[Senate Hearing 107-1079]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 107-1079

                U.S. COAST GUARD FY 2003 BUDGET REQUEST

=======================================================================

                                HEARING

                               before the

           SUBCOMMITTEE ON OCEANS, ATMOSPHERE, AND FISHERIES

                                 of the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 19, 2002

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation



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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

              ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska
    Virginia                         CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana            KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
RON WYDEN, Oregon                    SAM BROWNBACK, Kansas
MAX CLELAND, Georgia                 GORDON SMITH, Oregon
BARBARA BOXER, California            PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina         JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri              GEORGE ALLEN, Virginia
BILL NELSON, Florida
               Kevin D. Kayes, Democratic Staff Director
                  Moses Boyd, Democratic Chief Counsel
      Jeanne Bumpus, Republican Staff Director and General Counsel
                                 ------                                

           SUBCOMMITTEE ON OCEANS, ATMOSPHERE, AND FISHERIES

                 JOHN F. KERRY, Massachusetts, Chairman
ERNEST F. HOLLINGS, South Carolina   OLYMPIA J. SNOWE, Maine
DANIEL K. INOUYE, Hawaii             TED STEVENS, Alaska
JOHN B. BREAUX, Louisiana            KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California            GORDON SMITH, Oregon
BILL NELSON, Florida                 PETER G. FITZGERALD, Illinois


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held March 19, 2002......................................     1
Statement of Senator Kerry.......................................     1
Statement of Senator Snowe.......................................     2

                               Witnesses

Hecker, JayEtta, Director, Physical Infrastructure Issues, 
  General Accounting Office......................................     9
    Prepared statement...........................................    11
Loy, Admiral James M., Commandant, United States Coast Guard.....     3
    Prepared statement...........................................     6
Mead, Kenneth, Inspector General, Department of Transportation...    21
    Prepared statement...........................................    23

                                Appendix

Response by Admiral James M. Loy to written questions submitted 
  by:
    Hon. John F. Kerry...........................................    47
    Hon. Olympia J. Snowe........................................    50
    Hon. Barbara Boxer...........................................    53

 
                U.S. COAST GUARD FY 2003 BUDGET REQUEST

                              ----------                              


                        TUESDAY, MARCH 19, 2002

                                       U.S. Senate,
         Subcommittee on Oceans, Atmosphere, and Fisheries,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 3:32 p.m. in 
room SR-253, Russell Senate Office Building, Hon. John F. 
Kerry, Chairman of the Subcommittee, presiding.

           OPENING STATEMENT OF HON. JOHN F. KERRY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Kerry. The hearing will come back to order. We are 
delighted to welcome the Commandant of the Coast Guard, Admiral 
Loy. It is a great pleasure to welcome you, Jim, and also Ken 
Mead, Inspector General of the Department of Transportation, 
and JayEtta Hecker of the GAO. We welcome all of you.
    But particularly, Admiral Loy, we welcome you. It is, I am 
confident, a very mixed feeling that you have today. This is 
your last hearing before the Congress as Commandant, barring 
unforeseen circumstances. I am sure that there is a part of you 
that says, thank God I do not have to deal with this any more, 
and then there is another part of you that just sort of sees 
time passing by and the end of 4 years of stewardship, and also 
your career, which has been extraordinary.
    I was thinking about it a moment ago. I have been here now 
through commandants since Ronald Reagan was President and I 
have seen therefore I guess four or five come and go and, by 
the grace of God, some of us are still here. Maybe there is an 
unfairness in the terms of office. I do not know. I know we are 
not complaining.
    But it certainly does emphasize the passage of time and the 
great contribution that each of you make. You work these long 
careers, beginning as a young ensign and working your way up 
that long ladder, never knowing quite where it is going to take 
you or if there is even a career in it. I am sure there are 
moments along the way where you say, well, I will give it one 
more hitch and see where it takes me. I know that way of 
thinking, and all of a sudden you have this world-class 
opportunity to serve at the highest level of our Nation's armed 
forces.
    So we are very, very grateful to you for your distinguished 
service, and I personally, and I know Senator Snowe feels this, 
we are both very grateful to you for your attentiveness to our 
particular issues and our concerns and our regions that live by 
the sea and on the sea and have a great history with the sea 
and with the Coast Guard, too.
    You heard, I think, perhaps some of the exchange with your 
successor, and we certainly congratulate you on his stewardship 
as Vice Commandant. You have really prepared him well, I think, 
and the committee looks forward to working with him and it will 
be a continuum, if you will, of your own service.
    You heard our concern, and I am not going to go through it 
all again, but the bottom line is that we have always had deep 
concerns about the Coast Guard's budget, and I know that you 
all get put in this position by OMB, and by the pot you are 
given and you have got to live by it, and there are marching 
orders and you march. We are not quite so restrained and 
constrained, but we are deeply concerned that when you finish 
with this billion dollars there is only about a $330 million 
real operational increase and just an enormous amount of 
responsibility.
    I personally will just say it up front. I do not think it 
is enough to do the job. It is not a 28 percent increase in the 
end when you finish with retirement accounts and personnel and 
so forth. What we need is operational money, money to put 
people on the line, money to put equipment on the line, money 
to put people in boats and for the various things they ought to 
be doing.
    So we are going to continue to fight for that, and we are 
going to talk about it a little with you today. But let me just 
turn to my ranking member and ask her for her comments. Then we 
look forward to your testimony.
    Admiral Loy. Thank you, Mr. Chairman.

              STATEMENT OF HON. OLYMPIA J. SNOWE, 
                    U.S. SENATOR FROM MAINE

    Senator Snowe. Thank you, Mr. Chairman.
    Welcome, Admiral Loy, to what might be your final 
opportunity to testify before the committee. That may be good 
news or bad news, I do not know which. I have to tell you that 
one of the privileges in serving in public office is having the 
opportunity to work with people like yourself. You have been 
extraordinary in the service you have rendered this country in 
the performance of your obligations and responsibilities as 
Commandant of the Coast Guard.
    There was never a time, never a moment, where you were not 
forthcoming and straightforward with me and the members of this 
committee and with the chairman on so many of the issues 
confronting the Coast Guard. Throughout your tenure you 
provided exceptional leadership, particularly in the instance 
of September 11th. You displayed a remarkable agility and 
response and flexibility to the issues and challenges during 
that very perilous and tumultuous chapter in America's history.
    I want to convey my profound gratitude for the 
contributions you have made to this country in leading the 
Coast Guard. I also want to commend you on the manner in which 
you have, with the most upstanding integrity, standards, and 
principles, been able to accomplish so much on behalf of the 
Coast Guard. This is especially noteworthy when, as you have 
said on many occasions--and I concur and I know the chairman 
concurs--we are asking the Coast Guard to do more with less.
    Unfortunately, it will come soon enough for you, because 
you will be departing at the end of May. Hopefully we can 
reverse that course so that we can assist the Coast Guard in 
addressing the multiple challenges that do exist. These 
readiness and retention challenges manifest themselves in the 
budgetary shortfalls and the new challenges involving homeland 
security. Given the fact you are already a multifaceted agency 
with multi-mission responsibilities, you are now adding a whole 
new layer of homeland security.
    You have addressed this issue so eloquently since September 
11th and how you think the Coast Guard should respond to this 
particular responsibility and challenge. I appreciate your 
presence here today and I am interested in hearing how you can 
help steer the committee and the Congress in moving the Coast 
Guard forward into a new era, this new normalcy. I know that 
you are proposing a 3-year plan to address the personnel issues 
and the readiness and retention issues that are associated with 
it. Additionally it includes the modernization, the equipment 
side, as well as the homeland security initiatives that the 
Coast Guard will be supporting and fulfilling in the years to 
come.
    But again, I want to express my appreciation to you for 
going above and beyond your responsibilities in every way. I 
really appreciated your communications with this committee time 
and again on so many fronts that affected the Coast Guard. So 
again I applaud you for the stewardship that you have provided 
in such an exemplary fashion.
    Admiral Loy. Thank you very much, Senator Snowe.
    Senator Kerry. Admiral, we welcome your testimony. Let me 
just say that I have, unfortunately, a conflict at around 4 
o'clock. I am going to hope we can get through my round of 
questions and then I will leave the hearing in the hands of my 
ranking member.
    Thank you very much, Admiral.

        STATEMENT OF ADMIRAL JAMES M. LOY, COMMANDANT, 
                   UNITED STATES COAST GUARD

    Admiral Loy. Good afternoon, Mr. Chairman and distinguished 
members. It is a pleasure to appear before you today to discuss 
the Coast Guard's fiscal '03 budget and its impact on the 
essential daily services we provide the American public.
    I think my first responsibility today, Mr. Chairman, is to 
thank you for your personal effort and for that of all the 
members and the staff during the post-9-11 period when the 
transportation appropriation and the fall supplemental 
appropriation was being negotiated. I am especially pleased 
with the structure of the $209 million supplemental that was 
passed because it reflected not only immediate maritime 
security requirements that we had, to include paying for 
reservists called to active duty, but it also recognized the 
half-year of the fiscal '02 National Defense Authorization Act 
requirements. That exposure would have reflected less service 
to the American public if we did not get that, and to find it 
in the supplemental appropriation was something I appreciate 
very, very much, because that effort has enabled us literally 
to put the full capability of our service, including solid 
maintenance accounts, perhaps for the first time in a long 
time, into the war on terrorism.
    You were there when we needed you and I am enormously 
grateful for that from the committee.
    Working with Secretary Mineta and the Department, the Coast 
Guard's fiscal '03 budget first and foremost represents 
significant increases to stand up to our homeland security 
responsibilities. We are in a resource crisis with respect to 
the permanent capability to deal with our maritime security 
challenges and this budget steps forward strongly.
    When the President said this budget being sent to the 
Congress has the largest increase in spending for the Coast 
Guard in our Nation's history, it was our ports and waterways 
and coastal security, including the approaches to the exclusive 
economic zone, that must be the focus of what we do with those 
funds.
    Last year I talked about restoring our readiness and 
shaping our future so as to enable the Coast Guard to adapt to 
the needs of the Nation. This budget methodically continues 
that strategic effort and concentrates on our efforts to 
rebuild our search and rescue program, a clear administration 
and Congressional priority, as you have already discussed with 
Admiral Collins.
    All these intentions were shot sort of into the future that 
arrived unannounced on 9-11 of last year. The transformation 
that we had designed, that we were already about, occurred 
sooner, faster, and with a greater intensity than we ever 
anticipated, but it did not alter the fundamental vision that 
this committee and our service had set out for ourselves. We 
must continue that transformation because an investment in it 
is an investment in maritime security at the same time.
    As a first order of business, Mr. Chairman, I would like to 
thank you for your personal commitment to an authorization bill 
this year. We now have gone 2 years without one and there are 
important initiatives associated with our ability to do our 
work, including things in homeland security that are part and 
parcel of that bill, and I thank you for your commitment to see 
through getting us an authorization bill this year.
    I will just make brief remarks about four items, sir, as to 
the proposed '03 budget. First, maritime security. With strong 
support from Secretary Mineta and Governor Ridge, we have 
developed a five-goal maritime security plan for the Nation 
that we have briefed several times, both in its initial design 
and then its status across time. I am about to do that again 
for both the Secretary and for Governor Ridge, and if that is 
of value to the committee I am obviously delighted to have the 
opportunity to do that for you as well.
    But it is about five goals. I heard you discuss those with 
Admiral Collins, so again I will not belabor it. But it is 
about building better Maritime Domain Awareness, so that we 
literally know more about what is going on around us in the 
maritime sector. It is about the control of high interest 
vessels in our ports and waterways. It is about boat count and 
head count and presence on our waterways for their deterrence 
value and for their response capability value, is the third 
element.
    Fourth is so as to make sure we are protecting the critical 
infrastructure of our ports and waterways as well as protect 
Coast Guard people and forces.
    Finally, to outreach both at home and abroad, so that we 
design an all-hands evolution that collectively raises the 
security profile for our ports and waterways.
    I think we are making headway in that regard. We have 
developed the mother of all Gant charts which itemizes specific 
things that will carry forward in each of those five important 
areas.
    Second, sir, our search and rescue program. This committee 
focused on the search and rescue program last year and I want 
to report back that I have listened very carefully. As well, 
both GAO and the IG have constructively helped us think through 
the issues associated with the challenge. The enacted '02 
budget plus the supplemental plus the '03 budget are systematic 
steps in a 5-year plan that we have developed.
    Between them, we will add 400 people or more and $30 
million worth of capability to our SAR system over those two 
budget cycles. We just offered a solid review of the plan to 
the IG staff and my feedback from Ken is that they were very 
pleased with the game plan that they saw.
    But more importantly, clear capability improvements, 
significant head count additions, solid training investments, 
and very real equipment and technology improvements have been 
made and will continue in the '03 budget.
    Third, NDRSMP. This project will modernize the capital 
infrastructure that enables effective safety and security 
response capability. The IG continues to identify three issues 
here and I am happy to answer questions about them in Q and A: 
Did we dilute important capabilities in the phase two RFP? Will 
there still be coverage gaps? And is there an adjusted standard 
for system restoration that we should be concerned about? 
Again, happy to answer any questions about that in Q and A.
    Last, the Integrated Deepwater System. On his recent trip 
to Portland, President Bush said: ``We must make sure our Coast 
Guard has a modern fleet of vessels.'' The administration and 
the Congress have helped us move in that direction and we are 
literally on the cusp of the award of that contract. We have 
reached out along the way time and time again to seek counsel 
and advice from experts.
    Just last week we passed another important milestone when 
we determined the competitive range and those who would 
continue in competition, and that leaves us only the actual 
award itself, which appears to be in place on the time line in 
about the middle of June.
    Last year I was cautioned to be meticulous and methodical 
and not rush to decisions, and we have done that and more. At 
the request of OMB, the Acquisition Solutions, Incorporated, 
conducted an independent review of the phase two RFP. It 
delayed our time line, but I think it was time well spent. The 
review concluded the project was well conceived, well 
developed, and well managed.
    We have scrubbed the requirements very hard since 9-11 and 
in the aftermath of the terrorist attacks I find the Integrated 
Deepwater System Project to be even more important to the Coast 
Guard and the Nation because of its focus on interoperability 
and C4ISR issues.
    This is the right project, Mr. Chairman, which I know this 
committee supports, whose time is now.
    My written statement closes with a quote from the 
President. Again he said: ``I saw how the Coast Guard responded 
after 9-11 and I know how important the service is for the 
safety, security, and wellbeing of American citizens.'' Mr. 
Chairman, I know you are and I am enormously proud of what 
every member of my service has contributed since then, and 
before, for that matter.
    Our great strength is the multi-mission capability and the 
inherent flexibility that we have as an organization that we 
offer America. That is exactly what we did on 9-11 by shifting 
gears to the Nation's crisis of the moment. This budget will 
underpin that capability in fiscal year '03.
    Mr. Chairman, I look forward to your questions.
    [The prepared statement of Admiral Loy follows:]

 Prepared Statement of Admiral James M. Loy, Commandant, United States 
                              Coast Guard

Introduction
    Good morning, Mr. Chairman and distinguished members of the 
Subcommittee. It is a pleasure to appear before you today to discuss 
the Coast Guard's fiscal year 2003 budget request and its impact on the 
essential daily services we provide the American public.
    Working with Secretary Mineta and the Department of Transportation, 
the Coast Guard's fiscal year 2003 budget request first and foremost 
represents significant increases to address our Homeland Security 
responsibilities. The President said, ``the budget [being sent] to the 
United States Congress [has] the largest increase in spending for the 
Coast Guard in our nation's history.'' Our ports, waterways, and 
coastal security are the focus of that increase.
    Last year I talked about the Coast Guard's multi-year plan to 
transform our organization by Restoring Our Readiness and Shaping Our 
Future to enable the Coast Guard, as a multi-missioned, maritime, 
military organization, to adapt to the needs of our Nation. This budget 
methodically continues that strategic effort and also concentrates on 
our efforts to rebuild our Search and Rescue program, a clear, 
Administration and Congressional priority. All these intentions were 
changed by the events of September 11th of last year. The 
transformation that we had designed occurred sooner, faster, and with 
greater force than we might have anticipated but it did not alter our 
fundamental vision . . . we must continue that transformation. As we 
bolster the foundation of our service, we'll simultaneously enhance our 
increased Maritime Homeland Security capabilities.

Transforming Our Organization
    The Coast Guard achieves its flexibility and strength through its 
military discipline, multi-mission character, and civil law enforcement 
authority. This unique authority and flexibility in operations allows 
our organization to shift our resources rapidly from one priority to 
another, often in a matter of minutes.
    Our mission profile is different than planned for a year ago. At 
that time, Marine Safety was allocated 14 percent of our mission 
portfolio including the Coast Guard's traditional Port Safety and 
Security efforts. In the days and weeks following the terrorist 
attacks, we dedicated over half of all Coast Guard resources to 
Maritime Homeland Security--or as we now refer to it--Ports, Waterways, 
and Coastal Security. In fiscal year 2003, our traditional Marine 
Safety activities coupled with the resources dedicated to Ports, 
Waterways & Coastal Security will represent a very significant 27 
percent of our Coast Guard resources.
    Terrorism, however, is only one of many modern day threats to 
homeland security. Migrant and drug smuggling compound the threat of 
terrorism when they contribute to illicit movement of people, money, 
and weapons across our borders. They continue to grow in severity each 
year. Profits from these criminal activities are well documented as 
significant funding engines for international terrorism.
    Our Maritime Transportation System (MTS) is both valuable and 
vulnerable. The MTS includes waterways, ports, intermodal connections, 
vessels and vehicles. The Maritime Transportation System moves 95 
percent of the nation's overseas trade accounting for nearly $1 
trillion in GDP. Protecting America from terrorist threats requires 
constant vigilance across every mode of transportation: air, land and 
sea. The agencies within the Department of Transportation, including 
the U.S. Coast Guard, the Maritime Administration (MARAD), and the 
Transportation Security Administration touch all three modes of 
transportation and are cooperatively linked. The vast majority of the 
cargo handled by this system is immediately loaded onto or has just 
been unloaded from railcars and truckbeds, making the borders of the 
U.S. seaport network especially vulnerable. The Coast Guard, with 
strong support of Secretary Mineta, has developed five key goals, which 
when met will protect and ensure the safety of our Nation's waterways 
and ports, as well as maintain and increase public confidence in the 
Maritime Transportation System. In fiscal year 2003 the Coast Guard 
will make great strides in addressing these five goals:

   Build Maritime Domain Awareness--The United States must have 
        continuous awareness of all vessels--with their cargo and crew 
        along with associated risk profiles--that operate to and from 
        our ports, or transit our coastal waters. Determining a threat 
        profile of each asset as far out to sea as possible works to 
        optimize the ``maritime sovereignty'' that is required to 
        ensure security of the maritime transportation system as well 
        as the Nation in general. We will complete Port Vulnerability 
        Assessments for the Nation's most critical ports. We are also 
        requesting 300 personnel and $88 million to establish 
        intelligence fusion centers for the collection, analysis, and 
        sharing of intelligence information. The initiatives in this 
        component of our maritime homeland security strategy have the 
        potential to significantly reduce security risks while allowing 
        better decision-making and allocation of security resources.

   Ensure Controlled Movement of High Interest Vessels--We have 
        categorized any vessel that could be used as a weapon of mass 
        destruction and vessels carrying a large number of passengers 
        (i.e. Liquefied Natural Gas carriers, chemical tankers and 
        cruise ships) to be ``High Interest'' and subject to special 
        scrutiny as they approach our ports. These vessels must be 
        identified, and possibly boarded and inspected by Coast Guard 
        personnel well offshore before a possible threat could cause 
        harm to our nation's ports or people. This budget supports 160 
        Sea Marshals for armed escort of High Interest Vessels and 
        provides the resources to increase on-the-water patrols for all 
        49 Captain of the Port zones.

   Enhance Presence and Response Capabilities--Increased presence has 
        great value as a deterrent and if a potential threat has been 
        identified, the Coast Guard needs the capability to detect, 
        intercept and interdict it, preferably on the high seas, using 
        a layered defense of major cutters, patrol boats, and maritime 
        patrol aircraft. Such action will effectively disrupt a 
        terrorist's planned chain of events and prevent a possible 
        catastrophic terrorist attack well before it threatens our 
        shores. This budget completes the establishment of 6 Maritime 
        Safety & Security Teams with nearly 500 active duty personnel. 
        It will also add 26 more Port Security Response Boats and 
        staffing for small boat stations.

   Protect Critical Infrastructure and Enhance Coast Guard Force 
        Protection--The Coast Guard must take measures to ensure 
        protection of our personnel, physical plant, and, consistent 
        with the Administration's Critical Infrastructure Protection 
        Program, information technology capabilities. The threats posed 
        are wide and varied, and require considerable actions to 
        safeguard the Coast Guard's people and resources. $51 million 
        is requested for Anti-Terrorism/Force Protection--with specific 
        enhancements to physical infrastructure, cyber-security, 
        personal protective equipment, and firearms and ammunition.

   Increase Domestic and International Outreach--Addressing security 
        risks in the maritime environment is an ``all-hands'' affair. 
        It will require partnerships and strategic relationships at 
        home and abroad. To help build this security network, the Coast 
        Guard will require robust security plans, including plans for 
        commercial vessels, offshore structures, and waterfront 
        facilities. These plans will address access control, 
        credentialing of waterfront employees, state physical and other 
        security issues. Coast Guard Captains of the Port, in concert 
        with all other port stakeholders, will prepare anti-terrorism 
        contingency plans. All of these plans will be exercised 
        periodically. The Coast Guard will continue to work with the 
        International Maritime Organization to align international 
        activities and improve security. The budget proposes 110 
        contingency response planners for worldwide seaport 
        infrastructure security.

Restoring Our Readiness
    We must also continue our multi-year, phased efforts to restore 
readiness as we strive to establish equilibrium to sustain our ``new 
normalcy.'' We must attend to traditional operations and perform 
appropriate training, maintenance and administrative work, while 
maintaining `surge' capacity for emergency operations. We must ensure 
adequate levels of training, maintenance, and other support resources 
are in place to achieve the full measure of output from our ships, 
aircraft, and shore facilities.
    Search and Rescue (SAR)--The Coast Guard remains the sole 
government agency that has the expertise, assets, and around the clock, 
on-call readiness to conduct Search and Rescue operations in all areas 
of the maritime environment. Through education, regulation, and 
enforcement efforts, as well as SAR operations, the Coast Guard strives 
to reduce fatalities, injuries and property loss at sea. Annually, the 
Coast Guard responds to approximately 40,000 calls for assistance. In 
fiscal year 2001, the Coast Guard saved over 84 percent of all mariners 
in distress, over 4,100 lives.
    The Coast Guard has undertaken a multi-year effort to improve our 
readiness at our small boat stations where many of the search and 
rescue cases take place. We added 67 personnel for back-up safety boat 
crews and tower watches at our surf rescue stations in fiscal year 
2001. This year the Coast Guard is adding nearly 200 personnel to small 
boat stations and command centers. Additionally, we are opening a 
formal school for training Boatswain's Mates and establishing traveling 
small boat training teams, ensuring that our personnel have critical 
skills required to successfully carry out search and rescue missions. 
Personal protective clothing inventories have been enhanced to protect 
our crews from the harsh environment. This effort continues in fiscal 
year 2003 by adding another 174 personnel to our small boat stations to 
reduce the work hour requirements and enhance the retention of our 
front line personnel.
    The National Distress & Response System Modernization Project 
(NDRSMP)--In addition to adding personnel to our emergency response 
system, we are making major commitments to the capital infrastructure 
that enables effective safety and security response capability. The 
Coast Guard is underway with a major re-capitalization of the Nation's 
``Maritime 911 System.''
    The National Distress & Response System Modernization Project will 
update our 1970's technology to an integrated communications network 
that will greatly increase detection and localization of distress 
signals, eliminate known radio coverage gaps, and enhance Coast Guard 
command and control capabilities across all mission areas, including 
homeland security, on the Nation's inland and coastal waterways. This 
budget will fund the initial installation of NDRS equipment and 
networking at six of the Coast Guard's Group regions along the 
Atlantic, Gulf, and Pacific Coasts.
    Human Capital--Our personnel remain our organization's most 
valuable resource. It is their hard work and dedication that have 
enabled the Coast Guard to adapt to evolving missions and changing 
operational environments. The Coast Guard's motto of Semper Paratus--
always ready- is more a statement of our people's mindset than of the 
capabilities of our physical assets.
    At his State of the Union address, President Bush emphasized the 
commitment of men and women in uniform to provide for our Nation's 
security and safety. He said, ``Our men and women in uniform deserve 
the best weapons, the best equipment, the best training--and they also 
deserve another pay raise.'' This budget reflects the President's 
desires.

Shaping Our Future
    We must also plan the U.S. Coast Guard's future now. The ability to 
anticipate and respond to new threats, risks, demands and opportunities 
is critical to our success.
    The Integrated Deepwater System--Of the 39 similar naval services 
throughout the world, the U. S. Coast Guard has one of the oldest 
inventories of ships and aircraft. With great support from the 
Department of Transportation and the Administration, we're ready to 
move forward with our plans to recapitalize and upgrade our deepwater 
assets. During his recent trip to Portland, Maine, President Bush said 
we ``. . . must make sure our Coast Guard has a modern fleet of 
vessels.'' Providing capability across all mission areas, our Deepwater 
assets are vital to the layered defense and response for Maritime 
Homeland Security. Deepwater is key to ensuring the Coast Guard can 
continue to fulfill all our missions and essential in providing a high 
level of ``maritime domain awareness'' to exercise and protect our 
national sovereignty.

Conclusion
    The President's fiscal year 2003 budget provides immediate 
capability for our Homeland Security responsibilities and continues to 
build upon past efforts to restore service readiness and shape the 
Coast Guard's future. The budget also demonstrates unwavering support 
for both the Deepwater project and National Distress and Response 
System Modernization Project (NDRSMP). The end result of the 
President's fiscal year 2003 budget will be a more capable Coast Guard 
that is correctly positioned for transformation into the Coast Guard of 
the 21st century.
    I close with a quote from our Commander in Chief as he reflected on 
the Coast Guard's efforts as of late.

          ``I saw how the Coast Guard has responded after 9/11 and I 
        know how important the Coast Guard is for the safety and 
        security and the well-being of our American citizens.
          This is a fine group of people, who don't get nearly as much 
        appreciation from the American people as they should. And I'm 
        here today [Jan 25, 2002] to say thanks, on behalf of all the 
        citizens who appreciate the long hours you put in, the daring 
        rescues you accomplish and the fine service you provide to our 
        country. Oh, yes, we're on guard in America.''

    Protecting our ports, waterways, and coastal regions, saving 
mariners in distress, interdicting illegal migrant and seizing drugs, 
or protecting our fisheries--With this budget the Coast Guard will be 
there to answer the call . . . Semper Paratus

    Senator Kerry. Thank you very much, Admiral.
    Ms. Hecker, do you want to go now?

        STATEMENT OF JAYETTA HECKER, DIRECTOR, PHYSICAL 
         INFRASTRUCTURE ISSUES, GOVERNMENT ACCOUNTING 
                             OFFICE

    Ms. Hecker. I am here today and pleased to report to you on 
some ongoing work we have for you on three separate issues. 
They are really the ones you have been raising: the extent to 
which the new homeland security measures that the Coast Guard 
has taken has affected other missions; the second issue is how 
these changes are reflected in the '03 proposed levels; and 
finally, the central challenges that the Coast Guard faces in 
continuing to perform these multiple missions.
    The first area, then, in terms of the effect: Clearly, 
there was a major reprioritization and reallocation of assets 
to port security, but focusing on where it came from, basically 
scrubbing the numbers, it is very clear that law enforcement 
generally and fisheries in particular really took the primary 
hit. It was a dramatic drop in focus.
    The best way we found to look at this was to look at the 
'02 budget proposal and its distribution plan before 9-11 and 
then look at the revision that was done with the enacted 
supplemental. What we saw is that before 9-11, 43 percent of 
the operating expenses were geared to law enforcement; post 9-
11 it went down to 30 percent. So there was a significant 
change in both the relative share and the absolute amount, and 
obviously increases in the security area.
    To get a better feel for the impact at the local level, I 
went to Boston, talked with the folks there, and really heard 
the specifics. For example, in the first quarter of '01, there 
were 300 boardings focusing on fisheries enforcement. In the 
first quarter of '02 there were 30. So you can see there was a 
dramatic drop in the level of fisheries enforcement presence in 
the months immediately following 9-11.
    The second question then is how is all of this reflected in 
the '03 budget, which are the kinds of questions you have been 
asking. One question you asked was, ``How much does it really 
take to make `whole' the major competing missions of the Coast 
Guard along with this new dramatic requirement for Coast Guard 
resources for port security?'' While it is true there is a 
major focus on port security in the '03 budget, the big story 
about the '03 budget is not the increase for port security. 
Two-thirds of the budget is devoted to what is called accruals. 
There is basically a new legislative proposal whereby agencies 
will have to fund long-term retirement commitments from their 
annual budgets--beginning in '03. So two-thirds of the $1.2 
billion increase in the '03 budget is actually dedicated to 
taking on (and showing within each annual budget) the long-term 
retirement commitments of the agency.
    So two-thirds of the $1.2 billion goes there. So you are 
left with one-third. Then we looked at the distribution of the 
remaining one-third, or about $680 million. About $542 million 
of that amount is for increased operating expenses. As we 
looked at the distribution among major missions we saw a 
dramatic difference between the level of resources in the 
original plan (pre-9-11) for fisheries enforcement, for 
example, and what it calls for now.
    Basically, what was 43 percent of the '02 budget for law 
enforcement, before 9-11 went down to 30 percent in the '03 
budget. There is a small dollar increase in the total amount 
going to law enforcement, but percentage-wise it has still gone 
from a 43 percent share--with a growing '03 budget--to 30 
percent. So the budget impact continues on the Coast Guard's 
other missions in a significant way.
    The general summary, then, is that there are very 
substantial challenges that the Coast Guard faces in trying to 
translate the real substantial increases that are needed. The 
unfunded obligations are real. I am not saying they are not 
significant. It is just that the majority of '03 budget 
increases are not for boats and people and other relief to help 
with the kind of pressures Coast Guard personnel are under.
    The whole Coast Guard organization is operating at maximum 
sustainable levels, and therefore, a lot of the new funds in 
the '03 budget just get people to working, maybe 60 hours a 
week instead of 80 hours a week. So you have got some 
limitations because, while the '03 budget provides funding for 
more reasonable and more sustainable activity levels, there 
will not be necessarily more activity; the agency would just be 
burning its people out a little slower.
    Another issue that is really very significant concerns the 
human capital challenges that the agency faces. You heard the 
Commandant talk about trying to absorb 2200 people in '03. 
Their own concern is that it is no easy matter to do this. With 
attritions, the agency has 4,000 that it has to attract, train, 
and integrate into the organization. That is a lot of new 
people. It is a level of training and integration that the 
agency has not experienced in the past.
    They have significant attrition rates. They have to deal 
with that.
    Another key concern we have is that the Coast Guard has not 
really yet determined the level of port security required. We 
talk about reaching a ``new normalcy''. What is the new 
normalcy? We need a new definition. We have these five goals of 
the President's, but this committee in fact passed new port 
security legislation that would define additional roles for the 
Coast Guard. That is pending in the House, so there could be 
more significant roles for the Coast Guard, more standard-
setting, more active leadership within the communities. In our 
view, the new normalcy and the role in port security has not 
been defined.
    Another thing that was mentioned is the extent of the 
demands on the Coast Guard really has not been tested. The 
terrorist attacks came after the prime search and rescue season 
was over. Similarly, the peak cruise ship season was over. 
Also, it was unusually good weather. The New England folks said 
this was the mildest winter in 135 years. Well, all of this 
means that demands on Coast Guard resources were very, very 
moderate. Yet, we have a new major season ahead. So we do not 
think that the Coast Guard has really been tested, even though 
folks are working at phenomenal activity levels.
    In conclusion, the Coast Guard has done a stellar job 
dealing with major new challenges. It has got significant 
challenges, though, to try to balance the organization's 
priorities, define the new normalcy, and have the increased 
funding to in fact translate into better balance in performance 
of its many, multiple missions.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Hecker follows:]

Prepared Statement of JayEtta Hecker, Director, Physical Infrastructure 
                  Issues, Government Accounting Office

    Mr. Chairman and Members of the Subcommittee:
    We are pleased to be here today to discuss the challenges that the 
Coast Guard faces in its fiscal year 2003 and future budgets and the 
critical management issues it must resolve as it focuses relatively 
more of its resources on homeland security. Like many federal agencies, 
the Coast Guard's priorities were dramatically altered by the events of 
September 11, 2001. Analysis of changes in the Coast Guard budget is 
made more difficult by the fact that funds from the emergency 
supplemental were made available at different times.\1\ The Coast 
Guard's fiscal year 2003 budget request of $7.3 billion is a 36 percent 
increase from the previous year, part of which is for an increased 
emphasis on homeland security. At the same time, the Coast Guard has 
many other ongoing responsibilities, ranging from boater safety to 
icebreaking. How--and whether--the Coast Guard can continue to meet all 
of these responsibilities is a matter of concern to the Congress.
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    \1\ Eighteen million dollars was allocated to the Coast Guard in 
fiscal year 2001 and $209 million in fiscal year 2002. In this 
testimony we use the $209 million figure for fiscal year 2002 since 
that is what is shown in the Coast Guard budget documents used for the 
analysis.
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    My testimony today, which is based on recently completed and 
ongoing work, addresses three topics: (1) the extent to which the 
homeland security measures undertaken by the Coast Guard since 
September 11th affected the agency's multiple missions; (2) how these 
changes are reflected in the requested fiscal year 2003 funding levels 
for each of the Coast Guard's major missions, and (3) the challenges 
the Coast Guard faces in 2003 and beyond in continuing to perform all 
of these missions. Appendix I describes the scope and methodology of 
our review.
    In summary, our work shows the following:

    The events of September 11th caused a substantial shift of 
        effort toward homeland security and away from certain other 
        missions. Cutters and aircraft, used mainly on the high seas, 
        were redeployed closer to major harbors; security was 
        strengthened for potential terrorist targets such as oil 
        refineries, cruise ship terminals, and port facilities; and 
        security patrols and monitoring of ships in port were stepped 
        up. As resources were shifted to meet these needs, the law 
        enforcement mission area, which consists mainly of drug and 
        migrant interdiction and fisheries enforcement, saw the most 
        dramatic drop in mission capability, according to the Coast 
        Guard. Although activity levels for law enforcement and other 
        mission areas are once again on the rise, they have not all 
        reached levels of activity that existed before the terrorist 
        attacks.

    The Coast Guard's fiscal year 2003 budget request reflects 
        an attempt to maintain and enhance heightened levels of funding 
        for homeland security while also increasing funding for all 
        other Coast Guard missions beyond fiscal year 2002 levels. 
        About two-thirds of the requested increase of $1.9 billion 
        would be used for future retirement payments, in keeping with 
        proposed legislation that would make agencies more accountable 
        for funding such obligations on an ongoing basis. The remaining 
        one-third of the requested increase, or $680 million, would be 
        used for maintaining and enhancing missions. Marine safety and 
        security, the mission area that encompasses most of the Coast 
        Guard's homeland security activities, is slated to receive the 
        largest percentage increase in operating expenses of any 
        mission area--20 percent, or $180 million. The remaining 
        mission areas would each receive an increase over fiscal year 
        2002 levels of at least 12 percent. A substantial part of the 
        increase in each mission area would go to pay increases and 
        other entitlements, but we have not yet determined these 
        amounts.

    The Coast Guard faces substantial management challenges in 
        translating its requested funding increases into increased 
        service levels in its key mission areas. When the Coast Guard 
        received supplemental fiscal year 2002 funding after September 
        11th, it increased services by stretching available equipment 
        and personnel to the limit, according to Coast Guard personnel. 
        Additional cutters, aircraft, and patrol boats are not 
        immediately available. Workforce issues present a daunting 
        challenge: the Coast Guard will add an additional 2,200 full-
        time positions in the fiscal year 2003 \2\ (if the budget 
        request is approved), retain and build the expertise and skills 
        of its current workforce, and deal with issues of already high 
        attrition rates and looming civilian retirements. Finally, the 
        Coast Guard has not yet determined the level of security 
        required in the long term to protect the nation's major ports. 
        These challenges mean that in the short term giving the Coast 
        Guard additional funding does not immediately translate into an 
        increased ability to carry out its missions.
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    \2\ With funding provided in the Coast Guard's $209 million 
supplemental for fiscal year 2002, the agency plans to hire people 
during fiscal 2002 to fill 843 of the 2,200 positions.
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Background
    The Coast Guard, a Department of Transportation agency, is involved 
in seven main mission or program areas: (1) enforcing maritime laws and 
treaties, (2) search and rescue (3) aids to navigation, (4) marine 
environmental protection, (5) marine safety and security (including 
homeland security), (6) defense readiness, and (7) ice operations. Most 
of the Coast Guard's services are provided through a number of small 
boat stations, air stations, marine safety offices, and other 
facilities and assets located in coastal areas, at sea, and near other 
waterways like the Great Lakes. Its equipment in operation today 
includes 228 cutters, approximately 1,200 small patrol and rescue 
boats, and 200 aircraft.
    As an organization that is also part of the armed services, the 
Coast Guard has both military and civilian positions. At the end of 
fiscal year 2001, the agency had over 39,000 total full-time 
positions--about 33,700 military and about 5,700 civilians. The Coast 
Guard also has about 8,000 reservists who support the national military 
strategy and provide additional operational support and surge capacity 
during emergencies, such as natural disasters. Also, about 34,000 
volunteer auxiliary personnel assist in a wide range of activities 
ranging from search and rescue to boating safety education.
    Overall, after adjusting for the effects of inflation, the Coast 
Guard's total budget grew by 32 percent between fiscal years 1993 and 
2002. During nearly half this period, however, in real terms the budget 
was basically flat. As figure 1 shows, in constant 2001 dollars, the 
Coast Guard's budget remained essentially static from fiscal year 1993 
to 1998. Significant increases have occurred since fiscal year 1998.
Figure 1: Annual Budgets for the Coast Guard, Fiscal Years 1993--2002
(Dollars in Millions)



Note: Amounts are presented in 2001 dollars.
Source: GAO analysis of data provided by the Office of Management and 
Budget.

    The Coast Guard's initial budget request for fiscal year 2002, 
submitted early in 2001, represents a pre-September 11th picture of how 
the Coast Guard intended to operate. As figure 2 shows, law enforcement 
was by far the largest mission category, with budgeted expenses 
estimated at $1.47 billion, or about 43 percent of total operating 
expenses. Marine safety and security, at $456 million, was about 13 
percent of the total.\3\
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    \3\ Budget allocations such as these are estimates, not final 
amounts. The Coast Guard's accounting system does not track cost by 
program area, so there is no precise way to measure the extent to which 
actual expenditures in each program area mirror these budget allocation 
projections. Coast Guard officials note that as an agency with multiple 
missions, the Coast Guard must be flexible in shifting resources from 
one priority to another. This means that resources such as cutters may 
be projected for one mission but, depending on circumstances, actually 
be used for another more pressing need.
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Figure 2: Distribution of Budgeted Operating Expenses by Mission, 
        Fiscal Year 2002 Budget Request
(Dollars in Millions)



Source: GAO analysis of data provided by the United States Coast Guard.

    Following the events of September 11th, the Congress provided the 
Coast Guard with a supplemental appropriation of $209 million. After it 
received this additional amount, the Coast Guard revised the budget 
allocation for its various missions. As figure 3 shows, the revision 
produced a doubling of projected expenses for marine safety and 
security and smaller increases for aids to navigation and search and 
rescue. By contrast, projected expenses for law enforcement, ice 
operations, and marine environmental protection were reduced.

Figure 3: Comparison of Initial and Final Operating Expense Projections 
        by Mission, Fiscal Year 2002
(Dollars in Millions)



Source: GAO analysis of data provided by the United States Coast Guard.
Events of September 11th Substantially Affected Some Coast Guard 
        Missions
Protecting Port Facilities Became a Top Priority
    For the Coast Guard, the events of September 11th produced a 
dramatic shift in resources used for certain missions. The Coast Guard 
responded quickly to the attacks with a number of significant steps to 
ensure that the nation's ports remained open and operating. The Coast 
Guard relocated vessels, aircraft, and personnel from traditional 
missions--especially law enforcement--to enhance security activities. 
Subsequently, the Coast Guard has returned some of these resources to 
their more traditional non-security missions, but in some areas, it 
faces challenges in restoring the level of activity to what it had 
been.
    After September 11th, the Coast Guard responded by positioning 
vessels, aircraft, and personnel not only to provide security, but also 
to increase visibility in key maritime locations. Key actions taken 
included the following:

    Recalling all cutters that were conducting offshore law 
        enforcement patrols for drug, immigration, and fisheries 
        enforcement and repositioning them at entrances to such ports 
        as Boston, Los Angeles, Miami, New York, and San Francisco. The 
        Coast Guard also used smaller assets, such as patrol boats, 
        motor lifeboats, and aircraft, to supplement increased port 
        security activities. The smaller boats were used mainly for 
        conducting security patrols within port facilities and in fact, 
        became the port's ``cop on the beat,''\4\ according to Coast 
        Guard officials.
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    \4\ The Coast Guard reported that for some facilities there were 
requirements for conducting continuous 24-hour patrols, and this caused 
a great strain on both assets and personnel.

    Establishing a new National Vessel Movement Center to track 
        the movement of all foreign-flagged vessels entering U.S. ports 
        of call. The center is now the clearinghouse for vessel 
        information, such as type of cargo and crew manifest. All 
        commercial vessels over 300 gross tons are required to report 
        this information to the center 96 hours in advance of their 
        arrival. This information is then provided to the Coast Guard's 
        local marine safety offices, which use a risk-based decision 
        model to decide if a specific vessel is considered high 
        interest, thus requiring an escort or additional security and 
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        safety inspections or oversight.

    Implementing a series of limited risk assessments that 
        identified high-risk infrastructure and facilities within 
        specific areas of operation.\5\ These assessments, which were 
        done by Coast Guard marine safety office personnel at 
        individual ports, were the basis for deploying small boats for 
        security patrols inside harbors and focused on identified high-
        threat facilities.
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    \5\ Examples of high-risk infrastructure include fossil fuel 
processing and storage facilities, nuclear power plants, liquid natural 
gas transfer facilities, naval ships and facilities, cruise ships, and 
terminal facilities.

    Adopting a temporary regulation prohibiting any private 
        vessel from approaching within 100 yards of Navy ships without 
        permission. The Coast Guard is proposing that such a 
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        restriction become permanent.

     Activating and deploying the Coast Guard's port security 
        units \6\ to help support local port security patrols in high-
        threat areas. To maintain surge capacity and to deploy these 
        units overseas, the Coast Guard also formed five interim marine 
        security and safety teams, using full-time Coast Guard 
        personnel trained in tactical law enforcement and based in 
        Yorktown, Virginia. The Coast Guard is considering adding more 
        of these teams in the future.
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    \6\ The Coast Guard's port security units are specially trained 
reserve personnel that provide port security for U.S. Navy vessels 
deployed oversees.

    Recalling about 2,700 reservists to active duty. Today, 
        more than 1,800 are still on active duty. According to Coast 
        Guard officials, reservists have played a major role in 
        allowing the Coast Guard to respond to both its homeland 
        security and other mission functions. Their functions include 
        staffing boat crews and port security units and performing 
        administrative functions in place of active duty personnel who 
        were pressed into new responsibilities elsewhere.
Enhanced Security Activities Drew Resources From Other Missions
    The precise extent to which these responses changed the Coast 
Guard's allocation of mission resources cannot be determined, mainly 
because the Coast Guard is still gathering and analyzing the data. 
However, in our discussions with Coast Guard personnel, we were told 
that law enforcement activities, such as fisheries and counter drug 
patrols, saw the greatest reduction in actual services. For example:

    A number of Coast Guard districts have reported that 
        security activities have impacted their ability to conduct 
        fisheries enforcement missions, such as boarding of 
        recreational and commercial fishing vessels. For example, 
        District 1 \7\ reported a drop in fishing boat boardings in the 
        New England fishing grounds, from 300 in the first quarter of 
        fiscal year 2001 to just 38 during the first quarter of fiscal 
        year 2002. Also, law enforcement-related civil penalties and 
        fines were down substantially for the District as well.
---------------------------------------------------------------------------
    \7\ District 1 is headquartered in Boston, Massachusetts and is 
responsible for Connecticut, Massachusetts, Maine, New Hampshire, New 
Jersey, New York, Rhode Island, and Vermont.

    Districts also reported reduced drug interdiction efforts. 
        For example, prior to September 11th, District 11 \8\ would 
        send 110-foot patrol boats, which serve as the District's 
        primary boats for drug patrols, from Alameda to areas off the 
        southern California and Mexican shores. The District had to 
        eliminate these patrols when the boats were reallocated for 
        security functions.
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    \8\ District 11 is headquartered in Alameda, California and is 
responsible for Arizona, California, Nevada, and Utah.

    Some districts had to re-allocate personnel to specific 
        security activities. For example, District 13 \9\ reallocated 
        personnel from small boat stations along the Washington coast 
        to help implement added security measures in ports in Puget 
        Sound. District 13 staff reported that patrol boats and small 
        boats experienced a large increase in operational hours and 
        that Coast Guard personnel who were assigned to boat stations 
        experienced a marked increase in work hours from 60 to 80 hours 
        per week. Other districts reported similar strains on 
        personnel.
---------------------------------------------------------------------------
    \9\ District 13 is headquartered in Seattle, Washington and is 
responsible for Washington, Oregon, Idaho, and Montana.

    Although the Coast Guard drew resources from many mission areas, 
some areas were less negatively affected than law enforcement in 
continuing to meet mission requirements. For example, although the 
Coast Guard had to put search and rescue vessels and personnel into 
security roles, doing so did not negatively affect search and rescue 
activities or detract from saving lives, according to the Coast Guard. 
The main reason was that the terrorist attacks occurred when the 
busiest part of the search and rescue season was essentially over. In 
addition, during the initial response, there were no major storms and 
the weather was warmer, requiring less icebreaker services, search and 
rescue calls, and oil tanker escorts.
Some Resources Are Returning to Non-Security Missions, but Others Are 
        Not
    In an attempt to restore capabilities in its key mission areas, the 
Coast Guard has begun Operation NEPTUNE SHIELD, which has a goal of 
performing new enhanced security missions, while at the same time 
returning resources to other missions such as law enforcement, search 
and rescue, defense readiness, and marine safety. Also, in March 2002, 
the Coast Guard Commandant issued guidance \10\ that instructed his 
Atlantic and Pacific Area Commanders to plan and manage assets and 
personnel for long-term, sustainable operating tempos more in line with 
traditional mission functions, while still maintaining heightened 
security. Coast Guard officials from both the Atlantic and Pacific 
Areas have started implementing this guidance. As a result, deepwater 
cutters and aircraft are returning to traditional mission allocations 
but are still not at pre- September 11th levels. For example, because 
the Atlantic and Pacific areas each continue to allocate a deepwater 
cutter for coastal security patrols, the amount of time that will be 
spent on counter-drug and marine resources patrols is still below pre-
September 11th levels.
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    \10\ Operational and Marine Safety Mission Planning Guidance 
amended the fiscal year 2002 Law Enforcement Planning Guidance dated 
July 16, 2001 and COMDT COGARD Washington DC//G-M//P 042025Z of October 
1, 2001.
---------------------------------------------------------------------------
    While a return to the pre-September 11th activity pattern is under 
way for deepwater cutters, district patrol boats and small boats remain 
deployed closer to their post-September 11th levels. Because the Coast 
Guard has implemented a number of new security activities or has 
increased the level of normal port security activities, the Coast Guard 
has continued to use boats and personnel from small boats stations and 
other areas for security missions. These missions include performing 
security inspections of cargo containers and port facilities, escorting 
or boarding high-interest commercial vessels, escorting Navy ships and 
cruise ships, establishing and enforcing new security zones, and 
conducting harbor security patrols. To relieve or augment its current 
small boats now performing security functions, the Coast Guard plans to 
purchase 70 new homeland security response boats with supplemental 
funds appropriated for fiscal year 2002 and fiscal year 2003 
funding.\11\ According to the Coast Guard, these new boats will 
increase the capabilities of existing stations at critical ports, while 
others will provide armed platforms for the agency's newly established 
marine safety and security teams.
---------------------------------------------------------------------------
    \11\ The fiscal year 2002 supplemental appropriation provided funds 
to purchase 42 homeland security response boats. The fiscal year 2003 
request includes funding in the operating expenses account to purchase 
an additional 28 of these boats.
---------------------------------------------------------------------------
    One program, San Francisco's sea marshal program, illustrates the 
continued strain occurring at local ports. This program uses armed 
Coast Guard personnel to board and secure steering control locations 
aboard high-interest vessels. Implementing this program has affected 
the ability of the local Coast Guard office to accomplish its 
traditional missions in at least two ways, according to Coast Guard 
officials. First, the program has created new vessel boarding training 
needs for the sea marshal personnel. Second, the program requires the 
use of Coast Guard small boats in transporting sea marshals to vessels 
at assigned boarding points. This means that the Coast Guard must use 
small boats that are also being used for such missions as search and 
rescue and marine environmental protection, which will require further 
prioritizing and balancing of missions. Similar sea marshal programs 
are being implemented at other ports, such as Boston and Seattle, with 
similar impacts on other missions.
Fiscal Year 2003 Budget Request Reflects Changing Mission Priorities
    The fiscal year 2003 budget request of $7.3 billion would increase 
the Coast Guard's budget by about $1.9 billion, or 36 percent, over the 
fiscal year 2002 budget.\12\ More than $1.2 billion of this increase is 
for retirement-related payments for current and future retirees, 
leaving an increase of about $680 million for operating expenses, 
capital improvements, and other expenses. Funding for operating 
expenses for all of the Coast Guard's mission areas would increase from 
fiscal year 2002 levels. Under the Coast Guard's allocation 
formula,\13\ operating expenses for marine safety and security (the 
mission area that includes most homeland security efforts) would have 
the largest percentage increase--20 percent. Increases in other mission 
areas would range from 12 percent to 16 percent.
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    \12\ The Coast Guard's budget for fiscal year 2002 included both an 
initial budget of $5.2 billion and a supplemental appropriation of $209 
million for operating expenses. The supplemental appropriation was for 
expenses to respond to the September 11, 2001 terrorist attacks on the 
United States. Budget figures presented in the report are based on data 
provided by the Coast Guard.
    \13\ The Coast Guard uses a cost allocation model to apply dollars 
to mission resource hours. Direct, support, and overhead costs 
associated with each asset type are multiplied by the operation 
baseline (resource hours devoted to each mission area) to determine the 
allocation of operating costs across mission areas.
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Retirement Expenditures Account for Nearly Two-Thirds of the Budget 
        Increase
    The fiscal year 2003 budget contains a significant amount for 
retirement funding. In October 2001, legislation was proposed \14\ that 
would fully accrue the retirement costs of Coast Guard military 
personnel. This legislation directs that agencies fully fund the future 
pension and health benefits of their current workforce. Although this 
proposed legislation has not been enacted, the Coast Guard prepared its 
fiscal year 2003 budget to comply with these requirements.\15\ 
Excluding the amounts for retirement costs,\16\ the fiscal year 2003 
increase totals about $680 million, which represents a 13 percent 
increase over the Coast Guard's fiscal year 2002 budget.
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    \14\ ``Managerial Flexibility Act of 2001'' (S.1612).
    \15\ The Coast Guard's fiscal year 2002 budget did not include 
accruals.
    \16\ Retirement funding in the budget request includes a $736 
million payment to the Coast Guard's Military Retirement Fund and $496 
million included in the budget request for operating expenses, capital 
improvements, and other expenditures.
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Remaining Budget Request Would Increase Operating Expenditures for All 
        Mission Areas
    About $542 million of the requested $680 million increase is for 
operating expenses for the Coast Guard's mission areas.\17\ The 
requested amount for operating expenses represents an increase of 15 
percent over fiscal year 2002 levels. These expenses include such 
things as pay increases and other entitlements as well as new 
initiatives. Pay increases and military personnel entitlements in the 
fiscal year 2003 budget request total about $193 million or 36 percent 
of the requested increase for operating expenses. This leaves $349 
million for new mission-related initiatives and enhancements. As figure 
4 shows, all mission areas would receive more funding than in fiscal 
year 2002.
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    \17\ Most of the remainder of the $680 million increase would be 
for Acquisition, Construction, and Capital Improvements (AC&I)--the 
Coast Guard's capital expenditures budget. AC&I expenses would increase 
by nearly $89 million, an increase of 14 percent. About $48 million of 
the $680 million increase would be for other expenditures, which 
include such things as environmental compliance and restoration; 
reserve training; and research, development, testing, and evaluation.
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Figure 4: Comparison of Operating Expenses by Mission Area for Fiscal 
        Years 2002 Enacted and 2003 Requested.
(Dollars in Millions)



Source: GAO analysis of data provided by the United States Coast Guard.

    Projected increases in operating expenses would range from a high 
of 20 percent for the marine safety and security mission area to a low 
of 12 percent for the law enforcement mission area. (See table 1.) The 
Coast Guard stated that the increases are intended to improve the Coast 
Guard's capabilities in each respective mission area. For example, if 
fully funded, operating expenses for the search and rescue mission area 
would increase by 13 percent. According to Coast Guard officials, the 
Coast Guard has experienced staffing shortages, resulting in personnel 
working an average of 84 hours per week; therefore, if the budget 
request is fully funded, the Coast Guard intends to improve readiness 
at small boat stations by adding 138 new positions to reduce the number 
of hours station personnel must work each week.

   Table 1: Percentage Increase for Operating Expense by Mission Area,
 Fiscal Year 2003 Budget Request Compared to Fiscal Year 2002 (Enacted)
------------------------------------------------------------------------
                                                         Increase
------------------------------------------------------------------------
                                                   Dollars
                  Mission Area                       (in      Percentage
                                                  millions)
------------------------------------------------------------------------
Law enforcement................................        131.5          12
Aids to navigation.............................         94.3          15
Marine safety and security.....................        180.5          20
Search and rescue..............................         59.2          13
Marine environmental protection................         45.5          16
Ice operations.................................         17.3          16
Defense readiness..............................         14.1          15
------------------------------------------------------------------------
Source: GAO analysis of data provided by the United States Coast Guard.

    In line with the Coast Guard's relatively new responsibilities for 
homeland security, the marine safety and security area would receive 
the largest portion of the operating expenses increase. The levels of 
funding requested for the maritime security area would allow the Coast 
Guard to continue and enhance homeland security functions, begun in 
2002, aimed at improving the security of the nation's ports, waterways, 
and maritime borders. New security initiatives to be undertaken in 
fiscal year 2003 include programs to build maritime domain 
awareness,\18\ ensure controlled movement of high-interest vessels,\19\ 
enhance presence and response capabilities, protect critical 
infrastructure, enhance Coast Guard force protection, and increase 
domestic and international outreach. For example, to enhance presence 
and response capabilities, the Coast Guard intends to spend $12.7 
million to establish two additional deployable maritime safety and 
security teams, which are mobile law enforcement and security 
specialists that can be used in various regions during times of 
heightened risk. These teams would be added to the four teams already 
established with funds from the fiscal year 2002 supplemental 
appropriation. Other new security initiatives would largely be funded 
from the operating expenses appropriation.\20\ Table 2 provides a 
detailed breakdown of the cost of each of the proposed security 
measures.
---------------------------------------------------------------------------
    \18\ Maritime domain awareness is the real-time tracking of 
vessels, people, and cargo. The Coast Guard plans to increase 
intelligence efforts in ports and improve advanced information on 
passengers, crew, and cargo.
    \19\ High-interest vessels are vessels that may pose a threat to 
the United States or that require a heightened level of security. For 
example, naval vessels or vessels carrying hazardous materials would be 
considered high interest vessels.
    \20\ A portion of this funding, $9.4 million, would come from the 
AC&I appropriation. This would fund the Maritime Domain Awareness 
Information Management initiative, which is intended to enhance the 
Coast Guard's information management capabilities and improve its 
ability to collect, analyze, and disseminate information.

Table 2: Homeland Security Strategies and Initiatives in the Fiscal Year
                           2003 Budget Request
                          (Dollars in millions)
------------------------------------------------------------------------
                                                             Amount  (in
           Strategy                 Security Initiative       millions)
------------------------------------------------------------------------
Build maritime domain          Improve communications and          $34.4
 awareness                      connectivity
                               Improve information and              26.1
                                investigations capability
------------------------------------------------------------------------
Ensure controlled movement of  Maritime escort and safety           18.5
 high interest vessels          patrols
------------------------------------------------------------------------
Enhance presence and response  Maritime Safety and Security         47.5
 capabilities                   Teams
------------------------------------------------------------------------
Protect critical               Chemical, biological and             17.5
 infrastructure and enhance     radiological
 Coast Guard force protection   countermeasures
                               Critical infrastructure              11.2
                                protection
                               Firearms and ammunition               9.1
------------------------------------------------------------------------
Increase domestic and          Security readiness and               21.5
 international outreach         planning
                               Incident command system               2.3
------------------------------------------------------------------------
    Total fiscal year 2003     ............................       $188.1
     new initiatives
------------------------------------------------------------------------
Source: United States Coast Guard Fiscal Year 2001 Performance Report
  and Fiscal Year 2003 Performance Plan.
Note: Figures may not add up to total due to rounding.

Coast Guard Faces Difficult Budget and Management Challenges
    While the fiscal year 2003 budget request provides funding 
increases for every mission area, these increases alone may not return 
all of its missions to levels that existed prior to September 11th. The 
Coast Guard faces other daunting budget and management challenges and 
unknowns as it strives to achieve its new mission priorities and 
maintain its core missions at desired levels. The most serious 
challenges are as follows:

    The Coast Guard is now at or near its maximum sustainable 
        operating capacity in performing its missions. The agency has a 
        finite set of cutters, boats, and aircraft to use in performing 
        its missions, and according to Coast Guard officials, these 
        assets, particularly the cutters, are now being operated at 
        their maximum capabilities. In fact, officials in some 
        districts we visited said that some of the patrol boats and 
        small boats are operating at 120 to 150 percent of the levels 
        they normally operate. Significantly increasing the numbers of 
        its cutters, boats, and aircraft is not feasible in the short 
        term. Adding new deepwater cutters and aircraft, for example, 
        is years away as are new motor lifeboats to replace the aging 
        41-foot boats, which have been the mainstay of harbor security 
        patrols in recent months. Also, according to officials in 
        various Coast Guard units, many personnel are also working long 
        hours even now, six months after the terrorist attacks.

    The Coast Guard does not yet know the level of resources 
        required for its ``new normalcy''--the level of security 
        required in the long term to protect the nation's major ports 
        and its role in overseeing these levels. Until the Coast Guard 
        completes comprehensive vulnerability assessments at major U.S. 
        ports and the Congress decides whether or not to enact proposed 
        port security legislation,\21\ the Coast Guard cannot define 
        the level of resources needed for its security mission. Also, 
        the full extent of the demands on its resources to deal with 
        all of its missions may not have been fully tested. In terms of 
        its ability to respond to port security functions, the Coast 
        Guard was fortunate in the timing of the terrorist attacks. For 
        example, the busiest part of the search and rescue season was 
        essentially over, and the agency was able to redeploy search 
        and rescue boats from stations during the off-season to perform 
        harbor security functions. The cruise ship season was over in 
        many locations, requiring fewer Coast Guard escorts for these 
        vessels. There were no major storms, and the weather has been 
        warmer--requiring less icebreaking services, search and rescue 
        calls, and oil tanker escorts. Also, there were no major 
        security incidents in our nation's ports. A major change in any 
        or a series of these events could mean major adjustments in 
        mission priorities and performance.
---------------------------------------------------------------------------
    \21\ Pending legislation (S. 1214 and H.R. 3437) proposed a number 
of security measures for U.S. seaports. Major provisions of these bills 
would require heavy involvement by the Coast Guard in conducting 
vulnerability assessments at 50 U.S. ports, reviewing port security 
plans, developing seaport security standards, and making loan 
guarantees and authorizing grants for port security improvements.

    The Coast Guard faces a host of human capital challenges in 
        managing its most important resource--its people. Even before 
        September 11, 2001, the Coast Guard saw signs of needed reform 
        in its human resources policies and practices. Attrition rates 
        among military and civilian employees are relatively high, and 
        about 28 percent of the agency's civilian employees are 
        eligible to retire within the next five years. Budget 
        constraints during the last decade had led to understaffing and 
        training deficiencies in some program areas. For example, a 
        recent study \22\ of the Coast Guard's small boat stations 
        showed that the agency's search and rescue program is 
        understaffed, personnel often work over 80 hours each week, and 
        many staff are not fully trained. All of these challenges have 
        been exacerbated by new challenges added since September 11th. 
        As a result of its new emphasis on homeland security, the Coast 
        Guard plans to hire over 2,200 new full-time positions to its 
        workforce and increase its pool of reservists by 1,000 if its 
        funding request is approved--putting added strain on its 
        recruiting and retention efforts. While the Coast Guard has 
        embarked on a strategy to address these issues, many of its 
        human capital initiatives are yet to be developed or 
        implemented.
---------------------------------------------------------------------------
    \22\ Report on Audit of the Small Boat Station Search and Rescue 
Program, United States Coast Guard (MH-2001-094, September 14, 2001), 
U.S. Department of Transportation, Office of Inspector General.

    Other needs that have been put on the ``back burner'' in 
        the fiscal year 2003 request may require increased attention--
        some rather soon. For example, sizeable capital improvements 
        for shore facilities may be required in the near future, and 
        required funding for this purpose could be considerable. For 
        example, it appears that the agency reduced the fiscal year 
        2003 budget request for this budget item to fund other 
        priorities. In last year's capital plan, the Coast Guard 
        estimated that $66.4 million would be required in fiscal year 
        2003 for shore facilities and aids to navigation. However, the 
        fiscal 2003 budget request seeks only $28.7 million, a 
        significant disparity from last year's estimate. Other 
        priorities, such as funding for the Deepwater Project and the 
        National Distress System, will consume much of the funding 
        available for its capital projects for years to come. Coast 
        Guard officials said that while they still face the need for 
        significant capital projects at their shore facilities, they 
        are taking steps in the fiscal year 2003 budget request to 
        improve the agency's maintenance program in an effort to 
---------------------------------------------------------------------------
        forestall the need for capital projects at these facilities.

    In conclusion, to its credit, the Coast Guard has assumed its 
homeland security functions in a stellar manner through the hard work 
and dedication of its people. It has had to significantly adjust its 
mission priorities, reposition and add to its resources, and operate at 
an intense pace to protect our nation's ports. Now, six months after 
the terrorist attacks, the agency is still seeking to define a ``new 
normalcy''--one that requires a new set of priorities and poses new 
challenges. By seeking increases in each of the agency's mission areas, 
the fiscal year 2003 budget request is an attempt to provide the Coast 
Guard with the resources needed to operate within this environment. But 
particularly in the short term, increased funding alone is not 
necessarily the answer and is no guarantee that key Coast Guard 
missions and priorities will be achieved. In fact, because of the 
formidable challenges the Coast Guard faces today--particularly the 
finite numbers of cutters, boats, and aircraft it has available in the 
short run and its significant human capital issues--the Coast Guard 
will likely have to continue to make significant trade-offs and shifts 
among mission areas until it develops clear strategies to address its 
new mission environment.
    Mr. Chairman, this concludes my testimony. I will be happy to 
respond to any questions you or other Members of the Subcommittee may 
have.
                                 ______
                                 
                   Appendix I: Scope and Methodology

    To determine the nature of the Coast Guard's shift from traditional 
core missions to its new security functions for homeland security, we 
interviewed Coast Guard officials and reviewed relevant documents 
regarding the reallocation of Coast Guard resources. Coast Guard 
interviews involved personnel from Headquarters, Atlantic Area Command, 
Pacific Area Command, District 1, District 5, District 11, District 13, 
and a variety of group and small boat station personnel under these 
commands. These officials provided examples of post-September 11th 
activities and the operational status of assets and personnel. We 
gathered information on asset planning and operations from the Coast 
Guard's Abstract of Operations and the Commandant's Fiscal Year 2002 
Law Enforcement Planning Guidance.
    To evaluate the Coast Guard's efforts to fund enhanced security 
missions and increase funding for all other Coast Guard missions beyond 
fiscal year 2002 levels, we examined relevant budget and performance 
documents including the Coast Guard's Fiscal Year 2003 Budget in Brief 
and the Coast Guard's Fiscal Year 2001 Performance Report and Fiscal 
Year 2003 Performance Plan. We interviewed Coast Guard officials within 
the Office of Programs regarding proposed legislation establishing an 
accrual funding system, the Coast Guard's method of allocating 
operating costs across mission areas, and the fiscal year 2003 budget 
request. Analysis of changes in the Coast Guard budget is made more 
difficult by the fact that funds from the emergency supplemental were 
made available at different times.
    To identify substantial management challenges that the Coast Guard 
will face translating these budget request increases into increased 
service levels, we relied on previous GAO work. We also interviewed 
Coast Guard Headquarters and field personnel regarding the Coast 
Guard's ability to establish a sustainable operating tempo, develop and 
implement new security requirements and port security assessments, 
manage and plan for major increases its workforce, and funding requests 
for capital improvements at shore facilities.

    Senator Kerry. Thank you very much, Ms. Hecker.
    Mr. Mead, welcome back.

      STATEMENT OF HON. KENNETH MEAD, INSPECTOR GENERAL, 
                  DEPARTMENT OF TRANSPORTATION

    Mr. Mead. Thank you, Mr. Chairman, Senator Snowe.
    I would like to begin by saluting my colleague Admiral Loy, 
both for being a great colleague and for being responsive to 
issues the IG has raised. I would also like to thank him for 
his quiet leadership within the Department in other areas 
beyond the Coast Guard. I look back to Y2K and think that Jim 
Loy deserves a lot of credit for the Department's ability to 
make it through that period.
    I know that a lot of you have talked about security. By our 
reckoning before September 10th about 14 percent of the Coast 
Guard's resources were going there. After September 11th 
security went up to about 58 percent of Coast Guard's 
resources. I think they are moving back to about a 27 percent 
level.
    I also want to talk about the search and rescue program and 
two of the Coast Guard's major acquisitions, the Deepwater 
Project and the National Distress ``9-1-1'' system.
    First, search and rescue. You will probably recall that 
last year we finalized a report to the Coast Guard on the 
readiness of its small boat stations, which represent the first 
line emergency responder for mariners in distress.
    I would just like to review what we found. Approximately 
one-third of station billets were either vacant or filled by 
personnel that were not qualified for boat duty. There was no 
formal entry-level training program for key staff. Many of the 
staff came directly from boot camp. Equipment at the stations 
was often in a state of disrepair and a very substantial 
percentage of the small boats were not, by the Coast Guard's 
own reckoning, at that time ready for sea.
    The Coast Guard responded to our report with a very 
credible plan that we think will be responsive to our 
recommendations. The key now lies in the plan's execution. 
Congress gave the Coast Guard a plus-up in the budget for the 
search and rescue program. They also required us to conduct an 
audit to ensure the plus-up supplements, and does not supplant, 
what they were already spending.
    You should know that the small boat stations also perform a 
port security role. People we have spoken to tell us that that 
is also placing an enormous strain on their resources. So you 
have the same people who were already strained with search and 
rescue program also performing security. It is unclear to us 
what this means for the long-term implementation of the Coast 
Guard's plan for addressing our recommendations. We know they 
intend well, but I think there needs to be a lot of sorting out 
over the coming year in terms of what is actually being done.
    I would like to now address the major acquisition projects. 
The Coast Guard is approaching an important crossroads with 
Deepwater, which is the largest acquisition in Coast Guard's 
history. The project will easily be over $10 billion and 
probably take more than 20 years. More recently we have learned 
that it could run to 30 years. Another major acquisition is the 
National Distress System project.
    As an overarching observation about both of these projects 
is that they consume a large part of the acquisition budget. As 
a matter of fact, the 5-year capital plan for the Coast Guard 
has zero capital funding allocated for shore facilities and 
aids for navigation for FY 04 and FY 05, and that includes 
family housing. I do not think that that is a sustainable 
level, but it is occurring because available funds are being 
absorbed by these big projects.
    Regarding Deepwater, this is the second year that Congress 
will be asked to appropriate funding for Deepwater. It should 
also be this year that you find out what exactly will be 
acquired, at what price, and when those assets will be 
acquired. You should expect that information in the third 
quarter of this year.
    Another big factor you should expect to find out is whether 
this is going to be a 20- or 30-year procurement, and what 
implications that has for the funding stream that will be 
needed. We thought that it was going to be about $500 million 
for 20 years. If it goes more than 20 years, does that mean 
that the first 20 will be less than $500 million? Or, does that 
mean $500 million for however long this project is going to 
take?
    The National Distress System is the ``9-1-1'' system where 
mariners in distress call the Coast Guard for search and 
rescue. The current system that the Coast Guard is replacing 
has many deficiencies. I would like to show you a chart. There 
are about 88 communications coverage gaps--put up the one of 
the United States, please.
    Senator Kerry. He has already got it up there.
    Mr. Mead. OK, he has got it up there.
    Those red and green dots indicate dead zones. There are 
about 88 of them covering 21,500 nautical miles, where the 
Coast Guard cannot hear mariners. They are trying to eliminate 
those gaps. I have a list of where they are, for everybody that 
is on the committee, if you care for that.
    This smaller chart shows the coastline along Massachusetts 
and Rhode Island. The red area indicates a dead zone off of 
Rhode Island. There is also a red dot off of Massachusetts that 
is a dead zone. As you can see, Massachusetts does relatively 
better than Rhode Island. You can do these cutaways for the 
entire United States.
    Now, the concern that we have is that, while the system the 
Coast Guard is procuring will be a vast improvement over the 
current system, they originally estimated that it would cost a 
lot less than the contractors estimated. The contractors came 
in and said a billion dollars to do everything Coast Guard 
wanted to do. So in order to control the cost, the Coast Guard, 
is settling for some specifications that will not close all 
those gaps. The problem is I do not know what gaps will be left 
or where they will be, and I would like to know what those will 
be before we put the system design totally to bed.
    The other concern is the mean time that will be allowed to 
repair the system when it goes down. Originally it was 6 hours 
but now it has gone to a maximum of 24 hours. I am afraid that 
if you got caught up in a tragedy or a disaster or capsized 
during that 24-hour period, that could be a very long time to 
wait for rescue.
    That concludes my statement, Mr. Chairman.
    [The prepared statement of Mr. Mead follows:]

        Prepared Statement of Kenneth Mead, Inspector General, 
                      Department of Transportation
    Mr. Chairman and Members of the Subcommittee:
    We appreciate the opportunity to discuss Coast Guard's budget and 
management issues. We have identified balancing Coast Guard's missions 
and budget needs in light of post September 11 priorities as 1 of the 
top 10 management challenges in the Department of Transportation.
    The Coast Guard is seeking a significant increase in its budget to 
be able to deal with an expanded security mission, perform its other 
major missions, and proceed with an extraordinary set of important 
major acquisitions. The budget will increase from $5.4 billion in 
fiscal year (FY) 2002 to $7.3 billion in FY 2003. There are currently a 
number of uncertainties about Coast Guard mission requirements, how it 
will execute major acquisition projects, and control costs.
    Coast Guard needs an effective cost accounting system that meets 
Federal accounting standards to provide a basis for accurately 
measuring the costs of specific activities and making decisions about 
where to apply resources. Without such a system, Coast Guard cannot 
provide detailed information concerning the allocation of resources or 
the true operating costs of specific missions.
    My testimony today will address three areas.
    First, the budget request for 2003. Coast Guard is seeking an 
increase of $1.9 billion for FY 2003. A large portion of the increase 
is $736 million for a required payment to Coast Guard's military 
retirement fund. Two other categories, operating expenses (up by $1 
billion) and acquisitions (up by $99 million), account for most of the 
remaining increase. The increase in Coast Guard's operating capacity is 
not as large as it appears. About two-thirds of the increase will pay 
for entitlements and other inflationary adjustments and not add to 
operating capacity. The other one-third of the increase will fund the 
operation of new assets, such as seagoing buoy tenders and coastal 
patrol boats, continue increased security operations begun after 
September 11th, and fund new security operations.
    Immediately after September 11th, Coast Guard devoted 58 percent of 
its resources to port safety and security, while deployment to other 
core missions fell. For FY 2003, Coast Guard plans to dedicate 27 
percent of its resources to port safety and security programs. This is 
roughly twice the amount that Coast Guard planned to dedicate to these 
missions for FY 2002 prior to September 11th. The relative amount of 
resources Coast Guard plans to devote to drug interdiction and 
fisheries enforcement in FY 2003 is expected to decrease from planned 
FY 2002 levels. Coast Guard views its FY 2003 budget request as the 
initial phase of a 3-year plan to enhance its homeland security 
missions while still conducting other diverse missions that remain 
national priorities. It is not clear to us if Coast Guard intends to 
request additional increases in FYs 2004 and 2005 to support this plan.
    Second, the Search and Rescue program. Last year we reported that 
the readiness of the Coast Guard's small boat station search and rescue 
program was declining because it did not have sufficient numbers of 
qualified personnel, a formal training program for key staff, and 
equipment that was up to standards. Coast Guard developed a strategic 
plan to improve readiness and the Congress provided $14.5 million for 
FY 2002 for added search and rescue program personnel and equipment. We 
have been directed to audit Coast Guard's use of these added funds and 
certify that the $14.5 million supplements and does not supplant Coast 
Guard's level of effort in this area in FY 2001. The FY 2003 budget 
proposal seeks $22 million to follow through on Search and Rescue 
program enhancements such as adding crew members to the 47-foot motor 
life boats and procuring small search and rescue boats.
    Small boat stations are also playing a key role in port security 
activities since September 11th. More than half of all station hours 
are currently devoted to port security and operating tempo has 
increased significantly. Given the emphasis on security missions, it is 
unclear whether Coast Guard has implemented its plan to address the 
Search and Rescue program deficiencies we identified. As part of our 
audit to certify the use of FY 2002 funds, we will determine the status 
of Coast Guard actions to address the deficiencies identified in our 
prior audit report.
    Third, major acquisition projects. The FY 2003 budget seeks $590 
million for Coast Guard's two largest acquisition projects, the 
Deepwater Capability Replacement and the National Distress and Response 
System Modernization. Both projects are critical to improving Coast 
Guard's operations, but both also have significant uncertainties that 
the Subcommittee should expect to see resolved this fiscal year. Coast 
Guard, the Department's Deputy Secretary, and the Director of OMB have 
certified to congress that the FY 2003 5-year capital investment plan 
contains full funding for the Deepwater, NDS, and other essential 
search and rescue procurements.

    Deepwater--This is the second year that the Congress is 
        being asked to appropriate procurement funding for the 
        Deepwater project without a detailed cost and schedule 
        estimate. If the Congress appropriates the $500 million Coast 
        Guard is seeking for 2003, it will have $790 million available 
        for the procurement phase of the project. Given the acquisition 
        approach that Coast Guard is using, reliable estimates that 
        describe what assets will be modernized or replaced, at what 
        cost, when that will occur, and when funding will be required, 
        will not be available until after a contractor is selected. The 
        selection is currently scheduled for the third quarter of FY 
        2002.
       Another area of uncertainty is how long the project will take to 
        complete. Although Coast Guard originally stated this would be 
        a 20-year project, the request for proposals states that the 
        performance period for the contract could be up to 30 years. It 
        is not clear to us whether this means that (1) previously 
        planned annual funding levels will remain the same and result 
        in increased cost, or (2) the planned annual funding levels 
        will be spread out and reduce the level of funding required 
        each year.

    National Distress and Response System (NDS)--Coast Guard 
        has increased its estimate for the NDS project the 911 system 
        for mariners in distress from $300 million to $580 million and 
        it is seeking $90 million in the FY 2003 budget to begin 
        procurement. If the Congress appropriates the $90 million Coast 
        Guard is seeking for FY 2003, it will have $125 million 
        available for the procurement phase of the project.
       The current system has many deficiencies including more than 88 
        communication coverage gaps, totaling 21,490 square nautical 
        miles along the U.S. coastline where Coast Guard cannot hear 
        mariners. The revised system will provide a significant 
        improvement over the existing system.
       However, we are concerned that Coast Guard reduced or eliminated 
        capabilities in the revised system that it initially considered 
        essential. This occurred because Coast Guard reduced 
        performance specifications after contractors estimated that a 
        system meeting Coast Guard requirements would cost more than $1 
        billion. As a result of the reduced performance specifications, 
        the revised system will still contain gaps in communication 
        coverage. Because the acquisition strategy being used on NDS is 
        following the same approach as that used on Deepwater, the 
        number, size, and location of the gaps will not be known until 
        a contractor's system is selected. Also, the time allowed to 
        restore critical functions, if the system becomes unavailable, 
        has been increased from 6 to 24 hours. However, at some time in 
        the future, Coast Guard may have to upgrade the system to 
        provide some or all of the capabilities that were to be 
        provided by the $1 billion system. We have recommended that 
        Coast Guard develop an acquisition plan that includes cost and 
        schedule estimates for upgrading the system to provide these 
        capabilities.

Coast Guard's Budget Request Represents a 35.6 Percent Increase
    Coast Guard's FY 2003 budget request seeks an increase of $1.9 
billion or 35.6 percent over the FY 2002 budget. As shown in the 
following table, most of the increase is in three categories: operating 
expenses; acquisition, construction, and improvements; and military 
retirement fund payment.

                   Comparison of Coast Guard's FY 2002 Budget With Its FY 2003 Budget Proposal
                                                     ($ 000)
----------------------------------------------------------------------------------------------------------------
                                                                               FY 2003
                                                                  FY 2002    President's     Change     Percent
                                                                  Enacted       Budget                   Change
----------------------------------------------------------------------------------------------------------------
Operating Expenses............................................   $3,591,150   $4,635,268   $1,044,118       29.1
----------------------------------------------------------------------------------------------------------------
Acquisition, Construction and Improvements (AC&I).............      636,354      735,846       99,492       15.6
----------------------------------------------------------------------------------------------------------------
Environmental Compliance and Restoration......................       16,927       17,286          359        2.1
----------------------------------------------------------------------------------------------------------------
Alteration of Bridges.........................................       15,466            0      -15,466       -100
----------------------------------------------------------------------------------------------------------------
Retired Pay...................................................      876,346
Coast Guard Military Retirement Fund..........................  ...........      889,000       12,654        1.4
----------------------------------------------------------------------------------------------------------------
Reserve Training..............................................       83,194      112,825       29,631       35.6
----------------------------------------------------------------------------------------------------------------
Research, Development, Test and Evaluation....................       20,222       23,106        2,884       14.3
----------------------------------------------------------------------------------------------------------------
Oil Spill Recovery............................................       61,200       61,200            0        0.0
----------------------------------------------------------------------------------------------------------------
Boating Safety................................................       64,000       64,000            0        0.0
----------------------------------------------------------------------------------------------------------------
Gift Fund.....................................................           80           80            0        0.0
                                                               -------------------------------------------------
    Sub Total.................................................    5,364,939    6,538,611    1,173,672       21.9
----------------------------------------------------------------------------------------------------------------
Payment to Coast Guard Military Retirement Fund...............  ...........      736,000      736,000        N/A
                                                               -------------------------------------------------
    Total.....................................................   $5,364,939   $7,274,611   $1,909,672       35.6
----------------------------------------------------------------------------------------------------------------

    The increase includes approximately $736 million for payment to 
Coast Guard's military retirement fund consistent with legislation 
proposed in October 2001 by the Administration. The $736 million will 
fund the future retirement benefits of current Coast Guard uniformed 
personnel. The $889 million funding item in the above table for the 
Coast Guard Military Retirement Fund finances payments to existing 
retirees.
    The FY 2003 budget request also includes $4.6 billion for Coast 
Guard operations and $736 million for acquisitions. Operating expenses 
and acquisition funding have increased approximately $1 billion and $99 
million, or 29 percent and 16 percent, respectively, over FY 2002. 
About two-thirds of this increase will fund entitlements, such as pay 
raises, health care costs, and other inflationary adjustments. The 
remaining one third will fund the purchase and operation of new 
assets--such as those included in the Deepwater and NDS projects--
continue increased security operations begun after September 11th, and 
fund new and enhanced operations, including port security. Funding for 
new security initiatives includes $48 million for marine safety and 
security team; $19 million for maritime escorts and safety patrols; $60 
million for enhanced communications, information, and investigations, 
and $37 million for force protection.

The FY 2003 Budget Seeks to Balance Current Priorities With Coast 
        Guard's Multiple Missions
    In response to the September 11th attacks, Coast Guard deployed 58 
percent of its resources to port safety and security missions. These 
resources included its fleet of rescue boats at small boat stations 
around the country. The redeployment, however, came at the expense of 
other important core missions including drug interdiction and Living 
Marine Resources (LMR) patrols (fisheries enforcement). For example, 
resources deployed to drug interdiction fell from approximately 18 
percent to 7 percent. In Coast Guard's First District, no Living Marine 
Resources (LMR) patrols were conducted between September 11 and 
December 31, 2001. The First District estimates the number of patrol 
days devoted to LMR missions through the end of FY 2002 will be down at 
least 50 percent compared to historical averages. Other missions such 
as recreational boating safety, aids to navigation, commercial fishing 
vessel safety, and migrant interdiction were also hard hit.
    For FY 2003, Coast Guard plans to use 27 percent of its operating 
expense budget for port safety and security programs. This is roughly 
twice the amount that Coast Guard planned to dedicate to these missions 
for FY 2002 prior to September 11th. To help fund the increased port 
safety and security program, Coast Guard will continue reduced levels 
of activity in other missions such as drug interdiction and fisheries 
enforcement. The following chart shows the resources projected to be 
used for major missions during FY 2003 compared to FY 2002. Because the 
amount of operating funding is different in each year, the change 
reflects the difference in the relative amount of resources projected 
by mission.

                    U.S. Coast Guard Mission Profile
     Percent of Planned Operating Expenses Budget by Major Programs
------------------------------------------------------------------------
                Program                   FY 2002    FY 2003     Change
------------------------------------------------------------------------
Programs Increased in FY 2003
------------------------------------------------------------------------
Marine Safety                                  14*          5        +13
Ports, Waterways, and Coastal Security                     22
------------------------------------------------------------------------
Aids to Navigation                               5         17         +2
------------------------------------------------------------------------
Defense Readiness                                2          3         +1
------------------------------------------------------------------------
Programs Unchanged in FY 2003
------------------------------------------------------------------------
Search and Rescue                               12         12          0
------------------------------------------------------------------------
Programs Decreased in FY 2003
------------------------------------------------------------------------
Ice Operations                                   4          3         -1
------------------------------------------------------------------------
Other Law Enforcement                            3          2         -1
------------------------------------------------------------------------
Migrant Interdiction                             5          4         -1
------------------------------------------------------------------------
Marine Environmental Protection                 11          8         -3
------------------------------------------------------------------------
Living Marine Resources                         16         11         -5
------------------------------------------------------------------------
Drug Interdiction                               18         13         -5
------------------------------------------------------------------------
*Combined in FY 2002

    The Coast Guard is in the process of balancing its enhanced port 
safety and security mission requirements with its other missions. 
According to Coast Guard, the FY 2003 budget request represents the 
initial phase of a 3-year plan to address its needs. The Coast Guard's 
goal is to enhance all of its homeland security missions while still 
conducting other diverse missions that remain national priorities. It 
is not clear to us if Coast Guard intends to request additional 
increases in FYs 2004 and 2005 to support this plan.
    The changes in Coast Guard's mission structure have impacted its 
operating and capital requirements and emphasize the need for a 
comprehensive cost accounting system. Although Coast Guard began 
developing a cost accounting model in 1997, it does not have a cost 
accounting system that meets the Federal managerial cost accounting 
standards. The cost accounting model contains only Coast Guard 
operating expenses and does not address acquisition, environmental 
compliance, retirement pay, reserve training, or research and 
development costs. Coast Guard must obtain a cost accounting system 
that includes all costs if it wants to make informed decisions 
concerning the allocation of its limited resources.

FY 2003 Budget Continues Efforts to Address Deficiencies in the Small 
        Boat Station Search and Rescue Program
    Coast Guard's small boat station Search and Rescue program provides 
the first line of response for mariners in distress. During FY 2000, 
the 188 small boat stations responded to approximately 40,000 calls for 
help and saved over 3,300 lives.
    As we reported to you last year, the small boat station Search and 
Rescue (SAR) program was suffering from serious staffing, training, and 
equipment problems that go back more than 20 years. Our findings were:

    staff shortages required personnel at 90 percent of the SAR 
        stations to work an average of 84 hours per week;

    high attrition rates among enlisted personnel were 
        impacting experience levels at small boat stations;

    70 percent of vacant positions at small boat stations were 
        filled with Coast Guard boot camp graduates with little or no 
        training in seamanship, piloting and navigation, small boat 
        handling, water survival, or search and rescue techniques;

    there was no formal training for boatswain's mates, who are 
        key SAR staff and one of the largest of the Coast Guard's 
        enlisted job specialties;

    84 percent of the standard rescue boat fleet inspected by 
        the Coast Guard in FY 2000 were found to warrant a .Not Ready 
        for Sea. evaluation; and

    Coast Guard had not requested funding to replace or extend 
        the useful life of its 41-foot utility boat fleet, which is 
        reaching the end of its service life.

    In response to our recommendations, Coast Guard initiated a multi-
year strategy to improve readiness at small boat stations. For example, 
during FY 2002, Coast Guard added 199 billets to support station 
operations and is in the process of expanding training opportunities 
for station boatswain's mates. In its FY 2002 supplemental funding 
request, Coast Guard received an additional 54 billets and funding to 
purchase 18 port security boats to augment station port security 
operations.
    In DOT's FY 2002 Appropriations Act, Congress directed Coast Guard 
to use $14.5 million to add personnel, purchase personnel protection 
equipment, and begin the process of replacing its aging 41-foot utility 
boat fleet. We have been directed to audit and certify that the $14.5 
million supplements and does not supplant Coast Guard's level of effort 
in this area in FY 2001. The FY 2003 budget proposal seeks $22 million 
to follow through on SAR program enhancements, such as adding crew 
members to the 47-foot motor life boats and procuring small search and 
rescue boats.
    In December 2001, the Coast Guard briefed us on its strategic plan 
for the small boat station SAR program. The plan identified actions to 
address the deficiencies found during our audit by, for example, adding 
personnel at stations to reduce the hours crew members are on duty and 
to provide administrative support to station management, freeing up 
management to train and certify crew members. Coast Guard also plans to 
open a formal school for training aspiring boatswain's mates, provide 
additional training opportunities for its small boat coxswains, and 
establish traveling small boat training teams to ensure station boat 
crews have the critical skills to safely and efficiently perform search 
and rescue missions. Coast Guard also plans to enhance personal 
protective clothing inventories to ensure all active duty, reservists, 
and auxiliary personnel are protected from the environment. Coast Guard 
is also working to replace the 41-foot utility boat fleet.
    Since September 11th, the operating tempo at small boat stations 
more than doubled as they responded to support port safety and security 
efforts while maintaining a successful search and rescue capability. 
More than half of all station hours are now devoted to the port 
security mission. In addition, Coast Guard called up reservists and 
enlisted the Coast Guard auxiliary to support the port security 
mission. This mission includes: enforcing security/safety zones around 
high-risk vessels, oil/gas/chemical terminals, and power plants; 
conducting harbor patrols; providing round-the-clock force protection 
around U.S. Navy and Coast Guard vessels and facilities; escorting 
high-risk vessels in and out of ports, and transporting sea marshals 
and boarding teams to and from vessels. Given the emphasis on security 
missions, it is unclear whether Coast Guard has implemented its plan to 
address the Search and Rescue program deficiencies we identified. As 
part of our audit to certify the use of FY 2002 funds, we will 
determine the status of Coast Guard actions to address the deficiencies 
identified in our prior audit report.

Acquisition, Construction, and Improvements Budget Provides a 
        Significant Funding Increase for NDS and Deepwater
    The FY 2003 budget request seeks an acquisition funding increase of 
$99 million (16 percent) to $736 million. The funding request includes 
$90 million and $500 million for the NDS and Deepwater projects, 
respectively. As proposed, the NDS and Deepwater projects account for 
80 percent of Coast Guard's capital budget for FY 2003. Coast Guard, 
the Department's Deputy Secretary, and the Director of OMB have 
certified to congress that the FY 2003 5-year capital investment plan 
contains full funding for the Deepwater, NDS, and other essential 
search and rescue procurements.

The NDS Project Is Likely to Experience Cost Growth
    The 30-year old National Distress System no longer supports Coast 
Guard's short-range communication needs. System deficiencies, such as 
communication coverage gaps and limited direction finding capabilities, 
complicate Coast Guard's ability to effectively and efficiently perform 
search and rescue missions. For example, at least 88 major 
communication coverage gaps exist where Coast Guard cannot hear calls 
from mariners in distress. Totaling about 21,500 square nautical miles, 
the communication coverage gaps represent 14 percent of the total NDS 
coverage area and range in size from 6 to more than 1,600 square 
nautical miles.



    Over the last 6 years, Congress appropriated $56 million for 
planning the NDS project. In the planning phase, Coast Guard and its 
technical support agent performed a significant amount of technical and 
market research and worked directly with three contractors to design a 
system that would meet Coast Guard's needs. During March 2001, each of 
the contractors submitted a cost proposal that individually exceeded $1 
billion--nearly three and a half times Coast Guard's $300 million 
estimate.
    When the contractors. cost estimates came in higher than expected, 
Coast Guard revised the system's performance specifications to lower 
the costs to an estimated $580 million. The proposed system will 
provide significant improvement over the existing system. However, 
Coast Guard eliminated or reduced capabilities in the $1 billion system 
that Coast Guard originally considered essential to address 
deficiencies in the existing system and to improve the SAR program 
efficiencies. As currently designed the proposed system:

    Contains communication coverage gaps, meaning Coast Guard 
        will not be able to hear and locate all mariners in distress 
        even when they are within the system's planned range of 20 
        nautical miles of shore. While it is anticipated that the gaps 
        will not be as large or as numerous as the 88 gaps in the 
        existing system, the exact size and location will not be known 
        until a contractor is selected later this year.

    Cannot pinpoint the location of distressed mariners. The 
        proposed system will provide only the general direction of the 
        distress call. Compared to the $1 billion system, the revision 
        has negatively impacted Coast Guard's original project goal to 
        take the ``search'' out of search and rescue. Consequently, 
        Coast Guard may have to perform other investigative procedures 
        and conduct wide-area searches to locate distressed mariners.

    Restoring system outages will take longer. In the proposed 
        system, the specified time allowed to restore critical system 
        functions if they become unavailable has been extended from 6 
        hours to 24 hours and full system functions from 12 hours to 7 
        days. Coast Guard has no set parameters for restoring critical 
        functions if the existing system becomes unavailable.

    Reduced the capability to support an increased level of 
        operations during a national emergency or a natural disaster. 
        Capabilities that were eliminated, such as the ability to send 
        classified information and to talk with other agencies, may be 
        necessary to support some Coast Guard homeland security 
        activities.

    While it is notable that Coast Guard has taken aggressive action to 
reduce cost estimates for NDS, Coast Guard may have to restore 
capabilities that were reduced or eliminated as the system is deployed 
to meet operational requirements. This will not only increase the cost 
of the NDS project, but will further compound Coast Guard's capital 
acquisition challenge.
    We have recommended that Coast Guard develop an acquisition plan 
for approval of the Department prior to obligating any funds 
appropriated for the procurement contract, which is anticipated to be 
awarded in the fourth quarter of FY 2002. Coast Guard fully concurred 
with our recommendation. However, given our concern over the reduction 
in capabilities, we have since recommended that Coast Guard ensure the 
acquisition plan also contains cost estimates and milestones for adding 
the capabilities that were reduced or eliminated. In addition, we 
recommended that the plan should identify how Coast Guard intends to 
meet its short-range communication needs in response to its increased 
homeland security mission.

Uncertainties With the Deepwater Project Should Be Resolved This Year
    The Deepwater project proposes to replace or modernize 209 
aircraft, 92 vessels, and associated sensor, communications, and 
navigation systems that are approaching the end of their useful life. 
This project involves replacing or modernizing all of the Coast Guard 
assets that are critical to missions that occur 50 miles or more 
offshore, including drug interdiction, search and rescue, and migrant 
interdiction.
    This project is unusual not only because of its size, but also 
because, if all goes as planned, it concentrates the responsibility for 
project success with one contractor (called the Integrator) and 
subcontractors extending over a planned period of at least 20 years. 
Given this, the Coast Guard should expect a high level of scrutiny by 
the Department and the Congress regarding this project.
    The Congress supported the planning phase of the project by 
appropriating about $117 million. The Coast Guard plans to replace its 
Deepwater capability as an integrated system rather than a series of 
distinct procurements. For example, instead of specifying that it wants 
a medium endurance cutter or a long-range helicopter, Coast Guard 
tasked three industry teams to propose vessels and aircraft that can 
work together to meet mission needs more effectively. The planning 
process has been comprehensive and provides Coast Guard a good basis 
for identifying its needs and developing an acquisition strategy.
    The Coast Guard is rapidly approaching an important crossroads with 
respect to the Deepwater project. Although it previously planned to 
award the Integrator contract in the second quarter of FY 2002, Coast 
Guard has appropriately delayed the award to provide additional time to 
further analyze industry proposals. The award is currently scheduled 
for the end of the third quarter of FY 2002. The award of the 
integrator contract will start the Coast Guard moving forward on a 
course that is likely to be difficult and potentially expensive to 
alter once funding has been committed and contracts have been executed.
    Coast Guard has not yet provided a reliable cost estimate for the 
Deepwater project, but that should be resolved once the Integrator is 
selected. The selection of the contractor will allow the Coast Guard 
and the winning contractor to reach agreement on the exact system the 
contractor will provide. Once the final system design and configuration 
is determined, Coast Guard will be able to establish a cost estimate 
and deliverable schedule.
    Coast Guard received $290 million for the Deepwater procurement in 
FY 2002. If it receives the $500 million requested in FY 2003, Coast 
Guard will have $790 million available for the procurement phase of the 
project. Although Coast Guard originally thought this would be a 20-
year project, the request for proposal states that the performance 
period for the contract could be up to 30 years. It is not clear to us 
whether this means that (1) previously planned annual funding levels 
will remain the same and result in increased cost, or (2) the planned 
annual funding levels will be spread out and reduce the level of 
funding required each year.
    Mr. Chairman, this concludes my statement. I would be happy to 
answer any questions the Subcommittee may have.

    Senator Kerry. I appreciate it very much.
    Both of you have framed, both of you, Ms. Hecker and Mr. 
Mead, you have framed sort of the essence of almost all the 
questions that we had. Admiral, you mentioned that if we wanted 
to talk about the dilution question I might come back to you. 
Well, I think the dilution question was essentially raised by 
Ms. Hecker as well as by both Senators Snowe and I in our 
earlier questions. Could you talk to that a little bit?
    Essentially, what Ms. Hecker has said is that the Coast 
Guard is going from 43 percent in law enforcement down to 30 
percent.
    Admiral Loy. Yes, sir, happy to. First of all, I think the 
simple reality is to note that, although we cannot sustain 
those kinds of losses with respect to mission capability other 
than homeland security for any length of time without truly 
being concerned about it, we really ought to recognize that on 
the 11th of September one of the greatest strengths of the 
organization was exhibited in its agility, its flexibility to 
go to the scene, if you will, of the Nation's crisis at the 
moment.
    Senator Kerry. I understand that. I understand that. It was 
brilliant and it was well done, it was well executed. But it 
came, at everybody's admission, at the complete and total 
expense of each of those other efforts.
    Admiral Loy. Of other things we do.
    Senator Kerry. Correct.
    Admiral Loy. No doubt about it, sir.
    Senator Kerry. Let me ask this question. With the current 
budget, what level, what percentage of law enforcement effort 
are we going to be at? We are not going to be at 100 percent.
    Admiral Loy. No, sir. We will, through the course of the 
fiscal '03 budget, suffer what I will call budgeted capability 
shortfalls in this percentage thing. I think we keep getting 
wrapped around the axle of, for example, the three charts on 
the easel over here, which offers percentages associated, which 
gives you the impression that we have a finite solid, same size 
set of pies and we are radically reducing the ``devotion to 
duty,'' quote unquote, to all these other mission areas.
    There is no doubt that we will be, in order to focus on 
gaining what we think is about a 22 to 24 percent requirement 
in the homeland security through the course of fiscal '03, make 
reductions, but I think they are reasonable reductions in the 
sense that we just made good judgments about it. Let us take 
living marine resources. If you take living marine resources 
from a fiscal '02 traditional mission allocation 10 September 
and before, we were pending about 16 percent of our annual 
budgeted capability as an organization on living marine 
resources, fisheries enforcement, if you will.
    With a larger pie--and I should give you the dollar value, 
sir, as well as the simple percentage, because I think the 
simple percentage is a bit misleading. But in order for us to 
devote more attention to ports, waterways, and coastal 
security, living marine resources in the '03 budget will drop 
to about 11 percent. Now, the dollar value for living marine 
resources as opposed to, in the '03 request will actually 
increase from '02 enacted from about $440 million to $504 
million. So we are talking about percentages of a growing pie. 
That is enormously important for us to consider whether the 
adequacy of the mission accomplishment set is on target or not.
    Further, for example in New England, Admiral Naccara has 
done I think an enormous amount of good work with the local 
fisheries councils. The councils are actually increasing, for 
example----
    Senator Kerry. Can I interrupt you just for a minute?
    Admiral Loy. Oh, yes, sir, absolutely.
    Senator Kerry. I am not sure that does the job for us, and 
I will tell you why. That pie chart by which you are measuring 
your new normalcy versus where we were previously is based on 
total allocation.
    Admiral Loy. Yes, sir.
    Senator Kerry. It is based on the billion dollars.
    Admiral Loy. Yes, sir.
    Senator Kerry. But the billion dollars is not going into 
the job. It is a very much smaller amount going into the job. 
So, I do not think the pie chart tells the story either way. I 
agree with you it does not tell the story in terms of overall 
numbers, but nor does it tell the story in terms of the new 
allocation.
    The bottom line to me is as we look at this, for instance 
marine safety, there is increased demand, but we are going from 
13 percent of the pie down to 5 percent. Now, there is no way 
marine safety is going to be getting the kind of expenditure it 
was.
    Admiral Loy. Yes, sir, I think that is exactly right.
    Senator Kerry. Or it demands.
    Admiral Loy. In the instance of marine safety, it is 
because the concentration of marine safety offices and marine 
inspection offices are absolutely fundamental to the core of 
doing the work of port security in our ports and waterways. So 
yes, sir, you have put your finger right on that particular 
pulse, that the MSO's will be concentrating more on homeland 
security challenges than perhaps they have been on otherwise 
routine maritime safety inspections that they would normally be 
concentrating on.
    Senator Kerry. Resource hours are also going down, correct?
    Admiral Loy. Resource hours, I would have to give you a 
good read on that, sir.
    Senator Kerry. Search and rescue are going down.
    Admiral Loy. What I can tell you is, for example, there 
are--let us go to the types of assets. Our new coastal patrol 
boats will be almost exclusively devoted to homeland security, 
when in the past they have in part, in the First Coast Guard 
District in New England, been part of the offshore law 
enforcement capability and certainly part of the search and 
rescue capability, which they will continue to be on a mission 
interrupt basis.
    The 110-foot patrol boats in New England will be devoted 
probably 50 percent of their time to living marine resource 
activity. I just got off the phone this morning to check on 
this, knowing of your interest, with our area commander down in 
Norfolk and we will have a constant presence of a high 
endurance, medium endurance cutter offshore in the fisheries 
off New England for the balance of this year.
    I think the other thing to keep in mind, sir, is that we 
are returning to those missions. Even as we speak, we are 
probably back up to about 75 percent or so of our devotion to 
our counter drug activity, which had gone probably down close 
to 10 or 12 percent in the immediate wake of 9-11.
    So I recognize your concern. It is mine as well, sir, and I 
believe that in an incremental fashion we respond to the crisis 
of the moment and we will return as quickly as we can through 
the course of this 3-year plan to the legitimacy of all of the 
missions that we were responsible to the Nation for before 9-
10.
    Senator Kerry. Well, I certainly hope so. I think it is 
critical. I am just looking at the resource allocation and for 
boats in search and rescue--it is going to go down from 58,000 
hours to 53,848. In marine safety, in boats it is going to go 
from 121,398 down to 18,672. In enforcement of laws and 
treaties, it is going to go from 19,792 down to 16,767. In 
marine environmental protection it is going to go from 6937 
down to 5998. In aids to navigation, it is going down from 
46,147 to 42,045. Finally, in ice operations, from 66 to 45 
hours.
    So in every category in terms of boats, resource hours are 
going down. In cutters and aircraft, hours are going up, I mean 
tiny amounts, like 4 hours, for instance, in aids to 
navigation, 100 and some hours in marine environmental, and so 
forth.
    Admiral Loy. Clear recognition, sir, as you put your finger 
on at the beginning, this, the homeland security piece, is 
fundamentally a small boat local coastal operation. Therefore, 
to the degree the medium endurance and high endurance and 
aircraft will continue to be employed in these other mission 
areas, and no one wants better than I to get them back to where 
we need to get them.
    Senator Kerry. Let me ask you this question. Since you are 
leaving, maybe you can leave this one with us. What does it 
take, how much would it take, to write the budget you think you 
need to fill out each of these areas? What is the plus-up that 
we are talking about in order to do what we need to do in 
interdiction, in enforcement, in Deep Water, in the ports, and 
complete the task for the Coast Guard?
    Admiral Loy. Yes, sir. My estimate on that, sir, in terms 
of '04-'05, the other two segments of a 3-year bill, would have 
us probably a billion and a half or more above what we are 
going in with here and probably a 6,000-person increase in the 
size of the organization. We are taking that in bite-sized 
increments over three pieces. That is a ballpark figure and we 
are working with the administration on what '04 and '05 should 
look like.
    But as you know, '03 suggests about 2200 people, and we 
think about two more bites about that size will probably 
produce the Coast Guard that you and I want to have deal with 
our full mission array.
    Senator Kerry. Well, I appreciate that, Admiral.
    Regrettably, I need to go to this other meeting that I am 
being called to. But if I can just leave on the record a couple 
of concerns, maybe in the course of your answers to Senator 
Snowe you might touch on them. I am concerned about the 
intelligence commitment for homeland protection and how this 
compares with naval intelligence and may interrelate.
    The port security issue with respect to the upgrading of 
seaport security and helping the States to do that, there is a 
piece there that I think we have to obviously look at.
    I have raised the issue of drug interdiction, and 
Deepwater, and the National Distress System, which Mr. Mead has 
raised. Maybe you would sort of put that on the record and 
address those gaps in the time remaining.
    Finally, bridge alterations. The budget zeroes out bridge 
alterations. I know that measured against everything else, I 
suppose that is a place one has to choose. But the money for 
bridge hazards to navigation it seems to me will reduce again 
the impact for communities, reduce congestion, provide safe 
crossing over navigable waterways. That is its own security 
issue.
    Admiral Loy. Yes, sir.
    Senator Kerry. As well as being a long-term infrastructure 
issue.
    I apologize for dropping those, but I wanted to raise those 
concerns on the record. Again, I am confident we will see you 
before your date of departure, but let me again tell you what a 
great, great pleasure it has been working with you. It has been 
an honor to do so and we really appreciate all your input.
    Thank you, Ms. Hecker. Mr. Mead, thank you also. You have 
been at this for a long time now and we appreciate very much 
your input, too.
    Senator Snowe.
    Admiral Loy. Thank you, Mr. Chairman.
    Senator Snowe. [presiding]: Admiral Loy, Ms. Hecker was 
talking about defining the new normalcy and I do not believe it 
is defined with respect to port security. Obviously, port 
security is now and has been a major responsibility of the 
Coast Guard, but in light of September 11th it has been 
enhanced. Do you think that we should make sure that we define 
precisely what the new normalcy is with regards to port 
security?
    Second, I know the Coast Guard had embarked on an 
assessment of port security threats. In light of the Report of 
the Interagency Commission on Crime and Security in U.S. 
Seaports that actually was issued prior to September 11th, the 
risk was considered to be low and the threat to be high. After 
September 11th we found out this to be quite different.
    Could you explain how you visualize the new normalcy 
regarding port security?
    Admiral Loy. Yes, ma'am. What we have done is, as I 
indicated--and maybe the best thing for us to do, Senator 
Snowe, would be to arrange a briefing for the committee and the 
staff as you would desire, to get a feel for the full scope of 
the maritime security plan that we think is appropriate to 
define this new normalcy.
    Our 3-year budgetary build is so as to reach the point 
where the Coast Guard contribution to that new normalcy will be 
adequate to the task and return to the other mission areas that 
were just discussed with Senator Kerry. But within each of the 
five main pillars that I heard Admiral Collins mention to you, 
this notion of Maritime Domain Awareness, there are specific 
things in that that we need to be doing better than we are 
doing today as it relates to the control of high interest 
vessels in our ports, as it relates to presence, as it relates 
to critical infrastructure protection, and as it relates to 
outreach, not only to locals but literally to the international 
sector.
    The inventory is a very long list, Senator Snowe, as you 
know. But it is about credentialing, it is about real port 
vulnerability assessments, it is about having a criteria set 
established so that we know a generic set of attributes for a 
model port with a national threshold established that we offer 
to each and every port, 361 ports around the country, to take 
that model port and compare themselves to it. We will conduct 
sequentially with the 19 strategic ports, then the 55 ports 
that comprise 95 percent of the commerce, we will conduct full 
port vulnerability assessments.
    We hope to do those 50 over the course of the next 2 years, 
such that at the other end of the day we are not guessing as to 
where the shortfalls are in these important ports of ours, 
rather we have homed in on them and challenged each of the 
local ports to do what they need to do.
    Now, historically in our country, Senator Snowe, as you 
know better than most coming from New England, aviation and 
even the highway system in a post-Eisenhower Interstate kind of 
a system since the fifties, are a phenomenon of the twentieth 
century, while the port infrastructure of our Nation is a 
phenomenon of the eighteenth century. It is privately owned for 
the most part and a very different notion in terms of how we 
have over time supported them and especially with respect to 
infrastructure investments.
    With aviation, airports, and with highways and transit 
systems, we have TEA-21 and AIR-21 and a grant system designed 
to allow Federal infusion of infrastructure projects to take 
place. That does not exist with our local ports and waterways. 
So the design impact of if and how the Federal Government will 
find a way to make an investment in infrastructure in ports and 
waterways is a crucial question that we as a Nation have to 
answer.
    The '02 appropriation has $93 million that we are going to 
accept applications, and together with MARAD and TSA, we will 
very quickly, by the middle of June, have grants going back in 
the other direction that will take care of that $93 million. 
But I would offer that as a drop in the bucket in terms of what 
the true infrastructure needs are.
    Senator Snowe. So what would that money be used for? Would 
it be used for perimeter security?
    Admiral Loy. Two categories, ma'am. The first one is 
associated with doing good assessments and the specific things, 
if you have already done one, that you can go toward and 
actually get funded. The second is things like physical 
security and infrastructure investments in that regard. That is 
what we read as we interpret the intent of the Congress and we 
have designed the process that way.
    Senator Snowe. It is an interesting point that you raise 
about the fact that up to this point there has not been a 
separate fund.
    Admiral Loy. An SEA-21.
    Senator Snowe. Yes, exactly. That is an interesting concept 
that we certainly should consider. Perhaps it is essential, but 
I do not know. Would you agree?
    Admiral Loy. I think I do, absolutely.
    Senator Snowe. Assuming we could pass a Coast Guard 
authorization bill, but that is another issue.
    Admiral Loy. That is one thing that would be helpful. But 
the other piece, the Senate has already acted. The Maritime 
Security Act is a very solid step in the right direction for 
building the House counterpart with them so as to hopefully let 
that conference be something that we can actually gain 
legislation out of this session.
    Senator Snowe. With $93 million, exactly how many ports 
would that help? How far would that go?
    Admiral Loy. It really depends on what kind of application 
pattern we get in by the deadline. It could be as easy as two 
$45 million grants or it could be 93 $1 million grants. I would 
like to think that the criteria set that we have established 
will allow us to make good judgments about the choices we make 
with respect to those grants.
    Senator Snowe. I think it is a logical direction. The 
roundtable discussions that I conducted in January with many 
local officials across Maine all indicated that grants are 
essential to the coastal areas.
    Admiral Loy. I just met this morning with the American 
Association of Port Authorities and they feel also that they 
are delighted with the notion, but they also understand that 
not much ever in the past has the Federal arm of government 
made an infrastructure contribution to ports and waterways of 
our Nation, other than through Army Corps of Engineers, locks 
and dams projects, that kind of thing. But that is just 
something that is very different than the way we handle 
airports and terrestrial transportation infrastructure.
    Senator Snowe. On a separate note, is the Coastal Beacon 
program involving Maine fishermen a type of approach that you 
could visualize Coast Guard expanding to other parts of the 
country?
    Admiral Loy. Absolutely.
    Senator Snowe. I really do think it makes eminently good 
sense.
    Admiral Loy. I think it makes eminently good sense and we 
look forward to prototypes and those kind of best practice 
ideas. Where we can then make it happen in other places in the 
country, that is exactly what we do.
    Senator Snowe. Has the response been positive?
    Admiral Loy. It has been positive, yes, ma'am.
    Senator Snowe. How many port vulnerability assessments will 
you be able to conduct in this fiscal year?
    Admiral Loy. I think we will get to 55 by the end of fiscal 
year '03, so our hope is that, with the existent request, we 
would probably do--I do not know the number for the rest of 
'02, but I can get you that number.
    Senator Snowe. Is there a time line for completing all the 
port threat assessments? What would the time period be in which 
that would occur?
    Admiral Loy. My guess is that the 55, which are obviously 
the most significant, most complex, port installations because 
they compose 95 percent of the non-NAFTA commerce that is 
coming and going, the balance will be very quick. So I would 
guess that within another 2 years or so we would have all the 
lesser ports dealt with.
    But our goal here is to underpin the strength of our 
prosperity and economic stability, which is ports and 
waterways. The 55 that comprise 95 percent of the trade is our 
focus for the moment.
    Senator Snowe. That is why we also have to pass the Port 
and Maritime Security Act.
    Admiral Loy. Yes, ma'am, precisely.
    Senator Snowe. Do you agree with Ms. Hecker on the point, 
that two-thirds of the increase would go toward retirement 
benefits entitlement-type expenditures rather than expanding 
operating capacity? If so, this is clearly an issue.
    Admiral Loy. She has that right on target. JayEtta, I think 
it is $1.2 billion of the total $7.2 billion. That portion of 
the increase is all about, across all of our appropriations, OE 
and all of the rest, including the retired account, associated 
with the OMB judgment to go toward an accrual-based retirement 
system this year. So a significant portion of the total 
increase in the Coast Guard's budget is keyed to that, yes, 
ma'am, including the health care implications of it as part of 
the accrual retirement system.
    Senator Snowe. So the remainder then would address some of 
the readiness and retention issues and the expanding missions. 
This is insufficient; would you not agree?
    Admiral Loy. Well, it is what we felt was the executable, 
sort of consumable bite that we could take in that first year 
of the 3-year bill.
    Senator Snowe. You do not think you could absorb more than 
a billion plus in 1 year?
    Admiral Loy. That is correct. This is, as Ms. Hecker 
mentions--there are issues associated with recruiting and with 
the training infrastructure to get these young people through 
the system. The numbers that were challenged, just to give a 
little bit, she indicated that we had never done 4,000 before. 
Well, we just did 5,000 this year and last year, so the whole 
notion of how many people go through the boot camp system is 
something that we have limited our judgment and our imagination 
thereto, so it is something that we can actually execute.
    We actually anticipate that retention for this year appears 
to be about a 6 or 6.5 percent positive jump for us. We feel 
very good about the efforts we have undertaken about retention. 
Officer side, probably as much as 12 percent better than in the 
last couple of years. Now, how much of that is our young 
people's patriotic zeal on one hand, how much of it is a 
downturn in the economy, it is a very soft science to cause and 
effect that. But we have a very good story to tell at the 
moment with respect to retention.
    Senator Snowe. Regarding the National Distress and Response 
System, as Mr. Mead I think pointed out in his testimony, both 
the Deepwater and the National Distress System programs are at 
a crossroads. First with Deepwater, I gather there is a 
projection here, Mr. Mead, that is suggesting that the timeline 
may increase to 30 years from 20 years for the life of this 
modernization program?
    Mr. Mead. We do not know. Until June of last year we 
thought it was 20 years and were projecting a budget of about 
$500 million a year. However, the RFP says you can do this in 
the 20 to 30 year frame, but it does not specify which. Given 
the consequential monetary amounts, I think that is an 
important decision.
    Admiral Loy. My note here is simply this, Senator Snowe. 
The two parameters that were enormously important as framing 
parameters for the project's RFP overall was that they had to 
live within a $996 million OE account as they designed their 
system for the future and the AC and I would be $500 million of 
1998 dollars over time. Those were planning parameters 
associated with the ability for us to make sure each competitor 
was working with the same limits as they designed their 
proposals for our future system.
    Once the award is actually awarded, once the contract is 
actually awarded, there clearly will be each and every year 
adjustments based on what OMB requests and what the Congress 
appropriates. If we have more money appropriated to the 
Deepwater Project in any given year, I would hope that it would 
positively affect time and cost implications of performance. If 
we have less money sought for or appropriated in 2010 or 2012, 
that has the potential, of course, to lengthen the contract.
    We will make cost, time, and performance decisions about 
that each year as we go through, as will the Congress have 
their opportunity to take that judgment each year as it goes 
by. We just need, I think, to get away from the notion of 
understanding that $500 million limit and the $996 million OE 
implication to be anything other than what they were, the 
planning parameters for the proposal design stage of the 
contract as it comes together.
    Senator Snowe. Mr. Mead, does that sound logical?
    Mr. Mead. It sounds very conceptual. I think that things 
will become clearer later this year when they do a downselect. 
We have, as Admiral Loy knows, been pointing out for 2 or 3 
years along with GAO and probably the Office of Management and 
Budget too that it would be nice to know exactly what we are 
going to buy and when and how much.
    On the other side, I have got to say that I do believe the 
Coast Guard has followed a very innovative approach on the 
procurement. It is an unusual one, but we should not damn it 
because it is different. So next year at this time we will be 
back and we will know a lot more.
    Senator Snowe. I agree that we will know a lot more then.
    Admiral Loy. Again, we could tell you today three different 
versions because that is where the competitors are, so to 
speak. Come the middle of June, we will be able to brief the 
committee at great depth with the proprietary brief. At the 
moment, however, it stays competition-sensitive and we sort of 
cannot go there.
    Senator Snowe. You are right. I think at that point we will 
have a better appreciation of what exactly Deepwater will 
encompass.
    Admiral Loy. More importantly, Ken's point is a very good 
one with respect to the total capability of our AC and I 
account over time. As we push the CIP forward, the capital 
investment plan forward, for '04 and '05, we are very focused 
on the Deepwater Project and NDRSMP, to the exclusion of other 
very real needs that the organization has. Ken points out 
housing.
    There is nothing I would rather have than a bit of money in 
the AC and I account to do good things for Coast Guard people 
housing-wise across the country. But priorities are priorities 
and for the moment I think both the administration and the 
Congress properly focus on IDS, Integrated Deepwater System, 
and NDRSMP to get those right, then when we are done with 
NDRSMP in '06 press on to the other needs the organization has.
    Senator Snowe. A lot will be contingent on Congress then 
for making sure this program is on track.
    Admiral Loy. Yes, ma'am, absolutely. We owe that every year 
for the next 20 or however many it takes.
    Senator Snowe. That is a lot to hope for.
    Admiral Loy. Or however many it takes.
    Senator Snowe. I am still waiting for that Coast Guard 
authorization bill.
    Admiral Loy. I can promise you 2 more months.
    Senator Snowe. Which is not your fault, I should say. I 
wish that before the end of your term that we could pass that 
authorization bill. Frankly, it is inexcusable that here we are 
in the fourth year and now it is hung up on an amendment that 
is not even germane to the issue.
    I think it is a sad commentary on the legislative process 
that we cannot bring it to the floor because we have an 
extraneous amendment. This is true given the missions that are 
assigned to the Coast Guard, especially in light of what 
happened on September 11th.
    Admiral Loy. I tend to agree.
    Senator Snowe. I think this is really unfortunate and I 
regret that, because I do not think that there is any rationale 
or justification.
    Admiral Loy. I hope we can get past that.
    Senator Snowe. I do too. I hope we can do it to honor your 
leadership before the end of your tenure. Additionally I think 
that there are many people overlooking the importance and the 
value of this legislation for the Coast Guard.
    Admiral Loy. Did you want me to respond to the NDRSMP?
    Senator Snowe. Yes, I do, because there are a number of 
gaps that exist in the current system. I know several in fact 
are off the coast of Maine. But I gather there are 88 total, 
which represents more than 21,000 miles. I think that it is 
essential that we have a better understanding of how we can 
ensure that this is not going to compromise our communications 
with those who are on the sea.
    Admiral Loy. Yes, ma'am. The 88, I think the number is 
sound. I have not challenged Ken's team's number with respect 
to that. But what I think is important for us to understand is 
that we did not embark on this project to fill 88 gaps. We 
embarked on this project to do away with the 1970's vintage 
system and replace it with a twenty first century system of 
command and control structure--not only, by the way, for our 
search and rescue requirements coastally, but for everything we 
do coastally, including maritime security. The C4ISR value that 
will come out of NDRSMP is enormously important.
    We will be doing with the winning contractor site surveys 
region by region by region, and as each of those site surveys 
is done the contractor will make decisions associated with 
where high site towers are going to go for the system. As we 
know, any VHF-FM system that we are putting in place designed 
to cover, to provide reliable coverage out to 20 nautical 
miles, will always have the potential to be impacted by 
atmospherics, by physical obstacles. If the tower is here and 
there is a mountain in between you and the tower, it is going 
to be hard for your signal to be heard.
    The goal that we have, Madam Chairman, is to reach 98 
percent coverage factor for our Nation, with acceptable gaps as 
designed into the RFP. There are certain places, for example in 
the Bering Sea, the Aleutian Chain with the exception of Dutch 
Harbor, that we are not challenging the contractor to cover.
    So when we have the contractor, we will work with him or 
her to produce that 98 percent coverage, which by the way will 
give us a system that is well above national first responder 
challenge systems today, fire and police response systems. They 
are normally keyed to about 95 to 96 percent coverage. We will 
impose 98 percent as a requirement and we are probably in the 
mid-eighties today, just as a reference to that.
    So I would have us not focus on gaps so much as understand 
the new system and its incredible improvement. The capabilities 
inventory, there is a little chart that I will be glad to give 
you a copy of that just sort of goes down a set of columns. We 
are interested in monitoring distress calls. With this kind of 
capability that we want, we have all no's almost in the column 
of today's system and all yes's in the column of the new NDRSMP 
system.
    It is about lessons we have learned from the Morning Dew 
case, from the loss of our own sailors in the Niagara tragedy 
last year, such that we know about own unit tracking and we 
know about DF capability and we know about whether or not the 
kid in the watch center can turn the system back and hear the 
call and try to interpret it.
    So this is an enormously improved system, Senator Snowe. I 
agree that there are 88 gaps at the moment. I would rather us 
focus on a 98 percent coverage rate at the time we are done.
    Senator Snowe. Well, could you explain the current gaps on 
the coast of Maine. We are talking about the gap off Calais, 
Maine, which is 14 square miles? What exactly is that going to 
mean in terms of a distress call?
    Admiral Loy. Well, as it stands at the moment, Senator 
Snowe, assuming that Ken has got this wired tight and I am sure 
that he does, if you happen to find yourself inside that 
colored red zone and in distress, it is going to be difficult, 
if not impossible, for the Coast Guard station at the moment to 
hear your distress call. We want very much to eliminate that 
gap.
    How the contractor chooses to place high site towers to the 
98 percent coverage level hopefully will eliminate that gap for 
us. We will review that, and if in fact we get to a settled 
system we will advise the boating public and all the other 
maritime users as to where existent gaps would continue.
    Senator Snowe. It is treacherous off that coast.
    Admiral Loy. That is treacherous territory, yes, ma'am.
    Senator Snowe. Yes, it is.
    Admiral Loy. I am not personally familiar with that, but 
the coast of Maine is.
    Senator Snowe. Yes, in that particular area.
    Admiral Loy. Yes, ma'am.
    Senator Snowe. We have a lot of local fishermen down in 
that area where fishing is their way of life. It is off the 
coast of Washington County, so fishing does dominate. This 
represents sort of a perilous challenge.
    Admiral Loy. If I may, Senator Snowe, I will go find out 
what is happening with respect to the game plan at the moment 
with that particular piece of geography and let you know.
    Senator Snowe. Then the other one, of course, is off Bar 
Harbor. Those are the two.
    Admiral Loy. Bar Harbor.
    Senator Snowe. But as you may know, the coast of Maine just 
in general, but most especially in that area.
    Admiral Loy. And most especially in the winter.
    Senator Snowe. Absolutely. Winter, fog, currents. It is 
treacherous.
    Mr. Mead. Senator Snowe, I would just like to comment on 
this percentage of coverage issue. Actually what the 
contractors have been asked is to make sure that they cover not 
less than 90 percent, and the goal is to cover between 90 and 
98 percent of the area. The concern we have is we do not know 
where that delta or difference is going to show up along the 
United States coastline. In fact, if you just take the coast of 
Maine, you have got about 400 square miles of dead zone. You 
apply say 92 percent to that and that leaves a substantial 
number of miles. I do not want, and I am sure the Coast Guard 
does not want, a mariner to be caught up in distress there.
    You know exactly, we all know, exactly what would happen in 
aviation in a similar situation if there was a gap. There would 
be simply no tolerance of the situation.
    Senator Snowe. You would not survive long off the coast of 
Maine during the course of the winter. Some would question even 
in the summer, because the water is very cold. There is just no 
way. So survivability is very limited.
    Mr. Mead. To say nothing of if you had to wait 24 hours to 
get it there.

    Senator Snowe. It would not be possible, unless their ship 
or their boat is intact.

    Admiral Loy. The 24-hour issue is a different issue, a 
related issue, but a different issue. This is classically when 
the hurricane comes by and the tower goes over how quickly do 
we get the tower re-established so as to be part of the system. 
The original RFP, the phase one, called for each of the 
respondents to help us understand the cost-benefit 
relationships between 6 hours or 8 hours or 10 or up to 24. The 
point of a 6-hour response capability would essentially 
virtually have us have airplanes sitting at the end of the 
runway in order to bring the men, personnel and materials that 
would be necessary to repair the thing.

    The 24-hour system, if you will, would have us have in the 
warehouse portable towers that we could get to the right place 
at the right time in the midst of a tragedy like that. But all 
of these I would be the first to admit are about a cost-benefit 
tradeoff. If we want to spend $200 or $300 million more to put 
up however many more towers to go to 100 percent as opposed to 
98, that is a choice that we would eventually have as part of 
the negotiation process both in the Department as we prepare 
budgets for '04, '05, and '06 and for the negotiations in 
Congress as well.

    Senator Snowe. But was that not the original goal of this 
program?

    Admiral Loy. The original goal of the first phase of the 
project----

    Senator Snowe. To provide for these gaps. Don't we want to 
eliminate all gaps?

    Admiral Loy. I would say, you would have a hard time saying 
eliminate all the gaps, especially if you think in terms of 
gaps being about the Everglades and the Aleutian Island chain 
where there is no one there and places like that in our Nation 
that would be very difficult for us imagining a distress to 
take place.

    But we certainly want the best system we can have for our 
Nation to cover our people's requirements when they are in 
distress. 9-1-1 is what it is all about. Ken is right on 
target.

    Senator Snowe. We have 88 areas which I can see delineated 
on this map of the United States. Clearly we ought to work to 
rectify some of these gaps, because I do think that it would be 
unacceptable to have these gaps in the long term.

    Admiral Loy. I could not agree more. The system that will 
be designed will make a significant dent in the 88 gaps. We 
will look and see what is left when they have designed their 
system and that will be part of the conversation that we will 
continue to have.

    Senator Snowe. Many years ago back in the eighties they 
were suggesting that if there would be a rescue off the coast 
of Eastport that they would rely on a helicopter from Cape Cod. 
That was not a workable option.

    Admiral Loy. I spoke at great length about that.

    Senator Snowe. Remember that? Fortunately, we are not there 
any more to talk about that one. I think this is one of the 
issues.

    Speaking of Eastport, let's turn to the OPTEMPO concerns at 
Coast Guard boat stations, that Mr. Mead raised. This is 
another serious readiness problem, particularly the burden that 
many of these stations are feeling. They are on the front lines 
of providing security along our coastlines.

    Admiral Loy. Absolutely. That is exactly why we have taken 
so seriously the commentary from not only the Senate side, but 
the House side in committee last year, as well as GAO's review, 
as well as the IG's review. We had, as I indicated earlier, 
taken that so seriously as to design this 5-year game plan that 
will get us back to where we want to be. The '03 budget 
represents the third year of that. I think I heard Admiral 
Collins testify that we put about 200 people into the system 
last year, another 200 going in in '03, 130 or 140 of which go 
directly into those stations.

    So one bite at a time we are methodically going to come by 
the time '05 rolls around with a system that, as Ken just 
mentioned, looked very good to him and his staff when we showed 
it to them, and we will methodically go down that road, because 
again it is Coast Guard people that get these things done at 
the other end of the day and all of us must be in the business 
of providing them the equipment and the training and the 
numbers they need to do the job.

    Senator Snowe. Absolutely, absolutely.

    Finally on homeland security, I notice there is an article 
in The Washington Post today talking about the administration's 
proposal, it has yet to be announced, which indicates the 
President will recommend that INS and Customs be merged.

    Admiral Loy. And the Border Patrol.

    Senator Snowe. And the Border Patrol. It is unsure whether 
they will be in Justice or in Treasury or wherever, but I guess 
the point is that the Coast Guard has not been included. Are 
you relieved?

    Admiral Loy. I think for the moment, having been a 
participant in many of those long meetings on the issue, I 
think that it appears as if the proposal to the President will 
suggest that port of entry inspection kind of functions need to 
be dealt with and the people that do those things are INS and 
the Customs Service. To the degree that the Border Patrol is a 
part of INS, that is probably how they are being pulled in.

    I think the right answer at the moment for transportation 
security and the focus that has found its way to that, not only 
by the Congress passing the TSA standup requirement inside 
Transportation, that Transportation is the right place for the 
Coast Guard to stay for the moment, for the foreseeable future, 
if you will. If there was not a maritime voice about port 
security and transportation security in the three-legged stool 
that really is our transportation system for the Nation, I 
think the Secretary would be trying to get a job done without a 
full team.

    So the issue I think has always been about the synergies of 
the present compared to the synergies of the future. In other 
words, we do a lot within Transportation simply because we are 
there and it is easy to do it because we are there and the 
Secretary has line authority on all the players that are there. 
If we in favor of border security and wanted a better synergy 
there, my testimony, if you will, through the course of all 
these meetings has been, let us make sure that we understand 
the unintended consequences of taking people out of point A and 
B before we create another well thought out, well designed, 
well intended organization that would deal with border 
security.

    So I do not believe this is a decision made or taken quite 
yet, Senator Snowe. But if we stay in Transportation for the 
moment, especially while TSA comes on line, I think it is a 
good thing for the country.

    Senator Snowe. So you think it is logical where it stands 
today?

    Admiral Loy. Where we are today?

    Senator Snowe. Yes.

    Admiral Loy. Yes, ma'am, I do.

    Senator Snowe. Have you had to detail any of your personnel 
to the Homeland Security Office?

    Admiral Loy. We have done that. We have sent over probably 
as many as, I think it is probably 25, 28 people, principally 
watch-standers so they could stand up a coordination center for 
themselves over at their new offices at the Naval Security 
Group on Nebraska Avenue. The notion there is that those are 
temporarily seconded to the Office of Homeland Security until 
they can bring their own people on, train them, and get them to 
the point where they can do those very important things for 
themselves.

    So I thought it was sort of the least we could do to make a 
contribution toward the required success of the new initiative 
that Governor Ridge has undertaken for the President.

    Senator Snowe. Are you detailing any personnel to the 
Transportation Security Administration?

    Admiral Loy. Only a small handful so far. We have sent over 
a captain, an O-6, as an executive agent kind of helper to 
Under Secretary Magaw. I am sort of watching my flag officers 
retire and get picked up for employment, including Admiral 
Naccara and Admiral Bennis from the Northeast. That is a good 
thing. If they can bring their skill set to the TSA, that will 
help them enormously.

    Senator Snowe. Again, Admiral Loy, you have my admiration 
for your steadfast leadership and service to our country. It 
has been a pleasure to work with you and hopefully we will see 
you again before your term of office is up. I want to applaud 
you for the exemplary service that you have given this country 
and the manner in which you have conducted yourself throughout 
your longstanding service to this country.

    Admiral Loy. Senator Snowe, thank you very much. Those are 
very nice comments and I accept them only with your permission 
to pass them on to the young kids that are really doing the job 
for us out there.

    Senator Snowe. I know they are remarkable, but we 
appreciate the able leadership that you have given throughout 
your term of office and perseverance through some very 
difficult circumstances, particularly without an authorization 
and not to mention what happened this fall. You have done it 
with great aplomb and I appreciate all that you have done for 
this country.

    Mr. Mead and Ms. Hecker, thank you as well for your service 
and for your testimony. We are going to follow up on some of 
the issues which you have raised in your testimony and reports. 
Thank you.

    This hearing is adjourned.

    [Whereupon, at 4:50 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

    Response to written questions submitted by Hon. John F. Kerry to
                          Admiral James M. Loy
Plans to Return the Coast Guard to a New Normalcy
    Question. The Coast Guard has explained that this budget request is 
the first of a ``three year plan'' to return the Coast Guard to 
normalcy, covering all operations.

   --Will the Coast Guard be developing a three-year strategic plan for 
        returning to ``the new normalcy''? Can the Coast Guard share 
        that plan with the Committee in the very near future?

   --What is the long-term plan for incorporating new personnel over 
        the three year road to ``normalcy''? Won't this influx create 
        other needs, such as housing, that may be strained?

    Answer. Yes, the Coast Guard is developing a strategic plan to 
incorporate new normalcy. The President's fiscal year 2003 budget and 
request for additional fiscal year 2002 supplemental funding are 
critical and substantial steps to implement the multi-year strategy. 
These two funding requests support 5 major goals to achieving Maritime 
Homeland Security:

    Build Maritime Domain Awareness (MDA)

    Ensure the controlled movement of High Interest Vessels.

    Enhance Presence and Response Capabilities

    Protect Critical Infrastructure and Enhance Coast Guard 
        Force Protection

    Increase Domestic and International Outreach

    The Coast Guard has requested growth in operations and personnel to 
a level that is sustainable with current and requested support 
infrastructure. More specifically, the Coast Guard is growing in size 
proportionally to the ability to absorb new personnel.
    The Coast Guard will continue to work with the Department of 
Transportation, the Office of Management and Budget, and with the 
Office of Homeland Security to align its strategic plan within the 
overall Homeland Security Strategy. We will keep Congress apprised of 
progress.
Resources Allocated for Intel--HLS
    Question. Given the complexity of port security requirements, the 
sheer volume of international trade, and the geographic scope of the 
maritime area generating need for protection, it will be crucial that 
our port security effort include a strong component of intelligence and 
advance information on cargo, passengers and crew members as well as 
vessel information.

   --What resources does the Coast Guard intend to allocate for 
        intelligence with respect to homeland protection? How do these 
        resources compare with Naval intelligence resources?

    Answer. The Coast Guard's Intelligence Program (CGIP) is a multi-
mission capability within the Coast Guard. Within the budget request 
for fiscal year 2003, there are three new intelligence initiatives 
focused on homeland protection. These include the continuation of 
initiatives funded in the fiscal year 2002 Emergency Response 
Supplemental, enhancing Area-level tactical intelligence fusion 
capability, and developing Port Intelligence & Investigative Teams.

------------------------------------------------------------------------
                                  Military     Civilian    Total  amount
        New initiative           positions    positions    (in millions)
------------------------------------------------------------------------
Annualization of FY02                    49           25            12.7
 supplemental.................
Tactical Maritime Intelligence           41           13             3.2
 Centers......................
Port Intelligence Teams.......           23           20             3.8
Port Investigative Teams......           18           25             3.0
------------------------------------------------------------------------

    In addition, the President's fiscal year 2003 budget request 
includes $97.4 million for Maritime Domain Awareness initiatives. This 
includes the intelligence initiatives above plus additional Information 
Technology and sensors.
    The overall size of the Naval Intelligence budget is classified, 
prohibiting a comparison. Please contact the Chief of Naval Operations 
(N20) for the size of their program as well as new initiatives to 
support homeland security.
Coast Guard Maritime Safety and Security Teams: Deployed
    Question. New Maritime Safety & Security Teams are being deployed 
by the Coast Guard.

   --Where will the new teams be deployed? Is it envisioned that a 
        Marine Safety & Security Team will be assigned to the port of 
        Boston?

    Answer. Congress has provided the Coast Guard with funding to 
establish 4 Maritime Safety & Security Teams (MSSTs) in fiscal year 
2002. These units will be assigned to Seattle, WA; Chesapeake, VA; San 
Pedro, CA; and Galveston, TX. The teams will be capable of deploying to 
any United States port to provide waterside and limited landside anti-
terrorism and force protection. Two additional MSSTs were requested in 
the fiscal year 2003 budget. The locations of those teams are being 
reviewed at this time.

Local Port Security Funding
    Question. The budget request does not include important funding to 
help the port authorities and states to upgrade seaport security. S. 
1214, the Senate passed seaport security bill, authorizes port security 
funding for the Coast Guard and Customs. It also provides assistance to 
state and private sector port authorities. This funding will be 
crucial, since these entities are the agencies that actually own and 
control the entry points to our maritime borders.
    Local port authorities and states have an important role to play in 
port security. Yet it does not seem that the budget request includes 
any funding to help these authorities to upgrade port security. Is that 
accurate, and if so, why isn't this included?

    Answer. To assist ports in the near term, port authorities and 
states were able to apply for funds to address immediate port security 
mitigation needs through the Transportation Security Administration 
(TSA) Port Security Grant program. In the long term, the Coast Guard 
has begun its Port Vulnerability Assessment (PVA) program, which is a 
major step by the Coast Guard in supporting our port stakeholders in 
also meeting the security challenges facing our ports today. These 
security assessments will be the basis for identifying security 
vulnerabilities of ports and recommending mitigation strategies for 
addressing shortfalls. The valuable information provided by the 
assessments can then be utilized by Port Authorities and facility 
owner/operators as members of local Port Security Committees to 
determine the best course of action to close security gaps, develop 
Port Security Plans and seek long term funding.
Budget Zero--Bridge Alterations
    Question. Once again this year, the Administration is recommending 
to eliminate funding for the Coast Guard to eliminate bridge hazards to 
navigation under the Truman-Hobbs, on the rationale, that there is 
ISTEA funding for bridge alterations. However, ISTEA has a fixed 
formula of funds available for bridges, and elimination of funding for 
Truman-Hobbs would have the overall impact of reducing amounts 
available to help communities to reduce congestion and provide safe 
crossing over our navigable waterways.-Why does the budget zero out the 
amount for bridge alterations? How will this be funded, if not through 
the Coast Guard budget?

    Answer. Faced with the competing resource needs required to support 
increases in critical Coast Guard missions, the Coast Guard did not 
request funding for the alteration of bridges in Fiscal Year 2003.

Adequacy of Coast Guard Cost Accounting
    Question. Under the accounting system currently in place in the 
Coast Guard, it is difficult to track with certainty both dollar and 
resource hours expended on specific mission areas. Thus, it is a 
challenge to know with confidence how appropriated dollars have 
actually been spent. While the Coast Guard is improving its accounting 
system, substantial improvements are still needed.

   --What has the Coast Guard been doing to improve its accounting 
        system?

   --Is it possible to know with certainty how many human and capital 
        resources are allocated to various missions?

   --How can the accounting system be improved to enable tracking of 
        how appropriated funds are actually expended?

    Answer. The Coast Guard employs systems and techniques that 
significantly exceed the requirements of the Federal Accounting 
Standards Advisory Board's Statement # 4; Managerial Cost Accounting 
Concepts and Standards for the Federal Government. The elements of 
Coast Guard excellence in this area are: (1) highly reliable cost data 
which is based upon, and reconciled to, audited financial statements; 
(2) operating facility costs computed using state-of-the-market 
analytical tools and the latest Activity-Based Costing (ABC) protocols; 
(3) reliable, repeatable mission performance costs which are based on 
facility costs and our operational mission reporting, and (4) a 
performance budget reporting protocol meshed with our other reporting 
views.
    Using the same techniques and tools that private sector firms use 
to cost their products, the Coast Guard generates accurate reports of 
mission spending. Cost accounting calculations in capital-intensive 
enterprises such as the Coast Guard traditionally rely upon algorithms 
to allocate indirect costs. Such methodology has enabled derivation of 
cost data appropriate and useful for managerial decision-making.
    As management needs for greater cost granularity develop, we refine 
our models and allocation bases as appropriate. For example, KPMG 
Consulting is assisting with refinement of certain cost allocation 
modules that will yield specific improvements needed to support future 
Coast Guard acquisitions.

Status of Coast Guard/National Transportation Safety Board Memorandum 
        of Understanding
    Question. We understand that the issue of clarifying the leadership 
role of the National Transportation Safety Board (NTSB) has still not 
been resolved, despite language from Congress more than two years ago 
asking the two agencies to do so.
    When will the MOU be finalized with NTSB? What specific steps must 
occur to finalize the MOU with NTSB?

    Answer. The Coast Guard and the National Transportation Safety 
Board (NTSB) met numerous times during 1999 and 2000 to discuss 
modifications to the Memorandum of Understanding (MOU). The Coast Guard 
formally submitted the proposed ``bright line test'' to NTSB on March 
29, 2000. A series of meetings between the Coast Guard and the NTSB 
followed the submission of the ``bright line'' test. The ``bright 
line'' test is essentially a flowchart and scoring protocol that 
categorizes a marine casualty to determine who should have 
investigative lead. The NTSB, in its letter dated February 14, 2001, 
indicated that there are ``some remaining technical issues in its 
application.'' NTSB has not yet clarified those issues.
    In October 2001, NTSB presented a draft MOU to the Coast Guard for 
consideration. The draft included a provision that NTSB may 
unilaterally elect to investigate up to five marine accidents per year 
as lead agency. For many decades there has not been a year where five 
catastrophic marine accidents occurred; therefore, the NTSB proposal 
potentially excludes the Coast Guard from the decision-making process 
in all of the most important cases. The Coast Guard did not accept the 
NTSB proposal, but offered several alternatives to unilateral election 
including not only the Bright Line scoring protocol, but also NTSB lead 
of any intermodal accidents and NTSB lead on accidents involving any 
public vessels. The NTSB did not accept. The Coast Guard continues to 
believe that there are ways to satisfy both agencies' needs without 
unilateral election for NTSB and will continue to work toward that end. 
The Coast Guard proposal for the ``bright line'' will be discussed by 
the Commandant of the Coast Guard and the NTSB chairperson in the near 
future.

Status of the National Invasive Species Act
    Question. The National Invasive Species Act required a report to 
Congress in January, 2002, on the effectiveness of voluntary standards 
to address invasive species in ballast water. Three months later, no 
report appears to be forthcoming.
    What is holding up the release of this report? When can we expect 
it?

    Answer. In late January 2002, the report assessing the 
effectiveness of the voluntary ballast water management guidelines was 
forwarded to the Department of Transportation for approval and 
submission to Congress. The report was returned from the Office of 
Management and Budget on April 17 with comments from several agencies 
that need to be addressed before final delivery to Congress. The 
resolution of these comments and submission of the report is an 
immediate priority for the Coast Guard who is working towards a date of 
20 May for completion of the report.
                                 ______
                                 
  Response to written questions submitted by Hon. Olympia J. Snowe to
                          Admiral James M. Loy

Inexperienced Personnel Affecting CG Readiness
    Question. The Coast Guard is already facing a shortage of trained 
personnel particularly with petty officers. I am also concerned that 
the large numbers of personnel the Coast Guard intends to bring in this 
year will in the short term create additional readiness problems as 
more inexperienced personnel are assigned to operational units. What 
steps are you taking to ensure that this influx of new personnel won't 
adversely affect the Coast Guard's readiness?

    Answer. The Coast Guard is concerned that high number of accessions 
required to meet expanding mission requirements will decrease overall 
experience levels. The Coast Guard is stressing workforce retention, 
expanded programs to increase the number of experienced entrants to the 
military workforce, expanded retired recall programs, and new training 
initiatives to address this issue.
    Retention of both enlisted and officers has improved during Fiscal 
Year 2002 and the Coast Guard will take action to further address 
retention through bonuses, command intervention, education, and 
compensation.
    The Coast Guard is expanding programs that bring experienced 
members into the military workforce through expanded integration of 
reservists, opening enlistment opportunities for those with prior 
military experience, and recalling retired members to active status. 
The Coast Guard sent letters to 1100 former active duty members, most 
of them serving in the Reserve component, asking them to return to 
active duty. In order to capitalize on the talented Reservists who were 
called up during the recent mobilization, the Coast Guard has offered a 
number of them an opportunity to apply for integration into the regular 
Coast Guard. The Coast Guard has also requested funding increases for 
accession and specialty training at its five training centers.
Partnerships in Fisheries Enforcement
    Question. What efforts is the Coast Guard taking to forge 
partnerships with your partners in NOAA and the state marine patrols to 
develop alternate fisheries enforcement strategies?

    Answer. The Coast Guard works closely with its partners in NOAA and 
the Fishery Management Councils (FMC) to ensure regulations are 
enforceable. In some instances due to a reduced Coast Guard presence 
after September 11th, the FMCs have called for stricter penalties for 
fisheries violations as a deterrence measure.
    The Coast Guard Liaison Officer position at the National Marine 
Fisheries Service (NMFS) Headquarters in Silver Spring, Maryland, has 
provided substantial communication between our agencies. Additionally, 
both at the national and regional levels, the Coast Guard and NMFS 
Enforcement hold regular meetings to discuss fisheries enforcement 
implementation, strategies, and priorities.
    The Coast Guard and NMFS have partnered to establish the National 
Vessel Monitoring System (VMS). Currently, our two agencies are working 
to expand the use of VMS for several fisheries.
    The CG participates in Cooperative Enforcement Agreements (CEAs) 
with NMFS and the state marine patrols, whereby NMFS deputizes state 
enforcement officers to enforce federal fisheries regulations. So far 
NMFS has received $11M in funding to allocate to the various coastal 
states in return for an agreed upon level of federal enforcement 
effort.
    The Coast Guard also partners with NOAA and the state marine 
patrols through our five Regional Fisheries Training Centers (RFTC). 
Often NMFS and the state marine patrols send new agents to one of these 
training centers to learn how the Coast Guard enforces fisheries 
regulations at sea. Additionally, these partners often provide guest 
instructors for RFTC curricula.
    At the regional and local levels, Operational Commanders have 
always worked with their state counterparts to coordinate effective 
enforcement operations.

Need for Coast Guard Authorization Act
    Question. The U.S. Coast Guard, which is part of DOT, plays a vital 
role in the security of our nation's seaports. It is my hope the Senate 
will soon pass S. 1214, the Port and Maritime Security Act of 2001, 
which, if enacted, would give the Coast Guard additional authority and 
authorize funding to address identified seaport security needs. 
Unfortunately, for the third year in a row, the Senate has been unable 
to pass other legislation to authorize the basic needs of the Coast 
Guard due to disagreements over a matter that is unrelated to the Coast 
Guard or its operations. The Coast Guard has not had an authorization 
bill since 1998. What is the impact to the Coast Guard by not having an 
Authorization Act? How has it hurt the Service? What planned activities 
have been delayed due to the lack of an authorization bill? In light of 
the Homeland Security role the Coast Guard is playing, what provisions 
do you need to continue your important work?

   a) Do you believe the lack of an authorization is having an impact 
        on the Coast Guard's ability to provide for our nations' 
        seaport security? How will the lack of an authorization effect 
        future Coast Guard operations relating to seaport security?

   b) Do you believe that legislation intended to increase the level of 
        security at our nations' seaports should be linked to 
        reauthorization of the U.S. Coast Guard?

    Answer. As noted, a Coast Guard Authorization Act has not been 
enacted since 1998. On December 20, 2001, the House passed H.R. 3507, 
its version of a Coast Guard Authorization Act. H.R. 3507 contains a 
number of Coast Guard-sponsored issues that deal with a broad range of 
Coast Guard administrative and operational programs.
    Enactment of the Coast Guard's reauthorization is not directly 
linked to port security legislation. The Coast Guard and the Department 
of Transportation strongly support S. 1214, the Port and Maritime 
Security Act passed by the Senate on December 20, 2001, and appreciates 
the Committee's willingness to consider the Department's views on that 
important piece of legislation. S. 1214 provides a comprehensive 
approach to enhance the security of U.S. ports. Although it is not 
necessary to link S. 1214 directly to the Coast Guard's 
reauthorization, the Department also considers enactment of a Coast 
Guard Authorization Act to be one of its top legislative priorities.

Financial Resources & Statutory Authority--MDA Reality
    Question. Since September 11th, what roadblocks have you faced in 
coordinating with other agencies? What are your plans to facilitate 
increased sharing of intelligence information with the Intelligence 
Community and the other law enforcement agencies? What additional 
financial resources and statutory authority will the Coast Guard need 
to make Maritime Domain Awareness a reality?

    Answer. The Coast Guard has cooperated closely with its 
Intelligence Community and law enforcement agency partners, which 
willingly share intelligence and law enforcement information related to 
ports, waterways, and coastal security. The biggest problems to date 
are stovepiped databases, requiring the same query to be run multiple 
times. The Coast Guard is working with other agencies, including but 
not limited to, the Director of Central Intelligence, the Office of 
Naval Intelligence, the U.S. Customs Service and the Immigration and 
Naturalization Service (INS), to facilitate information and 
intelligence flow by linking databases through information technology.
    The President's fiscal year 2003 budget request includes $97.4 
million for Maritime Domain Awareness initiatives. This includes 
Intelligence Fusion Centers, Information Technology, Port Intelligence 
and Investigative teams, and sensors.
    Although the Coast Guard's existing authority is very broad, we are 
working closely with the Department of Transportation to identify any 
additional requirements and propose legislative changes as needed.
Federal, State and Local Coordination of Maritime Security
    Question. During the aftermath of the September 11th attacks there 
were reports of differing and sometimes conflicting requirements from 
the various agencies with jurisdiction over maritime activities. We 
heard from witnesses at our October 11th hearing discuss how 
coordination amongst jurisdictions worked well in some places, such as 
New York, and not as well in others, such as Portland.
    What are the Coast Guard's plans with regards to implementing a 
planned and coordinated response with regional personnel, other federal 
agencies, state and local officials to the new threats to our maritime 
ports? What steps is the Coast Guard taking to work with other federal 
agencies and regional Coast Guard officers in creating non-conflicting 
requirements for vessels and people involved in maritime commerce?

    Answer. The Coast Guard is moving ahead with an array of required 
new security plans for vessel crews, facility operators, and port 
areas. These plans will require a coordinated response to security 
threats that will include the regional stakeholders, government 
officials and law enforcement officials at the local, state, and 
Federal level.
    Routine meetings between stakeholders; industry; and local, state, 
and federal agencies are led by the Coast Guard Captains of the Port 
(COTP). These meetings are used to discuss and coordinate a wide range 
of Marine transportation System issues including security and safety.

    The Port Readiness Committees ensure activities are 
        coordinated in support of Department of Defense deployments in 
        designated Strategic Ports.

    Harbor Safety Committees have been created to coordinate 
        local maritime issues.

    In a December 17, 2001 message to Coast Guard units, the 
        Commandant of the Coast Guard directed COTP's to ``form port 
        security committees or security subcommittees of existing 
        harbor safety committees in each major port''. Port Security 
        Committees will provide a regular and active forum for the 
        enhancement of security and the prevention of criminal activity 
        within a port.

    At the national level, the Coast Guard leads the Interagency 
Committee for the Marine Transportation System (ICMTS) and co-chairs 
the ICMTS Security Subcommittee. These interagency groups are working 
to improve coordination at the national policy and regulatory level. 
Regional efforts are also underway, to respond to those issues 
affecting the Southeast U.S., Great Lakes regions, and others.
    There is greater coordination of budget builds and legislative 
initiatives between agencies, including the drafting assistance 
provided for the Port and Maritime Security Bill, S.2325 and ongoing 
discussions of how to best address gaps between port security needs and 
law enforcement authority.

    The Coast Guard is working with Customs and the Immigration 
        and Naturalization Service to reduce the individual agency 
        regulatory requirements for reporting vessel, cargo, crew, and 
        passenger information.

Drug Seizure Tactics
    Question. The Coast Guard recently announced that it had seized 
more than 19 tons of cocaine and 5.5 tons of marijuana during January 
and February 2002 in the Pacific Ocean and Caribbean Sea. I understand 
that these seizures were made using a combination of armed helicopters 
and larger, faster interceptor boats launched from Coast Guard cutters. 
These cocaine seizures bring the Coast Guard's totals for the fiscal 
year to date up to 71,767 pounds putting the Coast Guard ahead of pace 
to break its one year record of 138,000 pounds set last year. These 
successes run counter to the decrease in operational resources being 
applied to drug interdiction operations in the transit zone by the 
Coast Guard and the Department of Defense. Are these successes the 
product of better tactics, technology, and intelligence or are we are 
facing a larger maritime smuggling threat? Is more cocaine being 
smuggled to the U.S. via maritime means since September 11th? If so 
what are the Coast Guard's plans to counter this threat? How can we 
apply the lessons learned from these recent seizures to other Coast 
Guard missions such as fisheries enforcement, which are also facing 
reduced operational resources?

    Answer. Estimating an annual seizure amount based on a short period 
of time or comparing it to a particular date in a prior year can be 
difficult. The large amount of cocaine seized in January and February 
2002 was primarily due to three large seizures totaling more than 18 
tons. If this rate were to continue, we could expect to surpass last 
year's record seizure amount for cocaine. However, a longer period will 
be a more accurate representation of overall seizure trends.
    Two of the large seizures in January and February 2002, including 
the largest at 25,300 pounds, were attributed to improved intelligence 
and interagency intelligence sharing. One of those was attributed to 
Operation New Frontier: the Coast Guard's Armed Helicopter, Over the 
Horizon interceptor boats, and major cutter force package. This seizure 
totaled 6,750 pounds. All three seizures were made possible by having a 
combination of air and surface interdiction resources patrolling along 
the threat vectors for cocaine.
    There is no substantiated evidence to suggest that the flow of 
illegal narcotics toward the United States is significantly different 
prior to September 11, 2001. However, preliminary information indicates 
drug smugglers adjusted their activities in the transit and arrival 
zone immediately following the events of September 11, 2001 to both 
exploit the gaps in coverage of the transit zone and avoid increased 
law enforcement presence in the arrival zone. National law enforcement 
agencies observed evidence of temporary shortages of cocaine in Puerto 
Rico and surpluses in Mexico indicating the tighter U.S. border 
controls were having an effect on drug flow into the country.
    After the immediate surge after September 11th, the Coast Guard 
reallocated its forces to achieve a counter drug deployment rate of 
more than 90% of pre-September 11th levels. The Department of Defense 
did not significantly reduce their counter drug deployments following 
September 11th.
    The Coast Guard will continue to look for new ways to improve our 
level of effectiveness through improved sensors, end-game capability, 
intelligence/information sharing, and international/interagency 
cooperation, to other law enforcement missions, such as fisheries 
enforcement and migrant interdiction.
                                 ______
                                 
    Response to written questions submitted by Hon. Barbara Boxer to
                          Admiral James M. Loy

Trinidad Head, California Property
    Question. The Coast Guard has conveyed most of Trinidad Head in 
California to the City of Trinidad. The only part that the Coast Guard 
still has is some housing and a radio antenna. Although the city would 
like the Coast Guard to stay, I am interested to find out what the 
Coast Guard's plans are with the property. And, if the Coast Guard no 
longer wants the property, would the Coast Guard be willing to transfer 
the land to the city of Trinidad.

    Answer. The Coast Guard relinquished a 46-acre parcel of Trinidad 
Head, California to the Bureau of Land Management in 1983. The City of 
Trinidad, in turn, received this parcel from the Bureau of Land 
Management. Presently, Coast Guard retains two parcels of property. An 
active navigation light, fog signal, radio beacon, High Frequency radio 
communications site, and a three-unit housing complex are situated on a 
12.97 acre parcel. Additionally, two communication antennas encompass 
1.08 acres. The Coast Guard is reviewing the remaining property in 
order to determine what, if any, of the property is excess to the Coast 
Guard's operational needs. The aids to navigation are expected to 
remain active into the foreseeable future and the Coast Guard will 
retain easements of ingress/egress, visual rights, and any other rights 
pertaining to maintenance or operation in the event of transfer. If 
determined excess, the Coast Guard would relinquish the remaining 
property, in whole or in part, to the Bureau of Land Management or 
report to the General Services Administration/Department Of Interior 
under the Historic Lighthouse Preservation Act of 2000 in that order. 
The property is listed in the National Register # 91001098. The Coast 
Guard does not have the authority to transfer the property directly to 
the City of Trinidad.

The Future of Pacific Headquarters on Coast Guard Island
    Question. What is the future of Pacific Headquarters on Coast Guard 
Island in Alameda County?

    Answer. The Coast Guard currently intends to maintain Pacific 
Headquarters functions on Coast Guard Island in Alameda County and has 
no immediate or projected plans for change regarding the facilities or 
property.

Resources for Environmental Protection Post-9/11
    Question. I recognize all of the work that the Coast Guard has done 
since September 11th. I know that your limited resources were 
transferred to secure our coasts. I know that the Coast Guard also has 
a responsibility for environmental issues, such as oil spills.
    Do you think that the Coast Guard has enough resources since 
September 11th to also perform its environmental role in our waters?

    Answer. The shifting of resources towards ensuring our nation's 
security following September 11th has affected the amount of resources 
that were previously available for environmental protection, which 
includes both prevention and mitigation programs. However, the Coast 
Guard's multi-year budget strategy is designed to expand port security 
resources and enable resources dedicated to environmental protection to 
return to pre-September 11th levels.

                                  
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