[Senate Hearing 107-380]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-380
 
                      NOMINATION OF NANCY P. DORN
=======================================================================


                                HEARING

                               before the


                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                 ON THE

  NOMINATION OF NANCY P. DORN TO BE DEPUTY DIRECTOR OF THE OFFICE OF 
                         MANAGEMENT AND BUDGET

                               __________

                            FEBRUARY 8, 2002
                               __________

      Printed for the use of the Committee on Governmental Affairs







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                   COMMITTEE ON GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 FRED THOMPSON, Tennessee
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
RICHARD J. DURBIN, Illinois          SUSAN M. COLLINS, Maine
ROBERT G. TORRICELLI, New Jersey     GEORGE V. VOINOVICH, Ohio
MAX CLELAND, Georgia                 PETE V. DOMENICI, New Mexico
THOMAS R. CARPER, Delaware           THAD COCHRAN, Mississippi
JEAN CARNAHAN, Missouri              ROBERT F. BENNETT, Utah
MARK DAYTON, Minnesota               JIM BUNNING, Kentucky
           Joyce A. Rechtschaffen, Staff Director and Counsel
                        Kevin J. Landy, Counsel
              Jason M. Yanussi, Professional Staff Member
         Hannah S. Sistare, Minority Staff Director and Counsel
                  Johanna, L. Hardy, Minority Counsel
                     Darla D. Cassell, Chief Clerk











                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Lieberman............................................     1
    Senator Stevens..............................................     2
    Senator Cochran..............................................    11

                                WITNESS
                        Friday, February 8, 2002

Nancy P. Dorn to be Deputy Director of the Office of Management 
  and Budget.....................................................     4
    Prepared statement...........................................    15
    Biographical and financial information submitted for the 
      record.....................................................    17
    Pre-hearing questions and responses..........................    24
    Additional pre-hearing questions from Chairman Lieberman with 
      responses from Ms. Dorn....................................    68
    Post-hearing questions from Senator Thompson with responses 
      from Ms. Dorn..............................................    70

                                Appendix

Prepared statement:
    Senator Warner...............................................     3













                      NOMINATION OF NANCY P. DORN

                              ----------                              


                        FRIDAY, FEBRUARY 8, 2002

                                       U.S. Senate,
                         Committee on Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:33 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Joseph I. 
Lieberman, Chairman of the Committee, presiding.
    Present: Senators Lieberman, Stevens, and Cochran.

             OPENING STATEMENT OF SENATOR LIEBERMAN

    Chairman Lieberman. Good morning.
    Today we are considering the nomination of Nancy Dorn to be 
Deputy Director of the Office of Management and Budget. She 
comes to this position after having served the public in many 
other capacities, having worked in Congress, at the White 
House, and for the State Department.
    In 1991--my prepared remarks reveal your exact age. Do I 
have your permission to go ahead and do that?
    Ms. Dorn. It is OK.
    Chairman Lieberman. In 1991, she was the first woman and, 
at age 33, the youngest person to be nominated and confirmed to 
the position of Assistant Secretary of the Army for Civil Works 
with a responsibility for the Army Corps of Engineers.
    We welcome you, Ms. Dorn, and we are pleased you could be 
with us this morning.
    As you know, the Office of Management and Budget is one of 
the most influential agencies of the Federal Government with 
sweeping authority that most Americans are unaware of. I think 
of OMB as the administrative nerve center of the Executive 
Branch, recommending how every single taxpayer dollar should be 
spent and helping to oversee how every Federal program is 
managed. It has a unique role in shaping the annual budget, 
which means it helps define not just the goals and priorities 
of an administration but administration policy, as well.
    We will be engaged in lively discussion and debate in the 
coming months about budget policy, as we have already seen in 
the last week or two.
    Let me turn to new non-budgetary OMB responsibilities, very 
briefly. Cybersecurity and protecting the government's 
information infrastructure is a key OMB responsibility. And, if 
I may say so now, a critical part of homeland security. This 
Committee is proud of its role in developing the Government 
Information Security Act and other laws, and I hope that the 
Committee, OMB, and the relevant agencies will continue to work 
together to seek their effective implementation.
    Managing the government's information policies and the 
shift to e-Government is another area in which this Committee 
has taken a special interest. E-Government, we think, can help 
us respond also to the new security threats at home through 
better crisis management, improved data sharing between law 
enforcement, entities, and faster communication with the 
public.
    In the past year, as you and I have discussed, the 
Administration has articulated a commitment to e-Government 
which gives me great hope that our ongoing negotiations with 
OMB on this matter will result in consensus legislation very 
soon.
    Finally, let me discuss OMB's oversight of the Executive 
Branch regulatory process. From my perspective, this is 
actually one of the most significant roles played by OMB, and 
certainly by the Deputy. If confirmed, Ms. Dorn, you will help 
supervise the review of rules that provide critical protections 
to public health, the environment, worker safety, and 
consumers. This Committee was actively involved in sorting out 
problems years ago in regulatory review, problems that involve 
secrecy, and inappropriate influence that undermined public 
trust in the fairness of the process.
    Last year, some of us took an active interest, shall we 
say, in this Administration's actions which we viewed as 
rollbacks of a number of environmental regulations. I just want 
to state here to you, for the record, that in my view a one 
dimensional economic-based approach to regulatory review 
neglects fundamental principles of fairness and the very 
concept of protecting the public and the environment from harm.
    If changes are contemplated in the process or standards of 
regulatory review, I ask that you particularly, but also others 
at OMB, consult closely with this Committee. Regulatory 
agencies must have the capacity to do what Congress has asked 
them to do in protecting the public interest and public safety.
    We, on the Governmental Affairs Committee, and you at OMB, 
have a lot of work to do and we should be doing it together. We 
look forward to forging a partnership with you on these 
important matters.
    I would like to add a brief word, a special word perhaps, 
on behalf of Dan Blair, who has been nominated as Deputy 
Director for the Office of Personnel Management and whose 
hearing, chaired by Senator Akaka, will follow this one. Dan 
has served with distinction for 4 years on this Committee as 
senior counsel to Senator Thompson. And before that he worked 
for the House Committee on Government Reform.
    He has really dedicated his professional life to public 
service and represents, in my opinion, the very best that this 
country has to offer. I wish him the best in this new chapter 
of his public service.
    Senator Stevens.

              OPENING STATEMENT OF SENATOR STEVENS

    Senator Stevens. Mr. Chairman, as a former chairman, I am 
delighted to be here once again when Nancy Dorn returns to a 
position which requires Senate confirmation. I would call your 
attention, Mr. Chairman, to the fact that her husband, James 
Whittinghill, is sitting there behind her with her two 
children, Caroline and Patrick, who are new additions to the 
scene since the time that she was confirmed before by the 
Senate.
    I have known Nancy for a long time and her husband, also. I 
am delighted to be here representing Senator Thompson in these 
hearings. Thank you very much.
    Chairman Lieberman. Thanks very much, Senator Stevens. The 
husband has a familiar look to him. The children I am pleased 
to see for the first time.
    For the record, Ms. Dorn has submitted responses to 
biographical and financial questionnaires, has answered pre-
hearing questions submitted by the Committee, and additional 
questions from individual Senators, has had her financial 
statement reviewed by the Office of Government Ethics. Without 
objection, this information will be made part of the hearing 
record, with the exception of the financial data, which is on 
file and available for inspection in the Committee's offices.
    In addition, the FBI file has been reviewed by Senator 
Voinovich and me pursuant to Committee rules.
    At this time, Senator Warner had hoped to be here to 
introduce you. Unfortunately, he cannot, so he will give us a 
statement which we will include in the record and in some sense 
we will take Senator Stevens warm and personal remarks as the 
introduction of you.
    [The prepared statement of Senator Warner follows:]
  PREPARED STATEMENT OF SENATOR JOHN WARNER, A U.S. SENATOR FROM THE 
                           STATE OF VIRGINIA
    Chairman Lieberman, and my other distinguished colleagues on the 
Senate Governmental Affairs Committee, it is my honor to come before 
the Committee today and introduce Nancy Dorn to serve as Deputy 
Director of the Office of Management and Budget.
    It has been my privilege to once again be able to work with Ms. 
Dorn in her current capacity as the Vice President's top legislative 
aide. Previously, I had the opportunity to work directly with Ms. Dorn 
when she served as Assistant Secretary of the Army for Civil Works. As 
a member of the Committee on Environment and Public Works, which has 
jurisdiction over the civil works program of the Corps, I found Ms. 
Dorn to be an effective manager and skilled professional.
    In addition to her service with the Department of the Army, Ms. 
Dorn has a vast and distinguished career in Federal service and in the 
private sector. I strongly believe in her abilities to serve in such a 
vital role at OMB.
    Ms. Dorn has served the Federal Government in various capacities 
with budget and policy oversight, including senior level positions with 
former administrations of President Reagan, President Bush, as well as 
in the House of Representatives.
    I trust that the actions and policies advanced by Ms. Dorn will 
adhere to the mission of the Office of Management and Budget (OMB) in 
helping the President carry out his constitutional and statutory duties 
and conduct her work in the best interest of the American people.
    I am pleased that a person with the professional capability, 
personal character and integrity as Ms. Dorn's is willing to continue 
in public service at OMB. I look forward to working with Ms. Dorn and I 
offer my unqualified support for her nomination.

    Chairman Lieberman. Ms. Dorn, before we proceed, would you 
like an opportunity to introduce your family?
    Ms. Dorn. Yes, Mr. Chairman. Thank you so much for the 
courtesies that you and Senator Stevens have extended to both 
me and my family, making a special effort to get this hearing 
done in a timely sort of way. I know Friday mornings in 
February are an unusual time to have hearings of this sort, but 
we really appreciate the effort that you and your staffs have 
put into it.
    As indicated, my family joins me this morning. My husband, 
Jim Whittinghill, who has been part of my life since the first 
time I was confirmed. I think he was in the Senate working for 
Senator Dole at that time, who is also a very good friend of 
ours.
    My son, Patrick, and my daughter, Caroline, are happy to be 
here this morning. They are not in school, so they are taking 
copious notes on management and budgeting and all manner of 
issues of interest to this Committee and I hope that they can 
report back on the proceedings here this morning.
    Chairman Lieberman. If they can figure out the budget 
crisis, I hope they will share that with me.
    Ms. Dorn, our Committee rules require that all witnesses at 
nomination hearings give their testimony under oath. So would 
you please stand and raise your right hand?
    Do you solemnly swear that the testimony that you will give 
the Committee today is the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Ms. Dorn. Yes sir, I do.
    Chairman Lieberman. Thank you. Please be seated and the 
record will show that you have answered the question in the 
affirmative.
    Do you have an opening statement that you would like to 
give?
    Ms. Dorn. I have a very short opening statement, Senator, 
that I will just quickly go through.

  TESTIMONY OF NANCY P. DORN \1\ TO BE DEPUTY DIRECTOR OF THE 
                OFFICE OF MANAGEMENT AND BUDGET

    Ms. Dorn. As I said, I really appreciate the Committee's 
efforts to get this hearing together, and I apologize for my 
scratchy voice, 2 days ago I had almost no voice. So I beg your 
indulgence in getting this through.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Dorn appears in the Appendix on 
page 15.
     Biographical and financial information appear in the Appendix on 
page 17.
     Pre-hearing questions and responses appear in the Appendix on page 
24.
     Additional pre-hearing questions from Chairman Lieberman with 
responses from Ms. Dorn appear in the Appendix on page 68.
     Post-hearing questions from Senator Thompson with responses from 
Ms. Dorn appear in the Appendix on page 70.
---------------------------------------------------------------------------
    It is a great honor to appear here today as President 
Bush's nominee to serve as Deputy Director of the Office of 
Management and Budget. I wish to thank the President, the Vice 
President, and Director Daniels for the tremendous opportunity 
to serve in this important position.
    As I indicated, my family has made some sacrifices over the 
past 3 or 4 years as I have moved from the Office of the 
Speaker of the House to the Office of the Vice President, and 
now granting me the privilege of serving in this position in 
the government.
    As the President's gatekeeper on budgetary policy and 
regulatory matters, the Office of Management and Budget is at 
the very center of the Federal Government, as you indicated. 
For me, that offers great possibilities in the public policy 
arena and will allow me to draw on my experience in the 
Departments of Defense and State, and two previous White 
Houses, as well as this one, and certainly in the Congress.
    While I have never served in OMB during my 21 years in 
Washington, I have had the chance to view the organization and 
people from close range, and it is a very impressive 
organization. I recognize the enormous responsibilities and 
duties inherent in this position and, if confirmed by the 
Senate, I look forward to serving in one of the most 
professional and respected agencies within the U.S. Government.
    We face a number of challenges and opportunities as we 
enter 2002. As is reflected in the budget that President Bush 
submitted to the Congress this week, we must fund our 
priorities--defense, homeland security--as you indicated, and 
economic growth. At the same time, we must hold down increases 
in spending in other areas and this makes for some very 
difficult choices.
    While the potential for disagreement over which programs to 
fund and at what level is limitless, the possibility exists 
that the administration and the Congress can work together 
constructively and in the same spirit that came out of the 
tragedy of September 11.
    I was very much a part of the scene through the last year 
as Vice President Cheney's person, working with the Congress 
and I think we can all take great credit and great pride in 
getting through a very difficult year in a very harmonious 
manner. It is my sincere hope that I can play a part in what 
you, Chairman Lieberman, have called ``producing results for 
the people.''
    I would point out one other predominant theme of the fiscal 
2003 year budget and that is management and performance-based 
budgeting. This Committee has long been at the forefront of 
better government management and has passed a number of 
significant measures, including GPRA, the Government Paperwork 
Reduction Act, and the Government Information Security Act.
    The President and Director Daniels have capitalized on the 
spirit of these laws and have taken them several steps further. 
To the surprise of some, the budget scores the agencies on five 
specific goals outlined in the President's management agenda. 
Further, the fiscal 2003 budget actually pinpoints specific 
programs which are successful and those which are not, and we 
are beginning to budget for them accordingly.
    But this, I would say, is only a beginning. I think in the 
years to come we will take beginnings of what we started in the 
2002 budget and hopefully move those into even a more 
comprehensive whole. I look forward to moving toward fully 
institutionalizing performance-based budgeting.
    Thank you again for the opportunity to testify today and I 
certainly look forward to working with this Committee, as well 
as many of the other committees of the Congress that OMB has 
dealings with.
    Mr. Chairman, I would be happy to answer any questions that 
you, Senator Stevens, or others may have.
    Chairman Lieberman. Thanks very much, Ms. Dorn.
    I will start the questioning now with a number of questions 
that we ask of all nominees.
    Is there anything you are aware of in your background which 
might present a conflict of interest with the duties of the 
office to which you have been nominated?
    Ms. Dorn. No, sir.
    Chairman Lieberman. Do you know of anything personal or 
otherwise that would, in any way, prevent you from fully and 
honorably discharging the responsibilities of Deputy Director 
of OMB?
    Ms. Dorn. No, sir.
    Chairman Lieberman. And do you agree, without reservation, 
to respond to any reasonable summons to appear and testify 
before any duly constituted committee of Congress if you are 
confirmed?
    Ms. Dorn. Yes, I do.
    Chairman Lieberman. Thank you.
    I talked a bit in my opening statement about e-Government. 
I wonder if you could first describe the role that you would 
like to take as Deputy Director in information management and 
e-Government issues?
    Ms. Dorn. Mr. Chairman, I think this is one of the most 
important areas that the government is making strides in. As 
you know, the President's management agenda identifies e-
Government as one of the priorities that he wishes to pursue. 
And certainly, as Deputy Director of OMB this will become a 
very important part of my job if I am confirmed by the Senate. 
This administration has made some significant efforts to 
increase funding for e-Government. I think this year's budget 
has a substantial increase for e-Government. And I know that at 
least in the e-Government initiative that is being coordinated 
by the Office of Management and Budget there is $100 million 
increase just in that account alone.
    So I think we will be spending a great deal of time on 
trying to make the government more transparent, more 
accessible, and more 21st Century than it is now.
    Chairman Lieberman. I appreciate that. I mentioned the 
legislation that Senator Conrad Burns and I introduced, 
bipartisan legislation, which would promote initiatives to use 
the Internet in government along with other information 
technologies to improve government service.
    Last July your predecessor, Sean O'Keefe, testified that he 
intended to work with the Committee to arrive at consensus 
legislation. We did work together and we basically agreed on 
everything except one point, as I think you know, and the 
significant question was exactly where does the function of the 
chief information officer, the CIO, go in OMB?
    I guess what I would like to have is your commitment that 
you will work with this Committee to try to achieve that last 
consensus on that item as quickly as possible so we can move 
this legislation, which I think will make it more likely that 
the additional funds that the President has put into the budget 
will be well spent.
    Ms. Dorn. Senator, we have made substantial strides. I 
think even in the last several weeks there have been 
discussions at the staff level to basically narrow whatever 
differences are left. We look forward to working with you on 
that bill and hopefully seeing it pass the Committee and the 
Senate early this year.
    Chairman Lieberman. Good.
    In the 106th Congress, in a related matter, Senator 
Thompson and I were successful in getting significant portions 
of our information security bill, the Government Information 
Security Act, enacted into law. OMB is charged with significant 
responsibilities under the law, including establishing 
government-wide information security policies, receiving annual 
reports from agencies regarding their information security 
evaluations, and enforcing agency accountability through budget 
actions if an agency is not acting to protect its systems.
    I am asking, at this point, for a current answer coming in 
as you are, of what your opinion of Federal agencies' record is 
to date in the area of computer security, which is obviously 
important not only to the security from the government's point 
of view, but in our attempt to engage more of the citizenry in 
interacting with government over the Internet, by computer. We 
want to give them security that what they give us will be held 
in confidence.
    Ms. Dorn. Senator, you are exactly right and I think that 
the legislation that you and Senator Thompson passed made a 
significant statement, made a significant starting point for 
the government to start dealing with these issues. Our 
sensitivity on this point has been heightened by the events of 
last year. And in fact, the President has formed a council 
within the Executive Branch of sub-cabinet level people to deal 
with this issue on a comprehensive basis.
    Dick Clark, who has been named as the cybersecurity 
cyberterrorism coordinator under the Homeland Security Office, 
has been hard at work to develop plans, and strategies to deal 
with the issues of security breaches from the outside. That, I 
would say, is one of the most critical functions that the 
Office of the Homeland Security is undertaking.
    You have also mentioned the privacy issue, in terms of 
citizens' interaction with the government through the web, 
through e-Government, or through traditional means. This is an 
important consideration and I certainly share that view. We are 
asking and in this new world we are going to be dealing with 
citizens more and more through electronic transmissions. At the 
same time, when they put information onto a website or into a 
government system through computers, we have to be able to 
protect that information. So that is an ongoing concern.
    From OMB's perspective, this is not just a once a year 
check the box sort of effort. In addition to the annual budget 
submissions that come in through the agencies, OMB has 
undertaken to meet with agencies periodically through the year 
and have benchmarks periodically through the year as to how 
they are developing their plans, how their milestones are being 
achieved. Frankly if, at the end of the day, their IT purchases 
do not have the necessary security provisions inherent in the 
plan, I think I would be very reluctant to approve funding for 
those items.
    Chairman Lieberman. Two more questions, if I might. The 
first is about a regulatory policy that I referred to. I wanted 
to get your general reaction, both to the concerns about 
regulatory review and also a specific reaction to my request 
that if changes are contemplated and the process or standards 
of regulatory review that you will notify our Committee and 
work with us or at least listen to us before any such changes 
are made.
    Ms. Dorn. I certainly would be willing to make that 
commitment, Senator. I look forward to working with the folks 
at OMB, and particularly at OIRA, on regulatory policy. As 
Senator Stevens mentioned, as Assistant Secretary in the Army 
for Civil Works, I had some good experiences and some bad 
experiences relative to regulations and the implementation of 
regulations. I am very sensitive to the impact that they have, 
not only on regular citizens but on the economy as well.
    You have my commitment to work very closely with the 
Congress as we go forward. There is lots of activity in this 
realm. I think OIRA deals with something in excess of 4,000 
regulations a year. It is a huge area of interest and concern 
to me.
    Chairman Lieberman. Thanks. The last question is about 
human capital management, which is a subject that the Committee 
has been interested in, particularly I must say, and to his 
credit, Senator Voinovich has focused on this. This is one of 
the less dramatic questions before the Committee. It does not 
tend to attract a lot of media interest, but it really is 
important, as he has pointed out. Which is to say the 
projection of a very significant turnover in the Federal 
workforce in the years ahead, and the question of whether we 
are going to be able to attract the best people to fill those 
critical positions.
    I wanted to ask you two questions that related that, both 
related actually to the budget proposal. The Administration has 
now proposed that money be taken out of each agency's annual 
appropriation to cover the future pension costs for the 
agency's future retirees. I wanted to ask you to respond to 
that from both points of view. One is the security of the 
retirement system, which obviously is of concern as people 
decide where to come to work.
    But then the second is the adequacy of funding for the 
programs that the agencies are supposed to carry out.
    Ms. Dorn. Senator, the proposal and the budget, as I 
understand it, pertains to accruals. Basically, these are 
accounts that in the past have been funded in government-wide 
accounts in OPM. In fact, they are the obligations that we have 
for all the Federal employees, their retirement and the other 
benefit packages that they have.
    It is simply that the retirement and like benefits have 
never been funded in the agencies' budget. Basically, the 
Department of Defense, for example, has a large number of 
employees, all of whom have benefit packages and which the 
government is certainly responsible for those benefits.
    The FY03 budget simply for the first time presents them in 
a coordinated way so that each agency's true costs are shown up 
front. There is really no real budget impact of this, because 
we were funding these and had a liability to fund them anyway. 
But simply to show them so that the agencies and the Congress 
and the public could really see the true cost of employees and 
the benefits that they have.
    In this budget, no agency was penalized for taking this 
step. It is a little bit of true and accurate accounting to 
show these costs. We certainly are not seeking to penalize 
government employees in any way. It is simply an effort to make 
government and the cost of government a little bit more 
transparent.
    Chairman Lieberman. So whether the level of appropriations 
are adequate to fund the responsibilities of the agencies 
remains with my friend to the right, or to your left, and the 
other members of the Appropriations Committee.
    Ms. Dorn. We will certainly be working with the 
Appropriations Committee to enact this change. It is a little 
bit of a departure from the past, but I think that there is 
sufficient budget authority to cover these, certainly we made 
room for it in our budget. I think we can do it in the 
appropriations process, as well.
    Chairman Lieberman. My last question about human capital 
management. You may know that Congress enacted the Federal Pay 
Comparability Act in 1990 to close the gap between Federal and 
non-Federal salaries. The pay adjustments under the act have 
never been fully implemented and the administration's budget 
for fiscal year 2003 follows what is regrettably a bipartisan 
tradition of again not providing parity between public and 
private salary levels.
    I wanted you to comment on that from the perspective of the 
deed, as I mentioned Senator Voinovich and others have pointed 
to, to fill literally tens of thousands of positions that will 
be coming open in the Federal Government in the years ahead.
    Ms. Dorn. The President and the director are very aware of 
the problem in human capital. It is one of the five issues that 
has been identified in the President's management agenda. The 
Office of Personnel Management and OMB are working very hard on 
looking at the whole layout of Federal benefits.
    I know that this Committee has been one of the supporters 
of giving Federal managers some additional flexibilities and 
other management tools, and we hope to continue to work with 
the Committee on those issues, as well as a review of the whole 
policy in that area.
    I do not think anybody would say that the Federal system, 
and the way it has developed over the past 50 years, is 
flawless. We need to look at that.
    Relative to the pay provision in this year's budget, the 
President did make a determination that the military deserved a 
pay raise. Certainly in this environment I support that, and I 
suspect many others do, as well.
    The civilian pay raise is in excess of 2 percent. In light 
of the economic situation that most Americans are facing right 
now, a good job with a 2 percent pay raise is actually a pretty 
good deal. In light of a million people in the last 4 or 5 
months who have lost their jobs, I think it is a reasonable 
proposal.
    But I take your point and we will work with this Committee 
and with the Congress to look at the human capital issue, both 
from a pay and from the benefits perspective.
    Chairman Lieberman. Thanks, Ms. Dorn, I appreciate your 
answers. Senator Stevens.
    Senator Stevens. Thank you very much, Mr. Chairman.
    Ms. Dorn, first, on the disclosure of the costs of 
retirement, that covers, as I understand it, both the cost of 
the civil service retirement system and the Federal employees 
retirement system. My chief of staff for the Appropriations 
Committee is behind me. He assures me that is fully disclosing 
a total cost of the systems.
    And really, it is an indication to everyone that they are 
fully funded.
    Ms. Dorn. That is correct.
    Senator Stevens. In previous wars and periods of 
engagement, we have not fully funded the retirement systems. 
That was one of the real reasons why we had to really create 
the Federal Employees Retirement System. One of your husband's 
prior associates, Senator Baker, used to tell me that if you do 
not toot your own horn, it is not going to be tooted. That bill 
I authorized, the Federal Employees Retirement System. And I am 
delighted to see that you are acknowledging the costs of the 
system and assuring the members of the Federal system that we 
are fully funding their retirements despite the war.
    Let me ask you this. This is a strange thing, too, based on 
my own experience. But when I entered government, we had a 
Bureau of the Budget. The creation of the Office of Management 
and Budget was really a creature of this Committee, as a matter 
of fact.
    But I sense that OMB is still mesmerized by the budget and 
the management side is what is being slighted and has been 
slighted in recent years. Which side are you really going to be 
on? Are you on the budget side or the management side?
    Ms. Dorn. Senator, I have to be on both sides. I can tell 
you that while the budget and the whole budget process that 
stretches from January 1 to December 21 every year can be an 
all-consuming beast, that the President and Director Daniels 
have made an enormous investment in the management agenda.
    The management initiative that the President announced last 
summer, the new provisions that you see in the fiscal year 2003 
budget, they are new beginnings in this area. But I can tell 
you that is what they are. They are beginnings. We have a long 
way to go before we can institute and institutionalize a number 
of these changes. I really look forward to spending a lot of 
time in that area.
    Hopefully, we will not get eaten up by the whole budget and 
appropriations process entirely, and we can spend some time on 
these issues.
    Senator Stevens. In my judgment, things that we read about, 
such as the problems of the Interior Department's oversight of 
the trust funds of our Indian people, would not have happened 
if the Office of Management and Budget really had pursued the 
management side of their responsibilities.
    That is not an indictment of this administration or the 
previous one, but a whole series of administrations. And there 
are a whole series of situations throughout the Executive 
Branch were there are trust funds, and where there are funds 
that are managed for other beneficiaries. And I think that 
there is less oversight of those funds than there is of the 
items that members of Congress add to your budgets.
    So I would invite you to spend as much time looking at how 
the people within the Executive Branch manage other people's 
money and other people's property, and have them be as closely 
supervised as how we handle the money that Congress thinks 
ought to be allocated to items different from what the OMB 
believes they should be in.
    I think if you and I are going to have any unfortunate 
words in the future, it is going to be over what we consider to 
be Congressional priorities and what you consider Congressional 
add-ons.
    Ms. Dorn. Yes, sir, I take your point in that area and 
hopefully we will not have as many disagreements. I guess one 
of the strengths that I bring to this job is that I have spent 
at least as much time in the last 20 years on this end of the 
street as I have down on the other end of the street. It is 
certainly not going to be for a lack of understanding of the 
position that you take.
    Relative to the trust funds and these enormous programs 
that have enormous money associated with them, we have made an 
effort to try and, for example, start to run down what is known 
in the budget world as erroneous payments. Something like $20 
billion goes out of the government every year to people who 
have either died, do not exist, or never got the checks. We 
will make an effort to try and spend more time on these areas 
and hopefully make some progress in making the government and 
the agencies and the trust funds more accountable.
    Senator Stevens. Last, Senator Byrd and I carry normally, 
when we are in session, a copy of the Constitution in our 
pocket in order to answer people who question us about how we 
handle our Committee's review of the budgets that you all 
submit. I hope that you and your colleagues will read the 
Constitution, too.
    Thank you very much.
    Ms. Dorn. Thank you.
    Chairman Lieberman. In regard to this question of 
occasionally disagreeing with Senator Stevens, I can tell you 
from my own experience, it is a growth experience and I am sure 
you will handle it well.
    Senator Cochran.

              OPENING STATEMENT OF SENATOR COCHRAN

    Senator Cochran. Mr. Chairman, thank you very much.
    First, I want to congratulate Ms. Dorn on the nomination to 
be Deputy Director of the Office of Management and Budget. I 
know this is a very challenging undertaking for you, but 
knowing personally of your experiences as Assistant Secretary 
of the Army for Civil Works, the Office of the Vice President, 
and in various capacities here in the Senate, I am confident 
that you have the background and experience and ability to 
handle this job. So I do not have any questions of you along 
that line.
    I do sympathize with the additional hours that you are 
probably going to have to spend in your job, though, with this 
new title and these new responsibilities. I am particularly 
thinking about your family seated behind you, Jim Whittinghill 
and Caroline and Patrick. I am glad to be here today to extend 
my greetings to them.
    I think one of the things that may have been overlooked in 
the President's agenda that he outlined when he assumed office 
was to bring some real meaning to the word management to the 
Office of Management and Budget in his outline of what he calls 
the President's management agenda. Included in this is a 
directive really to the agencies to restructure and to reduce 
the number of managers and organizational layers in government.
    To what extent do you expect that you will be personally 
involved in supervising that or in following to be sure that 
directive is carried out by the agencies?
    Ms. Dorn. Senator, I expect that I am going to be spending 
a lot of time in this area. These issues are not something that 
you just send out a directive and then wait for it to magically 
happen. Having served in a number of the agencies, I have 
witnessed this sort of thing firsthand.
    It takes a sustained concentrated effort to make changes in 
governments. It is like turning the Queen Mary. It is going to 
take a change in attitude.
    I think the attitude in this administration starts with the 
President on down. You may have read in the press that the 
President, in meeting with the cabinet officers in December as 
we wrapped up the budget, was carrying around copies of their 
scorecards which I think made an impression on the members of 
the cabinet and we hope that that attitude pervades the 
agencies as well.
    I think we will be spending time with the agencies, not on 
just the budget, not on just the mid-session review and the run 
up to the budget, but on a regular basis. There are a number of 
councils and gatherings that OMB chairs that I expect to be a 
part of. I can say that I share your view that we have got to 
make some changes in this area and really sustain our effort. 
It is not just a once a year exercise.
    Senator Cochran. Well, from my point of view, we look 
forward to working with you closely to help ensure the success 
of this management agenda. I think it is a grand idea. I think 
it is clearly appropriate for us to put more emphasis on the 
management side of the old Budget Bureau, as Senator Stevens 
reminded us it was called. And I know that with your skills and 
experience, you will help make this into an agency that really 
does carry out the President's agenda in a very aggressive and 
successful way.
    Ms. Dorn. Thank you, Senator. And I think that this 
Committee deserves a lot of credit for making a start in this 
area. As I have mentioned, a number of these management 
initiatives really started with the Government Performance 
Results Act, the act that Senator Stevens cited. And we really 
need the help of this Committee to drive a number of these 
changes, both from a legislative perspective and with the 
agencies, as well.
    Senator Cochran. Good luck to you.
    Senator Stevens. Could I make just one comment and ask one 
question?
    In connection with the oversight of the Library of 
Congress, I was appalled to find the number of people that were 
leaving the Library at a very high level of government salary. 
They have been there for years and they deserve that salary.
    As they leave however, to acquire young people who have the 
same educational credentials, the competition with the private 
sector is just overwhelming. The level of our entry salaries is 
not sufficient to acquire the best and the brightest any 
longer. I think we have got to find some way to get into a 
performance budgeting concept and to recognize that there are 
people out there who, despite their young age, have the 
abilities that we need to manage things like the Library of 
Congress.
    The structure of our current salary system is such that 
there is no way to give inducements to these people to enter. 
Even though their grades might be lower grades, but their 
salary levels be commensurate with what they could achieve in 
the private sector.
    I would invite your attention and hope you would spend some 
time on that. If we do not act within the next 2 years, I think 
the Library of Congress loses about 40 percent of its people 
who have the skills that we need, and we have no way to replace 
them at the salary levels that are available.
    I think it pervades government and I think you will find 
that the problems of the inflexibility of the use of money to 
obtain people, to fill the key spots in government, is one of 
the great deterrents of really good management today. I hope 
you will join us in looking at that.
    Ms. Dorn. Senator, I hope we can work on that together. It 
is an enormous challenge, particularly in areas like 
information technology where the private sector gets college 
graduates right out of college and sets them up and the 
government never even has a shot at many of those people.
    Your initiative on e-Government is not going to be very 
successful if we do not have the right kind of people to manage 
it.
    One of the pieces of legislation that is pending in the 
Congress is this Freedom to Manage package. One of the pieces 
of it does give agencies some flexibility in providing bonuses 
and better entry packages and other things. We will look 
forward to working with the Committee to see if they can pass 
some of these legislative authorities shortly. And as I said, I 
am open to working with you and with the Director of OPM to see 
if we can look at sort of the totality of Federal compensation 
to see if improvements can be made.
    Chairman Lieberman. Thanks, Senator Stevens, for that 
important point. And thank you, Ms. Dorn. It just brings to 
mind that we talked about the budget and management parts of 
your work and of OMB. There is a natural focus on the budget.
    Unfortunately, in the normal flow of events here, on 
budgetary matters there tends to be a lot of sound and fury. 
Some of it ends up being, unfortunately, partisan although in 
the end we have got to get together to get the budget passed 
and keep the government running.
    But on the management questions, I think there is enormous 
potential for bipartisan support and not a lot of sound and 
fury but the opportunity to really accomplish quite a lot in 
the areas that we have discussed with you today. So I hope we 
can work on that together.
    I thank you for your testimony. I thank your husband and 
children for supporting you not only this morning but their 
willingness to have you take on this work. Caroline and 
Patrick, you have got two great role models of public servants 
in your mom and dad. And you are going to learn some higher 
math in the years ahead, as your mother carries out this 
function.
    Senator Cochran. Or the new math.
    Chairman Lieberman. Yes, Senator Cochran corrected me and I 
accept it, new math.
    This completes the hearing. The record will remain open for 
the rest of the day today for submission of written questions 
for the nominee and any written statements for the official 
record.
    It is my intention to have a Committee vote on your 
nomination, probably off the floor, sometime next week so we 
can have you at work legitimately.
    Senator Stevens. Mr. Chairman, Senator Thompson had four 
short questions he would like to submit for the record.
    Chairman Lieberman. Yes, indeed and I gather from his staff 
that keeping the record open for the rest of the day will allow 
him to do that.
    I also want to thank Senator Cochran for his interest in 
chairing the following confirmation hearing for Dan Blair and 
John Howard, which will occur within a few moments. So I know 
if any of you want to go anywhere, do not change the channel.
    The Committee will stand in recess.
    [Whereupon, at 10:18 a.m., the Committee was adjourned, 
subject to the call of the Chair.]
                            A P P E N D I X

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