee for their dedication to biomedical research at the 
National Science Foundation (NSF) and the Veterans Administration (VA).
    The Society for Neuroscience requests increased research funding 
for the National Science Foundation and for the Department of Veterans 
Affairs to facilitate the progress of research already being conducted 
at these institutions.
National Science Foundation
    As the Committee is aware, the President's fiscal year 2003 budget 
request for the National Science Foundation is $5.036 billion. This is 
an increase of $240 million, or 5 percent, over the fiscal year 2002 
request. As our nation progresses, a more solid foundation of science 
will be necessary to support growing technological advances including 
those integral to conducting biomedical research. The Society for 
Neuroscience endorses the Coalition for National Science Funding's 
(CNSF) request for an increase of $718 million, or 15 percent, above 
the fiscal year 2002 level. This would bring the agency's budget to 
$5.508 billion.
    Interdisciplinary research funded by NSF complements research 
currently conducted by other federal agencies. The nature of 
interdisciplinary scientific research has allowed investigators from 
each of the separate scientific disciplines to benefit and expand upon 
research conducted by colleagues in other fields. NSF-supported 
research embodies a collaborative enterprise and the results have 
provided immense benefits in our search for treatments and cures to 
deadly diseases.
    NSF-supported neuroscience research has played a major role in 
improving our understanding of neurological and mental disorders. NSF 
funds hundreds of studies in the area of basic neuroscience, and these 
studies have contributed immensely to our knowledge of the brain and 
central nervous system. The cross-disciplinary approach employed by NSF 
is particularly beneficial to research on the brain and central nervous 
system. New engineering advances, for example, have led to new and more 
powerful imaging technologies, which have greatly aided researchers in 
their study of the brain.
    In the wake of the tragic events of September 11th, our nation has 
become more aware of potential lapses in national security; such 
concerns affect our mental well-being. In addition to research 
conducted on bioterrorism, NSF can enhance support for research on the 
psychological effects in the aftermath of terrorist attacks, anthrax 
threats and living with terrorism.
    As the Committee is aware, nearly all NSF-appropriated funds are 
received through competitively awarded grants, with only 5 percent 
going to salaries and expenses. NSF is unique in its ability to channel 
the majority of its funding to the specific goal of acquiring knowledge 
and conducting research. To promote this worthy endeavor, the Society 
supports an increase in NSF grant size and duration. The average 2000 
NSF award was $93,000 and lasted for just under 3 years, whereas the 
average 2000 NIH award was $283,000 and lasted for just over 4 years. 
By increasing the award duration, valuable time is spent conducting 
actual research rather than submitting proposals. Lapse time in 
research is reduced and a trained and knowledgeable staff can be more 
easily retained. In addition, less NSF staff time is dedicated to 
reviewing and approving research which has already been deemed 
valuable.
    We are pleased with the NSF request for $37 million to increase 
graduate student stipends from $21,500 per year in fiscal year 2002 to 
$25,000 in fiscal year 2003. We believe this is critical to ensuring 
that the best students continue with graduate and postgraduate study in 
the scientific fields. The Society for Neuroscience supports continued 
funding for Nanoscale Science and Engineering. In its third year of 
funding, this priority area holds great promise of discovery for the 
future of neuroscience as well as other scientific endeavors.
Department of Veterans Affairs
    As you know, the Veterans Administration (VA) is the nation's 
largest direct provider of healthcare services and the nation's most 
clinically focused setting for medical and prosthetics research. As a 
result of the VA's ability to integrate clinical and basic research 
application by research physicians, the nation's medical research 
enterprise benefits our nation's veterans with rapid transfer of new 
medical knowledge.
    The President's budget request for VA health research is $409 
million. This recommendation includes a $23 million increase in actual 
research funding from the fiscal year 2002 level of $371 million. The 
Society for Neuroscience supports the Friends of VA (FOVA) and the 
Independent Budget for the Veteran's Administration request $460 
million for the Medical and Prosthetic Research account for fiscal year 
2003. This increase is necessary to offset the higher costs of 
administration resulting from inflation and wage increases.
    In order to continue to provide our nation's veterans with the best 
possible care, the VA needs to attract highly qualified researchers and 
clinicians. The VA Research and Development program, one of the 
nation's premier research endeavors, was established to improve health 
care for veterans and focus research on injuries and illnesses 
specifically relevant to veterans. In keeping with progress on other 
medical research initiatives through the National Institutes of Health, 
the Society believes research focused specifically on improving the 
health and quality of life for our nation's veterans is a worthwhile 
investment.
    The VA has delineated several areas of research which are funding 
priorities for fiscal year 2003. Included in this list is the Quality 
Enhancement Research Initiative (QUERI) program, a portion of which 
would be used to fund centers in dementia/Alzheimer's and diseases of 
the brain, where the VA has indicated additional studies are needed on 
the impact of different classes of psychiatric drugs on cognitive and 
behavioral function.
    The Quality Enhancement Research Initiative (QUERI) was launched in 
1998 by the Office of Research and Development to create and implement 
a national system to translate research discoveries, and innovations of 
known effective and efficient diagnostic and treatment strategies into 
high-quality patient care and system-wide improvements. QUERI is a 
multidisciplinary, data driven, outcomes-based quality improvement 
program that promotes the use of evidence in the provision of 
outpatient, inpatient, and long term care.
    QUERI is based on a strategic framework that supports a 
comprehensive process for translating research evidence into action. 
The QUERI process includes the following six steps:
  --Identify high-risk/high volume diseases or problems
  --Identify best practices
  --Define existing practice patterns and outcomes across VA and 
        current variation from best practices
  --Identify and implement interventions to promote best practices
  --Document that best practices improve outcomes
  --Document that outcomes are associated with improved health related 
        quality of life
Conclusion
    Mr. Chairman, the National Science Foundation and the VA medical 
system serve a critically important role by providing our nation's 
researchers the opportunity to learn more about the diseases and 
conditions that affect our quality of life. With advanced research 
performed collaboratively with NSF or with the VA, all Americans stand 
to benefit. We would encourage the committee to include increased 
funding within NSF and VA research programs among the Subcommittee's 
highest priorities. We thank you for your interest and consideration.
                                 ______
                                 

  Prepared Statement of the Upper Mississippi River Basin Association

    The Upper Mississippi River Basin Association (UMRBA) is the 
organization created in 1981 by the Governors of Illinois, Iowa, 
Minnesota, Missouri, and Wisconsin to serve as a forum for coordinating 
the five States' river-related programs and policies and for 
collaborating with Federal agencies on regional water resource issues. 
As such, the UMRBA has an interest in the budget for both the U.S. 
Environmental Protection Agency (EPA) and the Federal Emergency 
Management Agency (FEMA).
                    environmental protection agency
State Pollution Control Grants (Section 106)
    Funding for Section 106 State Pollution Control Grants would 
decline by $12.1 million under the Administration's fiscal year 2003 
budget request. This cut would translate into a loss of $1.482 million 
to State water quality programs in the five Upper Mississippi River 
Basin States. The Federal Section 106 funds, in combination with the 
States' matching dollars, support the core State water quality 
programs, including water quality assessment and monitoring, surface 
and ground water standards, point source permitting, and training and 
public information. Adequate funds are particularly critical to 
supporting the States' development and implementation of total maximum 
daily loads (TMDLs). The tasks associated with developing TMDLs for 
impaired waters include watershed characterization, computer modeling 
and related analyses, allocation of permissible loads, development of 
TMDL reports and plans, and public outreach and stakeholder 
development. These responsibilities have the potential to overwhelm 
State agency resources that are in many cases already strained. At a 
minimum, UMRBA supports maintaining Section 106 funding at the fiscal 
year 2002 level of $192.5 million. To the extent possible, funding 
should be enhanced to $200 million.
Clean Water State Revolving Funds
    The UMRBA is deeply concerned about the lack of support in the 
Administration's fiscal year 2003 budget proposal for the Clean Water 
State Revolving Fund (CWSRF), which helps address wastewater 
infrastructure needs. The CWSRF has made tremendous contributions to 
improving the nation's water quality. In fiscal year 2002, the five 
Upper Mississippi River Basin States received a total of $177 million 
in CWSRF funding. However, the CWSRF is proposed to be cut by 10.2 
percent in fiscal year 2003, funding it at $1.212 billion, rather than 
at its authorized historical level of $1.35 billion. Given the 
flexibility to redirect wastewater funds to the Drinking Water State 
Revolving Fund (DWSRF), even less than $1.212 billion might well be 
available for the wastewater SRFs. While the flexibility to shift among 
these programs can help the States address their most pressing needs, 
it is no substitute for adequate funding. Estimates of the nation's 
wastewater infrastructure needs certainly vary, as evidenced in the 
Congressional deliberations on new water infrastructure financing 
legislation (H.R. 3930 and S. 1961). However, there is absolutely no 
doubt there are substantial unmet needs. The high demand for these 
funds underscores the need to reauthorize CWSRF funding and increase 
annual Federal appropriations to $2 billion.
State Nonpoint Source Grants (Section 319)
    The Administration has requested $238.5 million for the Section 319 
State nonpoint source (NPS) grant program, a modest increase of $1 
million above fiscal year 2001 and 02 funding levels. Nonpoint sources 
are one of the major causes of water pollution in the Upper Mississippi 
River Basin, which drains the nation's agricultural heartland. Adequate 
funding for Section 319 and complementary efforts, including the USDA's 
conservation programs, is essential to meeting the region's major water 
quality challenges. While the UMRBA is pleased that the Administration 
is seeking a slight increase in Section 319 funding, it should be 
recognized that continued progress in addressing nonpoint pollution 
will require significantly increased resources.
Watershed Initiative
    The Administration has proposed $20 million in fiscal year 2003 for 
a new targeted Watershed Initiative. While the details of how the 
program will be implemented are not yet available, the intent is to 
provide grants to approximately 20 local watershed efforts on a 
competitive basis. Although UMRBA supports funding for watershed 
planning and management, it should not come at the expense of well-
established programs such as Section 106 and Section 319. Redirecting 
this funding to existing State grant programs would also obviate the 
need to establish new bureaucratic mechanisms within EPA to administer 
this new grant program. The fiscal year 2003 budget identifies $1 
million and 10 additional FTEs to simply administer the new program. 
These resources could be much more productively employed in existing 
programs.
Environmental Monitoring and Assessment (EMAP)
    EPA's fiscal year 2003 budget includes $38.26 million for its 
Environmental Monitoring and Assessment Program (EMAP). Of this amount, 
$4.875 million is proposed as a new initiative to extend the EMAP 
approach to large rivers in the Mississippi River Basin (Central 
Basin). Initially, under such an initiative, the scientific principles 
developed by EMAP for regional scale assessment and monitoring will be 
applied to the Missouri and Upper Mississippi Rivers. These rivers are 
challenged by long term loadings of nutrients, 2 sediments, and toxic 
chemicals, as well as extensive habitat alternatives. The Central Basin 
EMAP initiative is intended to fill the scientific gaps (indicators, 
sampling design, and sampling methodology) that currently limit our 
ability to assess baseline conditions and measure the performance of 
environmental protection activities. The resulting advancements in 
monitoring technology and approaches could be potentially useful in 
guiding the development of TMDLs on major rivers such as the Missouri 
and Mississippi Rivers. UMRBA thus supports proposed funding of $4.875 
million for the Central Basin EMAP.
Hypoxia Action Plan
    The UMRBA is disappointed that the Administration's fiscal year 
2003 budget proposal does not include additional new resources to 
address the recommendations in the Hypoxia Action Plan, submitted by 
the Mississippi River/Gulf of Mexico Watershed Nutrient Task Force in 
January 2001. The States in the Upper Mississippi River Basin have 
consistently said that reductions in nutrient inputs to the Gulf of 
Mexico and monitoring to evaluate the effectiveness of these efforts 
will only be possible if significant new budgetary resources are 
provided by the Federal Government. While the States continue to 
support the goals and strategies set forth in the Action Plan, little 
progress will be made to reduce the Gulf hypoxic zone and improve water 
quality conditions throughout the basin without a major Federal 
financial commitment.
                  federal emergency management agency
    Mitigation--Of particular interest to UMRBA is funding for 
mitigation of future flood hazards. Mitigation, which is the on-going 
effort to reduce or eliminate the impact of disasters like floods, can 
include measures such as relocating homes or community facilities off 
the floodplain, elevating structures, and practicing sound land use 
planning. Mitigation planning and implementation measures are essential 
to reducing the nation's future disaster assistance costs. Given the 
importance of mitigation, UMRBA supports the new Pre-Disaster 
Mitigation grant program proposed by FEMA and funded at $300 million in 
the President's proposed fiscal year 2003 budget. Such a program would 
significantly enhance communities' ability to prevent future damages, 
particularly in areas that have not experienced a major disaster and 
thus have not had access to postdisaster mitigation assistance through 
the Disaster Relief Fund. In addition, pre-disaster mitigation 
assistance is an effective means of meeting the on-going need in--all 
communities to plan for future floods and reduce their vulnerability 
before the next flood disaster.
    Unfortunately, the Administration's proposal for a new Pre-Disaster 
Mitigation Program is based on the premise that the existing post-
disaster Hazard Mitigation Grant Program (HMGP) will be eliminated. The 
HMGP has been a particularly popular and enormously helpful program. 
Authorized under Section 404 of the Stafford Act, the HMGP provides 
grants to States and local governments to implement long-term hazard 
mitigation measures after a major disaster declaration. Because grant 
funds are made available during the immediate recovery from a disaster, 
it offers a particularly attractive option for communities that may not 
otherwise consider mitigation. It is critical to maintain this post-
disaster option, in addition to creating a new pre-disaster mitigation 
option. Local communities need both. In addition, by retaining the 
HMGP, mitigation assistance specifically for flood damages would 
continue to be available to communities that experience disastrous 
flooding. In contrast, flood mitigation projects under FEMA's new pre-
disaster program will need to compete for funding with mitigation 
projects for a wide variety of other potential disasters, thus 
diminishing the likelihood that flood mitigation needs will be met.
    Therefore, UMRBA supports funding of $300 million for a new Pre-
Disaster Mitigation Program and urges Congress to reject the 
Administration's proposal to eliminate the postdisaster HMGP.
    Flood Map Modernization--UMRBA enthusiastically supports the 
Administration's proposal to provide $300 million to modernize and 
digitize flood maps. Among other things, flood maps are used to 
determine risk-based NFIP premium rates and develop disaster response 
plans for Federal, State, and local emergency management personnel. 
However, most flood maps are over 15 years old and axe rapidly becoming 
obsolete. Many flood maps are outdated by the effects of land use 
changes in the watersheds. When out-dated maps underestimate flood 
depths, it can often lead to floodplain development in high risk areas. 
It is therefore important that flood maps be updated on an ongoing 
basis and in a timely way.
    The Corps of Engineers is currently conducting a Flow Frequency 
Study that will update the discharge frequency relationships and water 
surface profiles of approximately 2,000 river miles of the Upper 
Mississippi, Lower Missouri, and Illinois Rivers. This data will have a 
variety of uses, including updating Flood Insurance Rate Maps (FIRMs) 
used by hundreds of flood prone communities along these rivers. The 
Corps and FEMA have estimated that 4,237 map panels in the 130 counties 
along these rivers will need to be revised at a cost of approximately 
$30 million. Using data from the Corps study will be a far more cost-
effective way to update FIRMs than having FEMA independently study 
flood hazards and update the maps. UMRBA therefore urges Congress to 
designate funding specifically for the Upper Mississippi flood mapping 
project and direct FEMA and the Corps to coordinate their efforts to 
advance FIRM updates.
                                 ______
                                 

   Prepared Statement of the University Corporation for Atmospheric 
                                Research

    On behalf of the University Corporation for Atmospheric Research 
(UCAR) and the university community involved in weather and climate 
research and related education, training and support activities, I 
submit this written testimony for the record of the U.S. Senate 
Committee on Appropriations, Subcommittee on VA, HUD and Independent 
Agencies for the fiscal year 2003 budget.
            university corporation for atmospheric research
    UCAR is a consortium of 66 universities that manages and operates 
the National Center for Atmospheric Research (NCAR) and additional 
research, education, training, and research applications programs in 
the atmospheric and related sciences. The UCAR mission is to support, 
enhance, and extend the research and education capabilities of the 
university community, nationally and internationally; to understand the 
behavior of the atmosphere and related systems and the global 
environment; and to foster the transfer of knowledge and technology for 
the betterment of life on earth. In addition to its member 
universities, UCAR has formal relationships with approximately 100 
additional undergraduate and graduate schools including several 
historically black and minority-serving institutions, and 40 
international universities and laboratories. UCAR is supported by the 
National Science Foundation (NSF) and other federal agencies including 
the National Aeronautics and Space Administration (NASA).
                              introduction
    Recent events that have shaken our nation's physical and economic 
well-being, point unequivocally to the fact that we must depend now, 
more than at any time in the country's history, on investments in 
science and technology. In his remarks at his confirmation hearing, Dr. 
John Marburger, the President's Science Advisor, stated that, ``More 
than any other nation, we have used science and technology wisely to 
create peace, advance democracy, and provide for the well-being of our 
citizens Economists tell us that fully half of our economic growth in 
the last half-century has come from technological innovation and the 
science that supported it. . . The Federal role is crucial If we 
sustain our investments in basic research, we can ensure that the 
United States remains at the forefront of scientific capability, 
thereby enhancing our ability to shape and improve the world's 
future.'' The science agencies funded by the VA, HUD and Independent 
Agencies budget have an enormous role to play in shaping that future. I 
would like to comment on the budget requests for two of those agencies, 
NSF and NASA.
                   national science foundation (nsf)
    The President's fiscal year 2003 Budget Request of $5.02 billion 
for NSF, a 4.9 percent increase from fiscal year 2002, includes $76.0 
million in transfers from other agencies. Subtracting those transfers, 
the real increase for NSF is $155.0 million, or 3.4 percent over fiscal 
year 2002. When inflation is taken into consideration, this is 
essentially a flat budget. Yet the President's NSF Budget Request 
states that the established priorities, ``take into account both 
growing needs and expanding opportunities for high-impact investments 
to strengthen world leadership in science, engineering and technology. 
They aim to keep the nation's science and engineering enterprise 
healthy, dynamic and relevant.'' Last year, 54 U.S. Senators signed a 
``Dear Colleague'' letter to the Senate leadership supporting doubling 
the NSF budget over 5 years. If that formula is followed, then 
addressing the priorities that have been established by the 
Administration could be within reach. If the numbers in the Budget 
Request prevail, then we will fail to address those priorities, as 
critical as they are to the current and future health and security of 
our nation. The productivity of the U.S. science and engineering 
enterprise, and to some extent, the technology used for national 
security applications, depend on NSF support of fundamental research. I 
agree with the call from the American Association of Universities (AAU) 
and the Coalition for National Science Funding (CNSF) to appropriate 
for the agency a 15 percent increase thereby continuing the momentum of 
the NSF doubling effort begun in fiscal year 2001 and continued at a 
more constrained level in fiscal year 2002. However, I also understand 
that these are extraordinary times with extraordinary fiscal pressures. 
Therefore, I ask the Committee to continue in fiscal year 2003, to the 
extent possible, the effort to double the NSF budget by supporting at 
least a 10.0 percent increase for a total budget of at least $5.34 
billion. (This figure includes the proposed transfers in addition to a 
real 10.0 percent increase over fiscal year 2002.)
    This is an increase that the science community has the capacity to 
use immediately and well. A 10 percent increase can be productive in 
terms of the NSF grant size and duration. The average grant size has 
been falling in constant dollars over many years. According to the 
CNSF, ``The average NSF grant in the year 2000 was for $93,000 and 
lasted for just under 3 years. By comparison, the average NIH grant in 
2000 was for $283,000, and lasted for just over 4 years. Increasing the 
size and time period of grants will enable researchers to concentrate 
on discovery rather than paperwork.'' Each year, NSF receives 
approximately 30,000 proposals and has the resources to fund only one 
third of them. Nearly $2.0 billion worth of proposals rated very good 
to excellent through the merit review process go unfunded. Recent 
national competitions have produced success rates as low as 7.0 
percent, not because of a paucity of excellent proposals, but because 
of lack of adequate funding. These low proposal success rates reflect a 
capacity for progress in this country that is not being realized.
    Within the NSF, I would like to comment on the following specific 
initiatives and programs that are of great importance to the country's 
global scientific leadership and to the advancement of the atmospheric 
and related sciences:
Research and Related Activities (R&RA)
    When the transfers mentioned above are subtracted from the fiscal 
year 2003 budget request for NSF's R&RA, the heart of this nation's 
non-medical basic research budget, the numbers are increased by only 
3.0 percent over fiscal year 2002 levels. This amount, barely enough to 
cover inflation, is then reflected in the budgets of most of the NSF 
Research Directorates. The peer-reviewed work supported by these 
directorates represents a major portion of the nation's scientific 
research achievement and technological advancement. I urge the 
Committee to allocate for Research and Related Activities an amount 
that reflects an overall increase of at least 10.0 percent for NSF as 
requested above.
    Geosciences (GEO) Directorate.--The Budget Request for RRA's GEO 
Directorate shows a 13.0 percent increase over fiscal year 2002. When 
the proposed external agency transfers, all of which affect the GEO 
budget, are removed from the request, the apparent real increase for 
GEO is $4.0 million, or 0.65 percent much less than inflation. However, 
when fiscal year 2003 mandated programs (these include the proposed 
transfers and the Climate Change Research Initiative detailed below) 
are subtracted from the GEO total, the Directorate's funding is 
actually down by $22.0 million from the fiscal year 2002 Current Plan 
total. This represents a significant decrease for core research that is 
of direct importance to the physical safety of our citizens, our 
economic health, and global issues of national security relevance, such 
as climate change and the environmental health of the planet.
    The GEO Directorate is this country's principal source of funding 
for university-based research in the atmospheric, earth and ocean 
sciences. As the Budget Request states, ``GEO plays a critical role in 
addressing the nation's need to understand, predict and respond to 
environmental events and changes and to use the Earth's resources 
wisely.'' Through involvement in such interagency programs as the U.S. 
Weather Research Program (USWRP), the National Space Weather Program 
(NSWP), and the U.S. Global Change Research Program (USGCRP), GEO core 
research advances our ability to predict natural phenomena of economic 
and human significance such as severe storms, solar variability, and 
climate patterns and change that affect food production, potable water 
supplies, human migration, the survival of plant and animal species, 
and the security of coastal zones. The fiscal year 2003 Budget Request 
lists GEO involvement in a new program of the Administration, the 
Climate Change Research Initiative (CCRI--see below for more detail), 
at a total of $10.0 million. While the CCRI activities listed are of 
importance to climate research, there appears to be no new money in the 
request to cover this worthy, proposed work. The CCRI mandated research 
is therefore part of the $22.0 million total in Administration-
requested programs that will negatively affect the funds available for 
the core GEO program.
    Both the Federal government and the private sector estimate that 
over $2.0 trillion of the $10.0 trillion U.S. gross national product is 
affected annually by weather and climate. Given the current struggles 
within our energy sector and within the economy as a whole, this is an 
unfortunate time to decrease research efforts that could help to 
anticipate weather and climate variability more effectively. I urge the 
Committee to allocate for the GEO Directorate an amount that reflects 
an overall real increase of at least 10.0 percent for NSF as requested 
above. I further urge the Committee to take into consideration in final 
allocations, the impact of the proposed agency transfers on GEO. If the 
language of the final bill allocates any increased RRA funding to NSF 
scientific directorates in proportion to percentages in the original 
request, but fails to include the amount of the proposed transfers if 
they are not accomplished, then the academic community funded by the 
GEO Directorate will be at a great disadvantage since its requested 
real increase is the lowest of all the NSF directorates.
    Atmospheric Sciences (ATM).--Within the GEO Directorate, the 
Division of Atmospheric Sciences supports research that contributes new 
understanding of the behavior of the Earth's atmosphere and its 
interactions with the sun. The fiscal year 2002 Current Plan total is 
$202.0 million. The Budget Request includes as ATM responsibilities two 
of the agency transfers. Once those are subtracted from the total 
request, ATM must still reduce its base by $7.4 million from fiscal 
year 2002 Current Plan numbers in order to accommodate additional 
requested mandates such as the new CCRI. Therefore, while it appears 
that ATM's Atmospheric Sciences Research Support line receives an 11.3 
percent increase (once $8.56 million in agency transfers is 
subtracted), this amount is quickly eroded by the Administration's CCRI 
new initiative. ATM funds fuel a major percentage of the country's 
university research in weather, climate, and the solar-terrestrial 
system. The ATM programs highlighted in the fiscal year 2003 request 
include enhancing computer systems and numerical models; continuing to 
evolve our understanding of the processes that control the atmospheric 
distribution of carbon, water, and other nutrients; and continuing to 
develop an upper atmospheric radar system to mitigate society's 
vulnerability to space storms. I question whether these advances are 
possible in the face of no real funding increase.
    Also funded within ATM, the world-class National Center for 
Atmospheric Research (NCAR) supports the country's entire atmospheric 
and related sciences community through observational and computer 
facilities, instrumented research aircraft, and an extensive visiting 
scientist program. In fiscal year 2002, more than 1,500 researchers and 
students will use the NCAR facilities and approximately 150 visiting 
scientists will stay for extended periods. NCAR has just been given 
excellent marks in a rigorous peer review conducted by NSF with heavy 
involvement from the university community. The center's research spans 
areas that are of great significance to the safety of our citizens, the 
health of our economy, and the security of our communications 
infrastructure, yet, apparently in order to accommodate the 
Administration's mandated programs, the President's Budget Request for 
fiscal year 2003 decreases the NCAR budget by 3.9 percent based on 
Current Plan fiscal year 2002 amounts. This reduction, when combined 
with the effects of inflation, will significantly reduce the productive 
and highly valued programs of NCAR that support the national, 
university-based atmospheric sciences community.
    I urge the Committee to allocate for ATM an amount that reflects a 
real overall increase of at least 10.0 percent for NSF as requested 
above, in order to enable the agency to adequately fund the university 
community involved in atmospheric sciences research and to provide a 
super-inflationary increase for the National Center for Atmospheric 
Research to preserve and enhance its highly valued, community-
supporting programs. I further urge the Committee to take into 
consideration in final allocations, the effect of two proposed agency 
transfers on ATM. If the language of the final bill allocates any 
increased RRA funding to NSF scientific directorates and programs in 
proportion to percentages in the original request, but fails to include 
the amount of the proposed transfers if they are not accomplished, then 
the academic community funded by ATM, including NCAR, will be at a 
great disadvantage since its requested real increase is extremely low.
    As a contribution within the GEO budget to the NSF Learning for the 
21st Century overall NSF priority area, we appreciate the funding being 
allocated for innovative approaches to education including the 
continued development of the geosciences community's Digital Library 
for Earth Systems Science (DLESE). We would also like to call your 
attention to the UCAR program, Significant Opportunities in Atmospheric 
Research and Science (SOARS), which is funded directly by ATM within 
GEO. Recipient of a 2001 Presidential Award for Excellence in Science, 
Mathematics, and Engineering Mentoring, SOARS is having a positive 
impact on the number of ethnically diverse atmospheric sciences 
graduate students through its model mentoring approach and research 
orientation, and is an excellent example of NSF's efforts to produce a 
diverse, internationally competitive workforce to meet the challenges 
of this new century.
Major Research Equipment and Facilities Construction (MREFC) Programs
    The Tools section of the NSF Budget Request states that, ``NSF 
provides support for large, multi-user facilities which give 
researchers access to essential state-of-the-art facilities. Support 
for these unique national facilities is necessary to advance U.S. 
capabilities required for world-class research.'' Yet NSF's MREFC 
account, the major NSF resource for non-medical research facilities in 
this country, is decreased by 9.3 percent from the fiscal year 2002 
actual level. I urge the Committee to examine the Major Research 
Equipment and Facilities Construction account cuts and to add funding 
for programs that have been planned carefully, that have been partially 
funded already, and that promise tremendous advances in this country's 
research capabilities.
    Terascale Computing Systems.--The multi-agency terascale effort is 
a key component of this country's strategy to gain leading edge access 
to computing capabilities. For years, this country has lagged behind 
other developed nations in high-end computing, a situation that has 
adversely affected the atmospheric science community's ability to run 
the complex models necessary to understand and predict regional and 
global climate change. Advances that accompany the completion of the 
terascale effort will return significant scientific advancements in all 
fields. I urge the Committee to support the President's fiscal year 
2003 request of $20.0 million for Terascale Computing Systems that will 
enable U.S. researchers to gain access to leading edge computing 
capabilities, and to support the budget request for NSF's Directorate 
for Computer and Information Science and Engineering (CISE) in its 
oversight of the terascale project through the Advanced Computational 
Infrastructure Subactivity.
    High-performance Instrumented Airborne Platform for Environmental 
Research (HIAPER).--While we support the great advances in science and 
technology that all MREFC-funded programs represent, we are 
disappointed as a community to see that HIAPER is not included in the 
fiscal year 2003 Budget Request. Following approval of the program by 
the National Science Board, funding for this modern research aircraft 
was begun by Congress in fiscal year 2000 and continued in fiscal year 
2001 and fiscal year 2002, for a total of $55.97 million of the $81.5 
million project total. We sincerely hope that funding is completed in 
fiscal year 2003 since NSF has just retired one other research aircraft 
and all delays in instrumenting the already procured Gulfstream 
airframe for HIAPER will result in higher completion costs. We look 
forward to HIAPER's vital contribution to our understanding of how 
severe weather and other weather and climate phenomena develop and 
impact the nation and the globe.
    Earthscope.--This multi-purpose geophysical instrument array will 
allow scientists to make major advances in our knowledge and 
understanding of the structure and dynamics of the North American 
continent. The initial Earthscope activity, deployment of high-
capability seismometers throughout the United States, will improve our 
resolution of the subsurface structure and lead to advances in 
understanding fault conditions and the rupture processes of 
earthquakes. I applaud the Administration's inclusion of Earthscope in 
the fiscal year 2003 MREFC request and urge the Committee to support 
this program.
Education and Human Resources (EHR)
    Nothing is more important for the future of our nation than the 
education of next generations of leaders, of a work force skilled in 
uses of technology, and of citizens who can make informed decisions in 
our democratic society. I applaud the long overdue request for 
increased stipends (to $25,000 annually) to attract our best graduates 
for research and teaching fellowships and ask the Committee to make 
sure that this stipend increase is included in the final budget bill.
    I support also the Administration's call to strengthen NSF's 
ability to leverage institutional partnerships for the systemic 
improvement of math and science education. However, I ask the Committee 
to ensure that EHR existing programs are complemented and strengthened, 
not compromised, by the expansion of the Math and Science Partnership 
program. This EHR program receives an additional $40.0 million in this 
year's request while all of EHR is increased by only $33.0 million, an 
obvious and significant $7.0 million gap.
    While the 3.8 percent requested overall increase for EHR may not 
seem adequate to meet the country's needs, it is my belief that the NSF 
science directorates and the MREFC account are in far greater need of 
enhancements this year. Therefore, I urge the Committee to support the 
President's request of $908.0 million in fiscal year 2002 for Education 
and Human Resources, a 3.8 percent increase over fiscal year 2002.
    National STEM Education Digital Library (NSDL).--The NSDL goal is 
to produce a digital library of high-quality educational materials at 
all levels in science, technology, engineering and mathematics (STEM,) 
that enables the development of virtual learning communities. This 
research, teaching and learning resource is being developed by a broad 
range of universities and UCAR in response to needs articulated by the 
academic community. NSDL presents a tremendous opportunity to improve 
access to superior instructional materials and advanced classroom 
technologies. The fiscal year 2003 NSDL request represents a cut of 
$960,000, or 2.0 percent below fiscal year 2002 levels. This decrease 
will cause a 10.0 percent reduction in collections supported. I urge 
the Committee to support the National STEM Digital Library (NSDL) by 
appropriating at least the President's fiscal year 2003 request of 
$23.6 million, and ask that the momentum to fund this important 
activity be resumed at a higher level in fiscal year 2004.
U.S. Global Change Research Program (USGCRP)
    The President's request for USGCRP activities within NSF is $188.0 
million for fiscal year 2003. This amount has been absolutely flat 
since fiscal year 2000 and therefore represents the continued erosion 
of NSF's contribution to this interagency program that addresses 
interactions among physical, biological, ecological, and human systems 
at various scales. Working with national and international research 
institutions, this program allows the atmospheric sciences community to 
improve prediction capabilities for climate fluctuations between 
excessively wet and dry periods, and for long-term climate change. This 
research is a critical investment for the future of this nation, its 
economy, and the health and safety of its citizens.
    In fiscal year 2003, the Administration will institute the Climate 
Change Research Initiative (CCRI) as part of a new interagency effort. 
CCRI deliverables will be targeted at information of strategic use to 
policy-makers, such as advanced understanding of the carbon cycle, 
improved ability to manage risk associated with climate change, more 
and better measurements of greenhouse gases, and improvements of 
climate models. It is critical, for both financial and scientific 
reasons, that the CCRI build on the extensive knowledge already gained 
under USGCRP activities, and that Initiative and Program activities be 
coordinated and leveraged to the greatest extent possible. Therefore, I 
urge the Committee to support the establishment of the Climate Change 
Research Initiative with new funding so that this initiative does not 
compromise existing core research programs, to enable to the fullest 
extent possible CCRI enhancement of and collaboration with USGCRP 
research, and to support the Initiative's and the Program's needed 
growth in years to come in order to provide continuous knowledge and 
guidance that contributes to the nation's security and well-being.
NSF Priority Areas
    Information Technology Research (ITR).--The ongoing ITR investment 
is enabling the development of tools to strengthen all-pervasive 
information technology applications in science, commerce, education, 
and government. Advances include the creation of new integrative 
software for high-end computing, applications to provide security for 
cyberinfrastructure in the academic, government, and business 
communities; support for the creation of digital library collections; 
and the strengthening of large-scale computer networks. The initiative 
promises innovations that will provide efficiencies in the way 
university researchers process and access data, communicate with 
collaborators, and share research results. Given the enormous Earth 
systems and solar-terrestrial data sets that are critical to 
atmospheric sciences research, it is possible that the ITR 
computational effort could advance our field of science through 
innovative processing, archiving, and networking methods which we have 
not yet imagined. I urge the Committee to support the President's 
fiscal year 2003 request of $285.8 million, a 3 percent increase, for 
Information Technology Research, to increase funding, if possible, for 
this initiative that has direct applications to our national security 
and economic well-being, and to support the NSF in its role as leader 
of this multi-agency initiative.
    Mathematical Sciences.--Mathematics is a basic and indispensable 
tool for many scientific fields including the atmospheric sciences; 
recent progress in climate science in particular has been made possible 
by new mathematical and statistical tools and applications. One of the 
great challenges to advancing climate change research, weather 
prediction, and the study of solar-terrestrial interactions is the 
incredible amount of data that must be captured, organized, and 
analyzed. I applaud the Mathematical Sciences focus on investigating 
the challenges posed by large data sets such as those generated by 
today's sophisticated sensors and satellite observations systems. I 
urge the Committee to support the Administration's scale-up efforts in 
Mathematical Sciences by allocating the $6.0 million request, a 100.3 
percent increase, for Mathematical Sciences.
    Social, Behavioral and Economic (SBE) Sciences.--This new priority 
area seems to take a creative approach toward achieving the goal of 
enabling this country to take greater advantage of technology while 
anticipating and preparing for the very real and significant 
accompanying challenges and consequences. As part of the Climate Change 
Research Initiative (CCRI) mentioned above, SBE priority area support 
is requested by the Administration for research on decision-making 
under uncertainty within the context of global change research. While 
much is known about climate change and its potential societal impacts, 
much is left to be discovered and much may remain unknowable given the 
great difficulties inherent in attempting to reproduce the entire Earth 
system in computer models. If the $10.0 million requested for this 
priority area is new money to be added to the SBE Directorate, then I 
urge the Committee to approve the request to establish the Social, 
Behavioral and Economic Sciences priority area.
    Learning for the 21st Century.--In order to remain a global leader 
in most scientific fields and competitive in all areas, and to maintain 
national security at the highest possible level, this country must 
offer the opportunity for all of our citizens to increase their 
understanding of science, mathematics, and technology and to meet the 
challenges of the dramatic global transition to a technology-literate 
workforce. The goals of this initiative in fiscal year 2003 are to 
establish national centers to expand our understanding of the learning 
process and demonstrate effective workforce preparation strategies, and 
to explore the potential of information technology to strengthen links 
between formal and informal education across all levels. I urge the 
Committee to support the President's fiscal year 2003 request of $184.7 
million, a 27.5 percent increase, for the Learning for the 21st Century 
initiative.
    Biocomplexity in the Environment (BE).--This interdisciplinary 
initiative is rapidly advancing our ability to understand the complex 
systems that are structured or influenced by living organisms and the 
interactions within biological systems and physical processes. We are 
confident that BE efforts will lead eventually to better understanding 
of human impacts on the environment and enhanced predictability of 
environmental systems, including climate, that will assist 
environmental decision makers and contribute to society's ability to 
adapt to natural hazards. I urge the Committee to support the 
President's fiscal year 2003 request of $79.2 million, a 36.3 percent 
increase, for Biocomplexity in the Environment.
    Nanoscale Science and Engineering.--Nanotechnology promises to 
revolutionize our control of matter in areas such as information 
technology and to change the way in which most products are made. We 
look forward to the manner in which it may advance research in the 
field of the atmospheric sciences, particularly through possible major 
breakthroughs in the development of technology such as computers, 
radars, and satellites. I urge the Committee to support the President's 
fiscal year 2003 request of $221.2 million, an 11.3 percent increase, 
for Nanoscale Science and Engineering.
          national aeronautics and space administration (nasa)
    NASA supports science, technology, and exploration that enables us 
to better understand the origin and evolution of the universe, better 
comprehend Earth's climate and other environmental forces, study living 
and physical systems in the environment of space, and improve aviation 
safety and efficiency. The agency provides crucial support for research 
and education by awarding, through the competitive selection of merit-
reviewed proposals, approximately $1.0 billion annually to colleges and 
universities across the country.
    The Administration's fiscal year 2003 overall request for NASA is 
$15.1 billion, a 1.4 percent increase over fiscal year 2002 estimates. 
(This includes pension expenses that NASA now may have to incur.) This 
request reflects less, in real dollars, than the investment our country 
made in NASA's science 10 years ago. While I understand that 
significant budgetary issues exist, and that the nation's resources are 
stretched during these extraordinary times, I believe that NASA's 
current and potential contributions to the nation's security and 
scientific knowledge are so great that the agency should be given some 
budgetary flexibility and room for growth. I urge the Committee to 
support NASA with a modest 5.0 percent increase, or a total of $15.7 
billion, for fiscal year 2003.
    NASA's Science, Aeronautics and Technology (SAT) appropriation 
provides funding for all of the research and development activities of 
NASA including the application of technologies critical to the 
economic, scientific, and technical competitiveness of the nation. The 
Budget Request for SAT is $8.84 billion. This appears to be a 9.9 
percent increase over fiscal year 2002, however approximately half of 
this amount consists of operations transfers formerly budgeted under 
the Human Space Flight account. Therefore, I urge the Committee to 
appropriate for the fiscal year 2003 Science, Aeronautics and 
Technology budget a real 5.0 percent increase, or a total of $9.28 
billion, an amount that reflects an overall increase of 5.0 percent for 
NASA as requested above.
    I would like to comment on the budgets of the following SAT 
programs that contribute to the health and well-being of the nation, in 
part through the achievements of the atmospheric and related sciences 
community:
Earth Science Enterprise (ESE)
    The goal of the Earth Science Enterprise is to understand Earth's 
environmental system and its response to natural- and human-induced 
changes, thus enabling improved prediction of climate, weather, and 
natural hazards as well as responsible stewardship of the planet. NASA 
ESE missions play a pivotal role for the entire national environmental 
research community in providing critical data sets on key parameters 
that describe the Earth system and the human influences on that system. 
In the past 3 years, Earth Science has successfully launched 11 
missions and six more are scheduled for launch this year. The fiscal 
year 2003 Budget Request proposes a total of $1.62 billion for Earth 
Science. This is a 0.17 percent increase over fiscal year 2002 that 
does not even cover inflation and essentially mirrors increases to this 
crucial NASA program in recent years. Therefore, I urge the Committee 
to support the Earth Science Enterprise at $1.75 billion, a 5.0 percent 
increase, in fiscal year 2003 so that NASA may have the flexibility to 
enhance ESE programs that are crucial to understanding our planet's 
environmental system.
    ESE contains several programs that are of great benefit to society, 
and are of particular importance to the atmospheric sciences community, 
including the following:
    Earth Observing System (EOS).--As part of NASA's contribution to 
the interagency U.S. Global Change Research Program (please see details 
below), the Earth Observing System (EOS) satellites have been deployed 
to collect data on the major interactions of the land, oceans, 
atmosphere, ice, and life that comprise the Earth system in order to 
answer questions about how the Earth is changing and what the 
consequences of those changes are for life. EOS data sets are used 
broadly by scientists and are crucial for research in a number of 
scientific fields. I urge the Committee to support the fiscal year 2003 
request of $410.9 million, a 6.6 percent increase over fiscal year 2002 
levels, for the next phase of EOS programming that includes the 
following components:
  --EOS Data and Information System (EOSDIS).--EOSDIS is operating the 
        EOS satellites now in orbit and retrieving flight data and 
        converting it into useful scientific information. Development 
        of EOSDIS is nearly complete with remaining activities timed to 
        support the upcoming launches of EOS missions through AURA in 
        2004, therefore the EOSDIS request is decreased appropriately 
        from that of past years. I urge the Committee to support the 
        President's request of $74.3 million for EOSDIS in fiscal year 
        2003.
  --AURA (Mission of the EOS Common Spacecraft).--In the troposphere 
        and lower stratosphere (altitudes up to 20 km), the four 
        instruments of the AURA mission will measure ozone, aerosols, 
        and several other key atmospheric constituents that play an 
        important role in atmospheric chemistry, air quality, and 
        climate. Scheduled to launch in January 2004, this mission will 
        provide data to answer such critical questions as whether the 
        Earth's ozone layer is recovering and whether air quality is 
        deteriorating around the globe. These are issues that affect 
        environmental policies and international agreements. I urge the 
        Committee to support the fiscal year 2003 budget request of 
        $85.3 million, a necessary 21.0 percent increase over fiscal 
        year 2002 levels, for AURA instrument completion.
  --EOS Follow-On.--As the first cycle of EOS missions comes to a 
        close, EOS Follow-On missions are being planned to continue to 
        meet the scientific needs of the NASA Earth science projects. 
        This next generation of missions will provide new technology 
        and space systems to continue global climate change 
        observations, extend the global land cover change data set, and 
        create improved observations of atmospheric phenomena such as 
        global precipitation, ocean wind vectors, and aerosol levels. 
        Much of the fiscal year 2003 EOS Follow-On requested increase 
        is directed to the NPOESS Preparatory Project (NPP), which will 
        fulfill NASA's commitment to obtain and make available a 15-
        year data record for fundamental global climate change 
        observations. I urge the Committee to support the 
        Administration's fiscal year 2003 request of $238.5 million, a 
        117 percent increase, for EOS Follow-On programs.
Space Science Enterprise
    The extraordinary mission of the Space Science Enterprise to chart 
the evolution of the universe and understand its galaxies, stars, 
planetary bodies, and life; to discover planets around other stars; and 
to understand the behavior of the sun and its interaction with Earth, 
is of great interest to the public as well as the academic community. 
These challenges form the basis of the country's space science program 
over the next several decades. While Space Science appears to receive a 
19.1 percent increase in the Budget Request, $200.0 million of the 
$547.0 million increase consists of the transfer from the Human Space 
Flight account of the operations for the Deep Space Network and the 
Mission Services for Space Science missions. This transfer results in 
no significant budgetary impacts. I urge the Committee to support the 
Administration's fiscal year 2003 request for the Space Science 
Enterprise of $3.4 billion, a 10.0 percent increase over fiscal year 
2002 once transfers are subtracted.
    Sun Earth Connections (SEC).--The SEC program within the Space 
Science Enterprise formulates missions to investigate the effects of 
solar phenomena on Earth and on the space environment. Its overall goal 
is to understand the changing sun and its effects on the Solar System, 
life, and society. I urge the Committee to support the Administration's 
request for growth within Sun Earth Connections by appropriating the 
request of $117.8 million, a 107.0 percent increase over fiscal year 
2002 levels.
    SEC contains several missions within its Solar Terrestrial Probes 
program that promise great benefit to society, and are of particular 
importance to our community, including the following:
  --Thermosphere, Ionosphere, Mesosphere Energetics and Dynamics 
        (TIMED), the first science mission of Solar Terrestrial Probes 
        within SEC, was successfully launched last December. Data are 
        being now collected for the first time on the composition of 
        the Mesosphere and Lower Thermosphere/Ionosphere (MLTI) region 
        of the Earth's atmosphere, the layer that is the fragile 
        gateway between the Earth's environment and space. Through data 
        analysis, TIMED will investigate the influences of the sun and 
        humans on this region of the atmosphere (60-180 km altitude) in 
        order to understand MLTI variability and the potential impact 
        of these changes on satellite tracking, spacecraft lifetimes, 
        degradation of spacecraft materials, and re-entry of piloted 
        vehicles. I urge the Committee to support the fiscal year 2003 
        request of $3.1 million for continued TIMED operations as well 
        as the $6.9 million request for TIMED mission data analysis.
  --Solar-B, scheduled to launch in 2005, is a U.S./Japan collaboration 
        to investigate the interaction between the Sun's magnetic field 
        and its corona. The mission will provide space weather data to 
        help understand events such as solar mass ejections that can 
        endanger astronauts in orbit and impact Earth's atmosphere with 
        enough force to cause expensive communications disruptions. 
        Much of the instrument development phase of this mission is 
        complete, therefore the fiscal year 2003 request shows a 
        decline from fiscal year 2002. The amount requested may be 
        adequate for the current program phase, but reviews are 
        underway now to determine if the delay of another program (the 
        Astro-E Mechanical Thermal Model) has adversely affected Solar-
        B. Given information available now, however, I urge the 
        Committee to support the fiscal year 2003 request for $16.2 
        million for the continued NASA development of the Solar B 
        mission's instrument subsystems.
    Focused Technology Programs.--The Office of Space Science 
Technology Program has as its goal the development of new technologies 
to enable innovative and less expensive research and flight missions. 
The Focused Programs component enables the most effective alignment of 
technology development programs with future missions in order to ensure 
that proposed mission studies are realistic and can be implemented. 
Solar Probe, a mission that has the potential to unlock some of the 
mysteries of the energetic solar coronal material, is an example of the 
important future programs being evaluated by the Focused Technology 
Program. I am concerned that funding for the Office of Science Focused 
Technology Program is essentially flat and I urge the Committee to 
provide better support for this crucial, mission-oriented function.
Office of Aerospace Technology
    Aviation Safety Program Weather Safety Technologies.--While the 
rate of commercial aviation accidents is very low worldwide, recent 
dramatic increases in air traffic (with the exception of the months 
following September 11) have resulted in an increase in the number of 
accidents. If the recent rate of increase were to stay constant over 
the next 15 years, the result will be an average of 50 catastrophic 
accidents per year--almost one per week. According to the National 
Transportation Safety Board, approximately 30 percent of all aviation 
accidents, and 37 percent of the fatal accidents, are weather related.
    The goal of NASA's Aviation Safety Program (AvSP), within the 
Office of Aerospace Technology, is to develop and demonstrate 
technologies that contribute to a reduction in the aviation fatal 
accident rate by a factor of five (compared to the 1994 1996 average) 
by the year 2007 and by a factor of ten by the year 2022. The Aviation 
Safety Program encompasses three areas, one of which is Weather Safety 
Technologies. In partnership with the FAA, the Department of Defense 
and the aviation industry, this program develops and supports the 
implementation of technologies to reduce fatal aviation accidents and 
delays caused by weather hazards. I urge the Committee to uphold the 
goal of reduced aviation accidents and fatalities by supporting the 
fiscal year 2003 request for the Weather Safety Technologies program of 
$20.9 million, a 17.0 percent increase over fiscal year 2002 levels.
U.S. Global Change Research Program (USGCRP)
    NASA is a major contributor to the interagency USGCRP. NASA 
research efforts in global change involve space-based, satellite 
studies of the Earth as an integrated system with remotely-sensed 
observations carried out as part of additional flight missions. With 
USGCRP efforts concentrated within the Earth Science Enterprise, NASA 
studies are expected to yield improved weather forecasts, tools for 
managing agriculture and forests, information for fishermen and local 
planners, and eventually, the ability to predict how the climate will 
change. This research is a critical investment for the future of this 
nation, its economy, and the health and safety of its citizens. I urge 
the Committee to support the President's request of $1.09 billion, a 
2.0 percent increase over fiscal year 2002 levels, for NASA U.S. Global 
Change Research Program activities.
    As stated above in the testimony presented for the NSF budget, the 
Administration will institute in fiscal year 2003 the Climate Change 
Research Initiative (CCRI) as part of a new interagency effort. The 
President's fiscal year 2003 request for CCRI activities within NASA is 
$3.0 million. As stated in the NSF testimony, it is critical for both 
financial and scientific reasons, that the CCRI build on the extensive 
knowledge already gained under USGCRP activities, and that Initiative 
and Program activities be coordinated and leveraged to the greatest 
extent possible. Therefore, I urge the Committee to support the 
establishment of the Climate Change Research Initiative with new 
funding, to enable to the fullest extent possible CCRI enhancement of 
and collaboration with USGCRP research, and to support the Initiative's 
and the Program's needed growth in years to come in order to provide 
continuous knowledge and guidance that contributes to the nation's 
security and well-being.
NASA Education Programs
    Since the creation of NASA through the Space Act of 1958, the 
agency has made a substantial commitment to education at all levels. 
Because of NASA's inspiring mission, the agency's work is of great 
interest to people of all ages. NASA is in a unique position to recruit 
the education community to help leverage the agency's scientific 
achievements, to interest students and citizens in the scientific 
enterprise, and to motivate many to pursue scientific study and 
careers. NASA's comprehensive portfolio of education programs includes 
teacher/faculty preparation and enhancement, student support, 
educational technology, support of systemic improvement, curriculum 
support and dissemination, and research and development. I urge the 
Committee to support NASA's continuing contributions to this country's 
broad education interests by appropriating the education programs 
imbedded throughout the strategic enterprises and offices delineated in 
NASA's fiscal year 2003 Budget Request.
                               conclusion
    I ask that the Committee continue the commitment made last year to 
invest steadily in our country's future. During this extraordinary time 
in our history, we must continue to support science in order to reap 
the benefits that accrue from the best research the world has to offer. 
History has shown that these investments will pay tremendous dividends 
to the country in lives saved, technologies developed, the economic 
health of the nation expanded, national security enhanced, and American 
leadership sustained throughout the world.
    On behalf of the UCAR community, I want to thank the Committee for 
the important work you do for U.S. scientific research, education, and 
training. We appreciate your attention to the recommendations of our 
community concerning the fiscal year 2003 budget of the National 
Science Foundation and the National Aeronautics and Space 
Administration.














       LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                              ----------                              
                                                                   Page
Aerospace:
    Engineering Division, prepared statement.....................   629
    Industries Association, prepared statement...................   629
Alachua County, Florida, prepared statement......................   575
Allbaugh, Joe M., Director, Federal Emergency Management Agency..   481
    Prepared statement...........................................   487
Alliance to Save Energy, prepared statement......................   578
American:
    Association of Engineering Societies, prepared statement.....   629
    Astronomical Society, prepared statement.....................   582
    Geological Institute, prepared statement.....................   589
    Helicopter Society, prepared statement.......................   629
    Indian Higher Education Consortium, prepared statement.......   592
    Institute of Aeronautics and Astronautics, prepared statement   629
    Lung Association, prepared statement.........................   617
    Psychological:
        Association, prepared statement..........................   598
        Society, prepared statement..............................   620
    Rivers, prepared statement...................................   604
    Society of:
        Civil Engineers, prepared statement......................   629
        Mechanical Engineers, prepared statements..............609, 629
    Thoracic Society, prepared statement.........................   617
    Water Works Association, prepared statement..................   606
Asrar, Dr. Ghassem, Associate Administrator for Earth Science, 
  National Aeronautics and Space Administration..................   409
Association of:
    American Universities, prepared statement,...................   624
    Minority Health Professions Schools, prepared statement......   628
Aviation Research and Technology, prepared statement.............   633
Ayres, Judith, Assistant Administrator, Office of International 
  Activities, Environmental Protection Agency....................   177

Babyland Family Services, Inc., prepared statement...............   634
Barile, Vincent, Deputy Under Secretary for Management, NCA, 
  Department of Veterans Affairs.................................     1
Boesz, Tina, Inspector General, National Science Foundation......   533
    Prepared statement...........................................   548
Bohmbach, James W., Chief Financial Officer, Veterans Benefits 
  Administration, Department of Veterans Affairs.................     1
Bond, Senator Christopher S., U.S. Senator from Missouri:
    Opening remarks..............................................    16
    Opening statement............................................   178
    Prepared statements....................................28, 342, 413
    Questions submitted by..................86, 149, 235, 389, 404, 516
    Statements of..........................112, 305, 340, 411, 482, 536
Bostock, Robert, Chief Senior Advisor to the Administrator, 
  Environmental Protection Agency................................   177
Brown, Tony T., Director, Community Development Financial 
  Institutions Fund, Department of the Treasury..................   354
    Prepared statement...........................................   357
Bryson, Jeffrey, General Counsel, Neighborhood Reinvestment 
  Corporation....................................................   337

California Industry and Government Central California Ozone Study 
  (CCOS) Coalition, prepared statement...........................   636
Cassidy, Sean G., General Deputy Assistant Secretary for Housing, 
  Deputy Federal Housing Commissioner, letter from...............   139
Catlett, D. Mark, Principal Deputy Assistant Secretary for 
  Management, Department of Veterans Affairs.....................     1
City of:
    Gainesville, Florida, prepared statement.....................   638
    Miami Beach, Florida, prepared statement.....................   643
    Newark, New Jersey, prepared statement.......................   647
Clark, Eligah D., Chairman, Board of Veterans' Appeals, 
  Department of Veterans Affairs.................................     1
Coalition for Indian Housing and Development, prepared statement.   649
Cobb, Robert W., Inspector General, National Aeronautics and 
  Space Administration...........................................   409
College Partners, Inc., prepared statement.......................   652
Colwell, Dr. Rita, Director, National Science Foundation.........   533
    Prepared statement...........................................   547
    Statement of.................................................   545
Combs, Linda M., Chief Financial Officer, Environmental 
  Protection Agency..............................................   177
Consortium of Social Science Associations (COSSA), prepared 
  statement......................................................   654
Cragin, Maureen P., Assistant Secretary for Public and 
  Intergovernmental Affairs, Department of Veterans Affairs......     1
Craig, Senator Larry E., U.S. Senator from Idaho:
    Prepared statements.........................................27, 416
    Questions submitted by................................104, 171, 477
    Statements of..............................................114, 415

DeWine, Senator Mike, U.S. Senator from Ohio:
    Prepared statement...........................................   417
    Statement of.................................................   417

Dillon, Joseph L., Comptroller, Office of the Chief Financial 
  Officer, Environmental Protection Agency.......................   178
Domenici, Senator Pete V., U.S. Senator from New Mexico:
    Prepared statement...........................................    30
    Questions submitted by......................100, 174, 298, 478, 526
    Statement of.................................................   180
Doris Day Animal League, prepared statement......................   658
Duffy, Dennis, Principal Deputy Assistant Secretary for Policy 
  and Planning, Department of Veterans Affairs...................     1

Egan, Nora E., Chief of Staff, Department of Veterans Affairs....     1

Fabricant, Robert, General Counsel, Office of General Counsel, 
  Environmental Protection Agency................................   177
Federation of American Societies for Experimental Biology, 
  prepared statement.............................................   660
Feussner, John R., M.D., Chief Research and Development Officer, 
  Veterans Health Administration, Department of Veterans Affairs.     2
Fisher, Linda, Deputy Administrator, Environmental Protection 
  Agency.........................................................   177
Fleet Reserve Association (FRA), prepared statement..............   662
Friends of VA Medical Care and Health Research, prepared 
  statement......................................................   666

Gauss, John A., Assistant Secretary for Information and 
  Technology, Department of Veterans Affairs.....................     1
Gelb, Nanci E., Director, Annual Planning and Budget Division, 
  Environmental Protection Agency................................   178
General Aviation Manufacturers Association, prepared statement...   629
Gibson, Thomas, Associate Administrator, Office of Policy, 
  Economics and Innovation, Environmental Protection Agency......   178
Great Lakes Indian Fish & Wildlife Commission, prepared statement   671
Griffin, Richard J., Inspector General, Department of Veterans 
  Affairs........................................................     2
Grumbles, Benjamin, Deputy Assistant Administrator, Office of 
  Water, Environmental Protection Agency.........................   177
Grunsfeld, Dr. John, Astronaut, National Aeronautics and Space 
  Administration.................................................   409

Harkin, Senator Tom, U.S. Senator from Iowa, questions submitted 
  by.............................................................    93
Hazen, Susie, Deputy Assistant Administrator, Office of 
  Prevention, Pesticides and Toxic Substances, Environmental 
  Protection Agency..............................................   177
Higgins, Robin, Under Secretary for Memorial Affairs, Department 
  of Veterans Affairs............................................     1
Holmstead, Jeffrey, Assistant Administrator, Office of Air and 
  Radiation, Environmental Protection Agency.....................   177
Horinko, Marianne, Assistant Administrator, Office of Solid Waste 
  and Emergency Response, Environmental Protection Agency........   177
Humane Society of the United States, prepared statement..........   674

Independent Budget, letter from..................................    13
Institute of Electrical and Electronics Engineers-U.S.A., 
  prepared statement.............................................   629
Isakowitz, Steve, Comptroller, National Aeronautics and Space 
  Administration.................................................   409

Johnson, Senator Tim, U.S. Senator from South Dakota:
    Questions submitted by......................................98, 403
    Statement of.................................................   540
Joslin Diabetes Center, prepared statement.......................   676

Kelly, Margo, Deputy Executive Director, Neighborhood 
  Reinvestment Corporation.......................................   337
Klein, Art, Director of Budget Office, Veterans Health 
  Administration, Department of Veterans Affairs.................     2
Kohl, Senator Herb, U.S. Senator from Wisconsin:
    Questions submitted by.......................................   146
    Statement of.................................................   200
Krenik, Edward D., Associate Administrator, Office of 
  Congressional and Intergovernmental Relations, Environmental 
  Protection Agency..............................................   178

Lazar, Ellen, Executive Director, Neighborhood Reinvestment 
  Corporation....................................................   337
    Prepared statement...........................................   346
Leahy, Senator Patrick J., U.S. Senator from Vermont, questions 
  submitted by...................................................   515
Lenkowsky, Leslie, Chief Executive Officer, Corporation for 
  National and Community Service.................................   303
    Prepared statement...........................................   309
Longest, Henry L., II, Acting Assistant Administrator, Office of 
  Research and Development, Environmental Protection Agency......   177
Lowrance, Sylvia K., Acting Assistant Administrator, Office of 
  Enforcement and Compliance Assurance, Environmental Protection 
  Agency.........................................................   177

Mansfield, Gordon, Assistant Secretary for Congressional and 
  Legislative Affairs, Department of Veterans Affairs............     2
Marburger, John H., III, Office of Science and Technology Policy, 
  Executive Office of the President:
    Prepared statement...........................................   553
    Statements of..............................................533, 551
Martinez, Hon. Mel, Secretary of Housing and Urban Development, 
  Department of Housing and Urban Development....................   109
    Prepared statement...........................................   119
    Statement of.................................................   115
Martyak, Joseph, Acting Associate Administrator, Office of 
  Communications, Education and Media Relations, Environmental 
  Protection Agency..............................................   178
McClain, Tim S., General Counsel, Department of Veterans Affairs.     1
McMichael, Guy H., III, Acting Under Secretary for Benefits, 
  Department of Veterans Affairs.................................     1
Metropolitan Water District of Southern California, prepared 
  statement......................................................   678
Mikulski, Senator Barbara A., U.S. Senator from Maryland:
    Opening statements.............2, 109, 187, 303, 337, 409, 481, 533
    Prepared statements................................3, 111, 190, 339
    Questions submitted by..................62, 136, 225, 379, 398, 452
Miller, Laura, Associate Under Secretary for Health, Veterans 
  Health Administration, Department of Veterans Affairs..........     2
Murphy, Frances M., M.D., Acting Under Secretary for Health, 
  Department of Veterans Affairs.................................     1
Murray, Senator Patty, U.S. Senator from Washington, questions 
  submitted by...................................................   300

NASA:
    Aeronautics Support Team, prepared statement.................   629
    Alumni League, prepared statement............................   629
National:
    Congress of American Indians, prepared statement.............   595
    Council for Science and the Environment, prepared statement..   680
    Emergency Management Association, prepared statement.........   684
Nelson, Kimberly T., Assistant Administrator, Office of 
  Environmental Information, Environmental Protection Agency.....   177
Norris, Jimmy, Chief Financial Officer, Veterans Health 
  Administration, Department of Veterans Affairs.................     2

O'Keefe, Sean, Administrator, National Aeronautics and Space 
  Administration.................................................   409
    Prepared statement...........................................   422
    Statement of.................................................   418
Ogden, John, Chief Consultant, Pharmacy Benefits Management 
  Strategic Health Group, Department of Veterans Affairs.........     1
Opfer, George, Inspector General.................................   481

People for the Ethical Treatment of Animals (PETA), prepared 
  statements.....................................................3, 693
Principi, Hon. Anthony J., Secretary of Veterans Affairs, 
  Department of Veterans Affairs.................................     1
    Prepared statement...........................................     7
    Statement of.................................................     4

Reed, Rita A., Deputy Assistant Secretary for Budget, Department 
  of Veterans Affairs............................................     2
Regas, Diane, Acting Assistant Administrator, Office of Water, 
  Environmental Protection Agency................................   177
Ryan, Michael W.S., Deputy Chief Financial Officer, Environmental 
  Protection Agency..............................................   177

Shelby, Senator Richard C., U.S. Senator from Alabama, statement 
  of.............................................................   484
Snuggs, Clarence J., Deputy Executive Director/Treasurer, 
  Neighborhood Reinvestment Corporation..........................   337
Society for Neuroscience:
    Prepared statement...........................................   696
    Statement of.................................................   417
Stevens, Senator Ted, U.S. Senator from Alaska:
    Questions submitted by......................................97, 478
    Statement of.................................................   414

Tinsley, Nikki, Inspector General, Environmental Protection 
  Agency.........................................................   177
Tucker, Daniel, Director, Budget and Planning Service, National 
  Cemetery Administration, Department of Veterans Affairs........     1

University Corporation for Atmospheric Research, prepared 
  statement......................................................   700
Upper Mississippi River Basin Association, prepared statement....   698

Washington, Dr. Warren, Chair, National Science Board, National 
  Science Foundation.............................................   533
    Prepared statement...........................................   543
    Statement of.................................................   541
Weiler, Dr. Edward J., Associate Administrator for Space Science, 
  National Aeronautics and Space Administration..................   409
Whitman, Christine Todd, Administrator, Environmental Protection 
  Agency.........................................................   177
    Prepared statement...........................................   184
Winn, Morris X., Assistant Administrator, Office of 
  Administration and Resources Management, Environmental 
  Protection Agency..............................................   177













                             SUBJECT INDEX

                              ----------                              

             CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

                                                                   Page
AmeriCorps, strengthening........................................   311
Budget request, fiscal year 2003.................................   311
Challenge grants...............................................325, 331
Citizen Corps..................................................319, 328
Community service in rural areas.................................   332
Effective service-learning.......................................   314
Establishment of ECORPS..........................................   332
Evaluation.......................................................   315
Freedom Corps....................................................   317
Homeland security................................................   328
Literacy and technology..........................................   334
Management and administrative improvements.......................   315
National:
    Programs.....................................................   323
    Service trust fund...........................................   327
    Service vs. National Guard...................................   329
Other budget requests............................................   315
Part-time model for national service.............................   330
Principles for a Citizen Service Act of 2002.....................   310
Senior Corps.....................................................   318
Specifics of the President's budget..............................   321
USA Freedom Corps................................................   310

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Accelerated claims process.......................................   144
Additional committee questions...................................   136
Asset control area (ACA) partnership program...................139, 141
Budget highlights, fiscal year 2003..............................   117
Chronic homelessness, elimination of.............................   147
Community development:
    Block grants...............................................137, 174
    Corporations.................................................   134
Comparison of per unit amount of operating subsidy...............   170
Confirmation of Inspector General................................   125
Conventional home mortgages, default rate for....................   169
Core HUD programs................................................   121
D.C. SFPD fraud and abuse........................................   167
Departmental grants management system............................   146
Downpayment assistance program...................................   146
Elderly:
    And disabled housing.........................................   145
    Housing......................................................   122
Emergency food and shelter program...............................   156
Empowerment zones and enterprise communities...................139, 175
Equal opportunity and access to housing..........................   172
Fair housing initiatives program.................................   174
FHA:
    Default rate.................................................   169
    Multifamily premium reduction................................   168
    Single family property disposition program, report on 
      implementation of..........................................   140
Home downpayment assistance initiative...........................   146
Homeless assistance..............................................   155
Homelessness.....................................................   122
HOPE VI...................................................123, 144, 166
Housing counseling...............................................   145
    Program......................................................   171
HUD:
    Assisted housing in foreclosure and in inventory.............   159
    Integrated Information Processing Service (HIIPS)............   168
Incremental vouchers.............................................   136
Interagency Council on the Homeless..............................   133
Lack of affordable housing.......................................   167
Management infrastructure at public housing......................   129
Market-to-market.................................................   132
    Opt-outs.....................................................   156
    Savings......................................................   156
Millennium Commission............................................   128
MMI reserves.....................................................   169
Multifamily accelerated processing...............................   168
Native American housing block grants fund........................   166
Naturally occurring retirement communities.......................   134
Office of Federal Housing Enterprise Oversight...................   133
Opt-outs.........................................................   155
Predatory lending................................................   134
Preservation of assisted units...................................   156
Project-based opt-outs...........................................   154
Public housing:
    Authorities..................................................   130
    Capital funds................................................   126
    Reinvestment and financial reform............................   149
Puerto Rico:
    Housing Authority............................................   170
    Public Housing Authority, per unit amount of operating 
      subsidy for................................................   170
Report requirement...............................................   140
Results..........................................................   142
Rural housing....................................................   171
Shelter Plus Care................................................   138
Single family property disposition holding costs.................   170
601 Program......................................................   169
Specific implementation steps....................................   142
Staffing issues..................................................   125
Status of implementation of:
    Section 601..................................................   140
    Section 602..................................................   141
Utilization of vouchers..........................................   131

                       DEPARTMENT OF THE TREASURY

           Community Development Financial Institutions Fund

Aditional committee questions....................................   398
Aging............................................................   387
Board of directors...............................................   384
Capacity building................................................   382
CDC mergers......................................................   397
CDFI fund programs...............................................   360
Certification of nonprofit organizations.........................   384
Community development financial institutions fund activities: 
  tracking rural outcomes........................................   375
Elderly needs....................................................   396
Federal programs, overlapping,...................................   393
George Knight Scholarship Program................................   396
Land trusts......................................................   397
Management and operations........................................   360
Monitoring awardees..............................................   406
Multifamily housing..............................................   389
Native American:
    Assistance for...............................................   390
    CDFI technical assistance program..........................404, 406
NeighborWorks:
    Affiliation of organizations.................................   382
    Multifamily initiative.......................................   385
New markets tax credit program...................................   356
Overlapping Federal programs.....................................   405
Oversight........................................................   394
Performance:
    For rural and reservation communities........................   404
    Measures.....................................................   404
    Of the CDFI fund: 2003 and beyond............................   358
Predatory lending................................................   379
President's fiscal year 2003 budget..............................   359
Resident involvement.............................................   397
Rural communities and the BEA program............................   403
Section 8 homeownership..........................................   391
    Option.......................................................   388

                     DEPARTMENT OF VETERANS AFFAIRS

$400 million budget shortfall....................................14, 62
$1,500 deductible proposal....................................... 5, 20
Alaska:
    Housing Finance Corporation..................................    17
    Medical services in..........................................    18
    Veteran issues...............................................    17
Capital asset realignment for enhanced services (CARES).......... 9, 50
    Funding for..................................................    88
    Next steps...................................................    87
    Study........................................................    51
    VISN 12 implementation.......................................    87
Claims processing........................................24, 32, 75, 91
Clinic funding process...........................................    24
Collections......................................................72, 86
Construction funding.............................................    88
Discretionary funding needs......................................    25
Enterprise architecture..........................................     7
Federal bond rate, maximum.......................................    18
Fort Howard......................................................    77
Geriatrics.......................................................    84
Homeland security................................................84, 93
Homelessness.....................................................    90
Hot Springs surgical unit........................................19, 20
Independent budget, letter from the..............................    13
Intellectual property rights.....................................    93
Job training veterans............................................    60
Kenosha, WI, clinic..............................................    23
Legislative mandates.............................................    52
Long term care...................................................    76
Major:
    And minor construction programs..............................     9
    Construction.................................................    79
Management improvements..........................................    11
Medical:
    And prosthetic research......................................     9
    Care.........................................................     7
        Funding needs............................................    16
        Other funding options for................................    21
        Supplemental.............................................    19
    Research.....................................................    85
    Supply cost containment measures.............................    55
Minor construction...............................................    80
National Cemetery Administration................................. 7, 11
New veterans employment grants program...........................    11
Nursing shortage.................................................    70
Pharmaceutical costs.............................................54, 55
Physician for Pocatello, ID clinic...............................    31
Physicians pay and medical school affiliations...................    92
Prescription:
    Benefit......................................................    53
    Drugs........................................................    67
Priority 7:
    Demographic profile..........................................    35
    Household income of enrollees................................    65
    Veterans.....................................................    32
        $1,500 deductible........................................15, 63
        Demographic profile of...................................33, 52
        Income profile of........................................    34
Procurement reform task force....................................     6
Recruitment and retention........................................    58
VA-DOD cost-sharing..............................................    89
VA's Medical Care Program........................................     4
Veterans:
    Benefits Administration......................................     6
    Department and DOD coordination..............................   101
    Employment:
        Grants for............................................... 6, 59
        Opportunities............................................    61
    Equitable resource allocation (``VERA'').....................    91
Veterans' benefits...............................................    10
Waiting times....................................................    73
Wartime veterans, average age of.................................    27

                    ENVIRONMENTAL PROTECTION AGENCY

Additional committee questions...................................   225
Agency's response to incorrect data in TRI database..............   271
Asbestos:
    Broadening and changing the definition of....................   302
    Libby, Montana asbestos clean-up.............................   301
Assistance to small business with compliance to TRI lead rule....   274
Brownfields:
    Increase in funding for fiscal year 2003.....................   234
    Questions raised concerning effective use of funding.........   234
Carbon dioxide emissions: voluntary vs. mandatory regulation.....   211
Chesapeake Bay research program: recruitment.....................   203
Clean:
    Air Act/New Source Review Enforcement Activity...............   219
    Water:
        Funding..................................................   194
        Revolving loan program...................................   203
Clear skies initiative and new source review.....................   210
Climate change Kyoto Accord......................................   289
Coeur d'Alene basin:
    Final record of decision (ROD)...............................   300
    National Academy of Science study of children's health.......   198
    Superfund site...............................................   197
Compliance assistance:
    Activity plan................................................   238
    Analysis of:
        New regulatory requirements and compliance assistance 
          tools in fiscal year 2003..............................   238
        Prospective enforcement activities in fiscal year 2003...   239
    Analysis in analytic blueprint for new regulations in fiscal 
      year 2003..................................................   240
    Cuts proposed by fiscal year 2003--President's budget for 
      compliance assistance and centers key program..............   242
    Documenting and measuring environmental improvements.........   239
    Dollars and FTE for compliance assistance activities within 
      and outside of OECA........................................   241
    Estimate of cost to develop compliance assistance tools......   236
    List of rules for developing compliance assistance tools.....   235
    Ranking of top ten compliance assistance needs...............   236
    Resources for implementation and performance and assessments.   240
    Status of total resources devoted to compliance assistance...   240
    Targeting compliance assistance to constituencies in fiscal 
      year 2003..................................................   241
Distinction between ``having no knowledge'' and ``not reporting'' 
  under TRI lead rule............................................   277
Enforcement:
    Acceptance of multiple proposals from States for new 
      enforcement grants.........................................   246
    Appropriate balance, roles, and responsibilities between 
      State and Federal enforcement agencies.....................   245
    Civil enforcement activities to areas that pose the greatest 
      risk to human health or the environment in fiscal year 2003   244
    Competitive grant program....................................   224
    Determining impact on environment by enforcement FTE cuts 
      from information from States...............................   247
    EPA's Inherent conflict between desire to meet inspection and 
      case output performance goals and strategies...............   244
    Federal inspections to areas that pose greatest risk to human 
      health or the environment in fiscal year 2003..............   243
    FTE ceiling and on-board levels as of October 1, January 1, 
      March 1, and July 1 for OECA...............................   242
    FTE reduction................................................   219
    Geographic areas subject to decrease in Federal enforcement 
      FTE realize increase in State enforcement resources........   246
    Grant Programs...............................................   187
    Impact of reduction of enforcement FTES and additional State 
      enforcement resources on:
        Enforcement output.......................................   246
        Environmental indicators.................................   246
    Information obtained from States measuring outputs or 
      outcomes from usage of new enforcement grants..............   247
    New enforcement grant program grants award to States and/or 
      used by EPA................................................   247
    Of environmental laws:
        Budget cuts affect on enforcing environmental laws.......   225
        Budget proposal..........................................   225
        Consequences of budget reduction on catching prosecuting 
          polluters..............................................   226
        GAO report on State enforcement weaknesses...............   226
        Monitoring States' use of funds..........................   227
        New State grant enforcement program......................   226
        Special or new authority legislation.....................   226
        States' use of funds for enforcement activities vs other 
          activities.............................................   227
        Work with States with poor records.......................   226
    Process used to choose and employ the most effective 
      regulatory tool............................................   245
    Program......................................................   218
    State grant program..........................................   193
    Verification and validation of actual accomplishments from 
      enforcement activities.....................................   247
Environmental air quality:
    Contribution to public health burden.........................   298
    Effect of air pollutants and contaminants....................   298
    Incorporating national environmental respiratory center 
      research strategy into agency's assessment of public health 
      burden and future regulatory strategies....................   299
    National environmental respiratory center incorporated into 
      agency's strategy for understanding effects of complex air 
      pollutant mixtures.........................................   300
    Research to understand health effects........................   299
Environmental education:
    Rationale for elimination of approximately $10M from K-12....   233
    Transfer to National Science Foundation......................   202
Fox River cleanup project........................................   200
    Cost and public acceptance...................................   201
General awareness of reporting requirements among those required 
  to re- 
  port...........................................................   273
Global and cross-border environmental risks......................   290
Grants:
    Dollars of non-profit recipients of non-construction grant 
      awards in last three years.................................   248
    Number of:
        Bench reviews conducted of non-profit non-construction 
          grantees from fiscal year 2000 to fiscal year 2002--by 
          region.................................................   249
        FTEs and on-board personnel conducting on-site reviews of 
          grantees in fiscal year 2002 and fiscal year 2003......   250
        Hours of paperwork burden imposed on businesses..........   250
        Non-profit recipients of non-construction grant awards in 
          last three years.......................................   248
        On-site reviews conducted of non-profit non-construction 
          grantees in fiscal year 2000 to fiscal year 2002 by 
          region.................................................   249
    OEI work with program offices to tailor new rules to impose 
      less paperwork burden......................................   251
    Program offices review of current paperwork requirements to 
      reduce burden on businesses in fiscal year 2002............   251
    Top twenty non-profit grant recipients by:
        Number of awards in fiscal year 2002.....................   248
        Total amount of funds awarded in fiscal year 2002........   248
Guidelines for screening new rules for compliance assistance...237, 238
Homeland security................................................   230
    Anthrax decontamination:
        Full reimbursement.......................................   231
        Spending.................................................   231
    Development of outcome-based measures and specific spending 
      plans......................................................   230
    Lessons learned from the anthrax decontamination at the Hart 
      Building...................................................   231
    Progress:
        For improving homeland security..........................   229
        Made assuring clarity of roles and safety................   231
    Status of funding for homeland security and activities 
      undertaken.................................................   228
    Technologies and methodologies...............................   195
Homestake mines in South Dakota: indemnification.................   207
Hydraulic fracturing:
    Landowners...................................................   284
    Peer review:
        Panel....................................................   284
        Process..................................................   283
    State oil and gas agencies...................................   284
    Timetable....................................................   283
Identification of business required to report under TRI lead rule   271
Inspector General draft report: pollution enforcement............   206
IRIS/residual risk rulemaking....................................   277
Lead:
    Bio-availability of lead sulfides vs lead oxides.............   285
    Lead sulfide in galena form vs lead in oxide form affect on 
      human body.................................................   285
    Potential risk of different forms of lead to regulatory 
      decisions..................................................   286
MACT standard setting..........................................279, 280
New source review..............................................206, 268
    Agency relaxation of enforcement.............................   213
NPDES permitting:
    Level of resources devoted to reduce NPDES backlog from 
      fiscal year 2002 and fiscal year 2003 request..............   261
    Status of efforts to reduce Federal and State NPDES permits 
      backlog....................................................   252
Pesticides.......................................................   297
Pharmaceutical pollution of waterways............................   231
President's directive for technical assistance to small business 
  regarding TRI lead rule........................................   273
Program specifics................................................   291
Reformulated gas price increase..................................   200
Reinvention:
    Environmental benefits of regulatory flexibility vs. status 
      quo regulatory schemes.....................................   263
    Examples of directing program offices and OECA to reduce 
      barriers, transaction costs and approval time for 
      reinvention projects.......................................   262
    Spreading the culture of reinvention by limiting its 
      application................................................   262
    Status of review of reinvention programs.....................   261
Report says many major polluters operate without required permits   208
Roles and responsibilities of EPA'S regional offices.............   235
    Analysis performed to determine size of regional offices.....   235
    Workforce analysis and projections...........................   234
Small and rural water systems vulnerabilities....................   196
Small business:
    Concerns with data TRI data quality..........................   271
    Ensure program offices' economic analysis of small business 
      impacts do not omit small business or industry sectors in 
      fiscal year 2003...........................................   268
    Examples of program offices tailoring analysis and regulatory 
      proposals to realities of given industrial sectors.........   263
    Increase knowledge of:
        Delivery of information about regulatory requirements in 
          fiscal year 2003.......................................   266
        Impact of regulatory requirements in fiscal year 2003....   263
    Increase knowledge of impact of rulemaking in fiscal year 
      2003.......................................................   264
    Program offices considering rulemakings determining impact on 
      potential small business in fiscal year 2003...............   266
    TRI reporting................................................   274
        Without computers........................................   274
    Unaware of reporting requirements............................   272
Spokane River hot spots..........................................   199
Standardizing data elements......................................   251
Star fellowship..................................................   234
    Citation.....................................................   233
    Graduate students completing fellowships?....................   233
    Rationale for shift from EPA to NSF..........................   233
    The Star program?............................................   233
States with poor records.........................................   226
Superfund cleanup:
    Adequate funding in fiscal year 2003 for Washington State 
      superfund cleanups.........................................   301
    Adequate funds to continue superfund cleanups................   289
    Pace of superfund cleanup....................................   288
Superfund tax: administration's opposition to tax chemical and 
  petroleum industries...........................................   301
Toxics release inventory (TRI) program and the TRI lead rule.....   269
TRI:
    Assistance to small companies................................   275
    Burden of proof in an enforcement context....................   277
    How has the guidance document received by the small business 
      community..................................................   275
    Knowledge in:
        An enforcement context...................................   277
        Context of TRI reporting.................................   276
    Lead rule data quality.......................................   271
    Small business:
        And the 100-pound threshold..............................   276
        Reporting responsibility in the case of ``no knowledge''.   276
    Unusual aspects of the TRI lead rule.........................   275
U.S. Geological Survey: contaminents in water....................   205
Wall Street Journal article:
    Inspector General draft report...............................   208
    Non-profit grants............................................   207
Water infrastructure funding:
    Prioritizing funding needs...................................   287
    Reasonable level of funding to preserve existing 
      infrastructure.............................................   286
    Infrastructure funding.......................................   227
    Methods for detecting security violations....................   228
    Watery security improvement..................................   227

                   EXECUTIVE OFFICE OF THE PRESIDENT

Federal:
    Coordination of nano-technology..............................   568
    R&D support..................................................   559
Funding physical sciences........................................   560
Homestake mine and neutrino research.............................   567
Physical sciences support........................................   569

                  FEDERAL EMERGENCY MANAGEMENT AGENCY

Additional committee questions...................................   515
Buyouts..........................................................   517
Cerro Grande:
    Assistance...................................................   518
    Audits.......................................................   507
    Fire.........................................................   504
Chemical stockpile emergency preparedness program (CSEPP)........   498
Citizen Corps.............................................490, 496, 511
    And volunteers...............................................   513
Delivery of assistance...........................................   495
Disaster assistance:
    Criteria.....................................................   525
    Relief fund..................................................   492
    Response & recovery..........................................   493
Emergency food and shelter program.............................493, 522
FEMA:
    Concern for..................................................   515
    Disaster relief fund.........................................   517
    Role in CSEPP................................................   500
    Team.........................................................   487
Fire:
    Act grants...................................................   524
    Fighter grants...............................................   513
    Grant program................................................   501
    Management assistance........................................   510
First responder:
    Grant process................................................   506
    Grant program................................................   509
    Initiative...................................................   485
    Training budgets.............................................   514
Fiscal year:
    2001 independent auditor's report............................   523
    2003 request.................................................   488
Flood:
    Fund.........................................................   491
    Insurance participation......................................   514
    Insurance program............................................   520
    Map modernization..........................................486, 519
    Mapping......................................................   511
Goals for assisting disaster victims.............................   517
Hazard mitigation grant program..................................   497
Independent auditor's report, fiscal year 2001...................   493
Inter-agency fire center.........................................   501
Interoperability and mutual aid..................................   503
La Plata, Maryland, disaster.....................................   495
Legislation......................................................   525
Missouri, tornado damage in......................................   498
National:
    Flood insurance program......................................   492
    Preparedness--Homeland security responsibilities.............   488
New pre-disaster mitigation grant program........................   491
New York:
    City 9/11 losses from terrorism..............................   519
    Investigations...............................................   507
ODP transfer.....................................................   485
Office for Domestic Preparedness to FEMA, transfer of the........   489
Pre-disaster mitigation..........................................   486
Prevention and consequence management............................   514
Prevention vs. homeland security.................................   523
Project impact...................................................   500
QHMGP plans......................................................   516
Supplemental:
    Appropriation request........................................   486
    Request, fiscal year 2002....................................   494
Training programs, merger of.....................................   508
U.S. Fire Administration.........................................   490

             NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

Additional committee questions...................................   451
Aeronautics:
    Blueprint....................................................   452
    Industry, mergers in the.....................................   466
    Research.....................................................   464
Air Force/space launch initiative................................   444
Beyond core complete configuration...............................   433
Civil service reform.............................................   444
Contract management/integrated financial management program......   460
Core completion--crew size.......................................   431
Dreamtime........................................................   472
Earth science:
    Enterprise...................................................   470
    Missions.....................................................   450
Environmental community--nuclear power...........................   438
Gilmore Creek tracking station...................................   478
Hubble:
    Mission......................................................   429
    Space telescope..............................................   417
        Images...................................................   427
Human capital....................................................   443
Integrated financial management program..........................   442
International space station......................................   454
    Prioritizing research for the................................   434
Management:
    Effectiveness................................................   479
    Reforms of the station.......................................   429
National security issues.........................................   445
Next generation:
    Of space telescopes..........................................   449
    Space telescope..............................................   464
Non-proliferation................................................   446
Nuclear propulsion.............................................466, 478
Nuclear systems initiative.....................................435, 477
    Program/Energy Department....................................   436
Orbital debris...................................................   471
Orbiter major modifications......................................   468
Pluto mission....................................................   447
Radiation exposure...............................................   469
Re-examining head centers........................................   437
Reliability of the shuttle.......................................   439
Reusable launch vehicle..........................................   472
Russian commitments, status of...................................   467
Science research, prioritizing...................................   432
Scientists, attracting and retaining.............................   479
Shuttle privatization............................................   440
Space launch initiative...................................436, 452, 459
    Nuclear propulsion program...................................   441
    Reserves.....................................................   460
Space shuttle....................................................   457
    Safety/astronauts............................................   465
Space station cost overruns......................................   430
Workforce issues.................................................   462

                      NATIONAL SCIENCE FOUNDATION

Contact information..............................................   551
Core sciences....................................................   558
Federal investment in science and engineering....................   544
Fiscal year 2003:
    Additional NSF funding in....................................   571
    Funds, additional............................................   562
Homestake mine and neutrino research.............................   567
Large facilities:
    Management plan..............................................   550
    Prioritization...............................................   571
Maize sequencing project.........................................   573
National:
    Academy of Sciences..........................................   572
    Science Board activities on science and engineering education 
      and workforce..............................................   563
    Workforce policies for science and engineering...............   545
NSB:
    Meetings.....................................................   572
    Recommendations..............................................   563
    Response to IG report........................................   567
NSF:
    IG report....................................................   565
        Response to..............................................   566
    Proposed fiscal year 2003 budget increase....................   558
    Transferred programs to......................................   557
Plant genome.....................................................   573
Post-award management............................................   548
U.S.:
    Government role in international science and engineering.....   544
    Science and engineering infrastructure.......................   545
Undergraduate and minority programs..............................   561
Very large array (VLA)...........................................   569
Workforce planning...............................................   549

                 NEIGHBORHOOD REINVESTMENT CORPORATION

Additional committee questions...................................   379
Community development laboratory.................................   349
Solutions to a range of challenges...............................   351
Stewardship of Federal resources...............................344, 347
NeighborWorks system...................................   346

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