[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]




   MID-TERM REPORT CARD: IS THE BUSH ADMINISTRATION DOING ENOUGH ON 
                          PAPERWORK REDUCTION?

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON ENERGY POLICY, NATURAL
                    RESOURCES AND REGULATORY AFFAIRS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 11, 2003

                               __________

                           Serial No. 108-16

                               __________

       Printed for the use of the Committee on Government Reform


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



                                 ______

87-418              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana                  HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   DIANE E. WATSON, California
ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER, 
NATHAN DEAL, Georgia                     Maryland
CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of 
TIM MURPHY, Pennsylvania                 Columbia
MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
JOHN R. CARTER, Texas                            ------
WILLIAM J. JANKLOW, South Dakota     BERNARD SANDERS, Vermont 
MARSHA BLACKBURN, Tennessee              (Independent)

                       Peter Sirh, Staff Director
                 Melissa Wojciak, Deputy Staff Director
              Randy Kaplan, Senior Counsel/Parliamentarian
                       Teresa Austin, Chief Clerk
              Philip M. Schiliro, Minority Staff Director

Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs

                     DOUG OSE, California, Chairman
WILLIAM J. JANKLOW, South Dakota     JOHN F. TIERNEY, Massachusetts
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
CHRIS CANNON, Utah                   DENNIS J. KUCINICH, Ohio
JOHN SULLIVAN, Oklahoma              CHRIS VAN HOLLEN, Maryland
NATHAN DEAL, Georgia                 JIM COOPER, Tennessee
CANDICE S. MILLER, Michigan

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                       Dan Skopec, Staff Director
                Barbara F. Kahlow, Deputy Staff Director
                          Melanie Tory, Clerk
                   Alexandra Teitz, Minority Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 11, 2003...................................     1
Statement of:
    Graham, John D., Administrator, Office of Information and 
      Regulatory Affairs, Office of Management and Budget; Robert 
      E. Wenzel, Acting Commissioner, Internal Revenue Service, 
      Department of the Treasury; John D. Henshaw, Assistant 
      Secretary of Labor for Occupational Safety and Health, 
      Deparment of Labor; and Victor S. Rezendes, Managing 
      Director, Strategic Issues, General Accounting Office......    13
    Peterson, JoAnne E., president and CEO, Abator, Pittsburgh, 
      PA; Victor Schantz, president, Schantz Organ Co., Orrville, 
      OH; and Frank C. Fillmore, Jr., president, the Fillmore 
      Group, Inc., Ellicott City, MD.............................   107
Letters, statements, etc., submitted for the record by:
    Fillmore, Frank C., Jr., president, the Fillmore Group, Inc., 
      Ellicott City, MD, prepared statement of...................   124
    Graham, John D., Administrator, Office of Information and 
      Regulatory Affairs, Office of Management and Budget, 
      prepared statement of......................................    16
    Henshaw, John D., Assistant Secretary of Labor for 
      Occupational Safety and Health, Deparment of Labor, 
      prepared statement of......................................    52
    Ose, Hon. Doug, a Representative in Congress from the State 
      of California, prepared statement of.......................     4
    Peterson, JoAnne E., president and CEO, Abator, Pittsburgh, 
      PA, prepared statement of..................................   109
    Rezendes, Victor S., Managing Director, Strategic Issues, 
      General Accounting Office:
        Information concerning violations........................    90
        Prepared statement of....................................    66
    Schantz, Victor, president, Schantz Organ Co., Orrville, OH, 
      prepared statement of......................................   118
    Wenzel, Robert E., Acting Commissioner, Internal Revenue 
      Service, Department of the Treasury, prepared statement of.    35

 
   MID-TERM REPORT CARD: IS THE BUSH ADMINISTRATION DOING ENOUGH ON 
                          PAPERWORK REDUCTION?

                              ----------                              


                         FRIDAY, APRIL 11, 2003

                  House of Representatives,
  Subcommittee on Energy Policy, Natural Resources 
                            and Regulatory Affairs,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2154 Rayburn House Office Building, Hon. Doug Ose 
(chairman of the subcommittee) presiding.
    Present: Representatives Ose and Janklow.
    Staff present: Dan Skopec, staff director; Barbara Kahlow, 
deputy staff director; Danielle Hallcom, professional staff 
member; Melanie Tory, clerk; Yier Shi, press secretary; 
Alexandra Teitz, minority counsel; and Cecelia Morton, minority 
office manager.
    Mr. Ose. Good morning.
    Welcome to today's hearing before the Subcommittee on 
Energy Policy, Natural Resources and Regulatory Affairs.
    Today's subject matter is, ``A Mid-Term Report Card: Is the 
Bush Administration Doing Enough on Paperwork Reduction?''
    Every April the subcommittee holds a hearing to assess 
progress in paperwork reduction. This week, as Americans 
prepare and file their Federal tax returns and their State 
returns, they will again get to experience firsthand the kind 
of paperwork that the government imposes. Today our 
subcommittee will examine if, after 2 years in office, the Bush 
administration is doing enough on paperwork reduction.
    The Office of Management and Budget, which we are going to 
refer to as OMB hereafter, estimates the Federal paperwork 
burden on the public at over 8 billion hours. The IRS accounts 
for 81 percent of that total. Five additional agencies each 
levy over 140 million paperwork hours annually on the public 
and those agencies are: The Department of Health and Human 
Services, including Medicare and Medicaid, the Department of 
Transportation, Department of Labor, Environmental Protection 
Agency, and the Securities and Exchange Commission. In its 
March 2002 draft Regulatory Accounting Report, OMB estimated 
that the price tag for all paperwork imposed on the public is 
$230 billion a year. Let me just repeat that, $230 billion a 
year.
    Much of the information that is gathered in this paperwork 
is important, sometimes even crucial, for the government to 
function. However, much is duplicative and unnecessarily 
burdensome.
    In 1980, Congress passed the Paperwork Reduction Act, 
established an Office of Information and Regulatory Affairs 
[OIRA] in OMB. By law OIRA's principal responsibility is 
paperwork reduction. It is responsible for guarding the 
public's interest in minimizing costly, time-consuming and 
intrusive paperwork burden.
    In 1995, Congress passed amendments to the Paperwork 
Reduction Act and set governmentwide paperwork reduction goals 
of 10 or 5 percent per year from fiscal year 1996 to fiscal 
year 2001. After annual increases in paperwork, instead of the 
decreases, in 1998, Congress required OMB to identify specific, 
expected reductions in fiscal years 1999 and 2000. OMB's 
resulting report was unacceptable. In response, in 2000, 
Congress required OMB to evaluate major regulatory paperwork 
and identify specific expected reductions in regulatory 
paperwork in fiscal years 2001 and 2002. Again, OMB's resulting 
report proved unacceptable.
    Finally, last June, Congress passed the Small Business 
Paperwork Relief Act of 2002, as Public Law 107-198. This law 
required OMB to take certain actions by June 28, 2003. Also 
last July, Congress directed OMB to identify and review 
proposed and existing IRS paperwork. I look forward to the 
status report today from OMB on its implementation of this new 
law and on the changes it has made to specifically focus OMB's 
resources on IRS paperwork.
    In last year's annual paperwork hearing, witnesses 
criticized the unnecessary complexity and burden of the 
Department of Labor's paperwork. After the hearing, I wrote 
Labor Secretary Chao to review this testimony and asked her to 
focus on the 38 Department of Labor paperwork requirements 
which each impose over 500,000 hours of burden on the public. 
Half of these, 19, are imposed by a single agency, the 
Occupational Safety and Health Administration. I look forward 
to Department of Labor's status report.
    Congress' actions were taken to reduce red tape each year. 
However, paperwork burden has increased, not decreased, in each 
of the last 7 years. Today, the General Accounting Office [GAO] 
will report that last year saw the largest 1-year increase in 
paperwork since the 1995 law was enacted. Curiously, in 
November 2002, OMB told the agencies, ``While we encourage you 
to identify additional paperwork reduction initiatives, it is 
not required.'' That is disturbing, to say the least.
    Under the Paperwork Reduction Act, OMB is the watchdog for 
paperwork. However, the evidence seems to point to OMB's 
continued failure to focus on paperwork reduction. OMB has not 
pushed the IRS and other Federal agencies to cut existing 
paperwork in a satisfactory manner. Additionally, agencies 
continue to levy unauthorized paperwork burdens on the American 
people. Let me repeat that. Agencies continue to levy 
unauthorized paperwork burdens on the American people.
    IRS also has a dismal record in paperwork reduction. Today 
GAO will report that, ``IRS has some discretion that can affect 
paperwork burden,'' and some IRS burden increases were ``at the 
agency initiative, not because of new statutes.'' Former IRS 
Commissioner Rossotti, who testified before this subcommittee 
in April 1999, 2000, 2001, and 2002, promised more initiatives 
each year, especially for small-business taxpayers. I hope IRS 
has initiatives planned to make a substantial dent in this 
burden.
    OMB and the IRS are not doing an acceptable job in 
paperwork reduction. The subcommittee's Mid-Term Report Card, 
grading each agency's effort is on display. In sum, the 
administration is clearly not doing enough on paperwork 
reduction.
    I do want to welcome our witnesses today. Again, we are 
joined by the Office of Management and Budget's Director of the 
Office of Information and Regulatory Affairs, OIRA's 
Administrator, John Graham. We have Acting IRS Commissioner 
Robert Wenzel; and the Assistant Secretary of Labor for 
Occupational Safety and Health, Department of Labor, John 
Henshaw. We have Victor Rezendes, who is the Managing Director 
of Strategic Issues at the GAO.
    On our second panel we have Joanne Peterson, president and 
CEO of Abator in Pittsburgh, PA. We have Victor Schantz, who is 
the president of the Schantz Organ Co. in Orrville, OH, and 
Frank Fillmore, Jr., the president of the Fillmore Group in 
Ellicott City, MD.
    [The prepared statement of Hon. Doug Ose follows:]

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    Mr. Ose. The manner in which this committee proceeds is 
that the members on the dais have opening statements. They make 
those. Then, we are going to swear in all of our witnesses. We 
have your testimony. We have received it. We have reviewed it 
to the extent that, when we get to your testimony, if you could 
summarize within the 5 minutes we will allot, that would be 
great, so then we can go directly to questions.
    We are going to have some votes here shortly. So, we are 
going to have to work around that. I know my good friend, Mr. 
Janklow, has an opening statement, and I recognize him for 5 
minutes.
    Mr. Janklow. Thank you very much, Mr. Chairman.
    I appreciate your comments, and I truly appreciate your 
setting this hearing.
    You know, the reality of the situation is, this is a war, 
another war we're going to lose. Congress passes laws. 
Everybody says he is for paperwork reduction, and nothing 
happens. The reality of the situation is, it's like the old 
Shakespearean play, full of sound and fury, signifying nothing. 
That's really what it comes down to. We live in a society where 
the government forms, they ask for information that's 
unnecessary, absolutely unnecessary, and they will argue with 
you about whether or not the information is necessary.
    I personally have dealt, as a chief executive in my State, 
on many occasions dealt with getting forms from the Federal 
agencies, the various Federal agencies, not all of them, but 
various Federal agencies that are using old forms competing 
with new forms. And, they don't get rid of the old forms, and 
God knows why they need the new forms.
    We deal with a situation where you can't even deal with a 
lot of these agencies electronically. You can't even download 
their forms off the electronic media. Some of them you can. 
Some of them have done a good job of it. But, there shouldn't 
be a single form in this government that a citizen needs to go 
out of their home to collect, if they have technology at home. 
They ought to be able to download 100 percent of the forms in 
this country. They ought to be able to fill out 100 percent of 
the forms in this country at home and transmit them 
electronically.
    Our National Government has to be one of the few places 
left that still has both legal-sized paper and letter-sized 
paper. We haven't figured out that you can get by with letter-
sized paper, and they will give you an argument of how much 
more information they can get on a legal-sized document, as 
opposed to doing something about getting rid of those types of 
things.
    The only way for the citizens in this country to be able to 
access the information they have to access, the only way the 
citizens of this country can be in the position where they can 
provide the information the government needs and get the 
information from the government that they need to conduct their 
affairs as we continuously, increasingly regulate their lives, 
is to do it on some type of electronic means. And, I don't 
blame OMB for this. There is no way they can handle this 
problem. No one listens to them, either.
    And so, we live in a society where every agency of every 
government thinks it is sovereign. They do everything they can 
to sabotage everything that anyone from the outside wants to 
do, and the reality of the situation is this is another war we 
are going to lose, but we are going to have a lot of fun 
fighting it.
    And so, I think it is very timely that you have called this 
meeting, Mr. Chairman. And, I look forward to the testimony of 
the witnesses and the opportunity to ask them questions. The 
tragedy is that the citizens of this country, they hold out no 
hope for any real change. They hold out no hope at all for any 
real change in the reduction of paperwork and the reduction 
of--and the increased ability to deal with productivity in 
their lives, vis-a-vis on how they deal with their government 
and for an ever increasing amount of rules and regulations, 
most of which are not going to be able to be dealt with 
electronically, but they will be dealt with in the paper world.
    The truth of the matter is, we are dealing with a 
revolution that has been started by the grade schoolers. They 
understand technologies. The grade schoolers know how to 
utilize technology. It's the adult community that hasn't 
figured it out. So, we need to go to the 8th graders and ask 
them how would you do it, what's an efficient, effective way to 
do it, and then maybe they can give us some advice on how we 
can transmit it electronically.
    So, these are very timely hearings, and I really look 
forward to the testimony of the witnesses and seeing if there's 
something we can do. Although I know there probably won't be. 
Thank you.
    Mr. Ose. On that happy note, I do appreciate your making it 
this morning. I know it can't be easy to be here given last 
night's schedule. So, we're grateful. Gentlemen, if you'd all 
rise please.
    [Witnesses sworn.]
    Mr. Ose. Let the record show that the witnesses answered in 
the affirmative.
    Our first witness who joins us, as he has many times in the 
past, is John Graham, the Administrator of the Office of 
Information Regulatory Affairs, the Office of Management and 
Budget.
    And, Dr. Graham, you are recognized for 5 minutes and 
welcome.

    STATEMENTS OF JOHN D. GRAHAM, ADMINISTRATOR, OFFICE OF 
 INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND 
BUDGET; ROBERT E. WENZEL, ACTING COMMISSIONER, INTERNAL REVENUE 
SERVICE, DEPARTMENT OF THE TREASURY; JOHN D. HENSHAW, ASSISTANT 
    SECRETARY OF LABOR FOR OCCUPATIONAL SAFETY AND HEALTH, 
DEPARMENT OF LABOR; AND VICTOR S. REZENDES, MANAGING DIRECTOR, 
          STRATEGIC ISSUES, GENERAL ACCOUNTING OFFICE

    Dr. Graham. Thank you, Mr. Chairman, and good morning to 
you and members of the subcommittee.
    In my exercise class this morning--Friday morning is my 
exercise day--I was laboring on the Stairmaster, and then doing 
those beloved crunches. To get myself going, I said to myself, 
this is not so bad. It's nothing compared to the delightful 
experience of Chairman Ose's annual paperwork hearing.
    For OMB officials, we live to get through this day, and I 
already see the light at the end of the tunnel. But in 
seriousness, Mr. Ose, thank you for your leadership on this 
issue, the challenge of reining in government paperwork. It 
isn't fancy policy analysis. It isn't the most enjoyable 
exercise, but it's hard work that needs to be done. We are 
working on it, and we need your encouragement and your 
leadership.
    A few reminders before I get to a few of the good pieces of 
news that we have to offer this morning, and that is the 
Paperwork Reduction Act, while its first goal is to reduce 
burdens of paperwork on the public, it has as a second goal the 
promotion of utility of the information that agencies use in 
their various programs. And, the Paperwork Reduction Act has 
embodied in it, an understanding that there is a need for the 
government to have information to do its work and the 
challenges to make sure that we don't have unnecessary 
paperwork burdens.
    We at the Office of Information and Regulatory Affairs 
realize that we are a cause of some paperwork burdens. For 
example, we require agencies to do Regulatory Impact Analyses, 
to support their regulatory proposals. In order for these 
analyses to be quality analyses, agencies must collect data 
from the public and this is burdensome.
    So, as a starting point, understand we have a conflict of 
interest. We supposedly are part of the solution of the 
paperwork problem, but we also, to some extent, require 
agencies and the public to provide information to the 
government.
    Now, you've already mentioned some of the bad news in the 
report that we have submitted prior to this hearing. This 
year's Information Collection Budget. I'd like to take a few 
moments to highlight some of the good news.
    The first is, and I hope my staff has brought our nice 
little visual for you to take a peek at. That is, we have made 
some progress in slashing violations under the Paperwork 
Reduction Act. As you know, Mr. Chairman, this has been a theme 
of your efforts. I want to come out of this hearing today to 
say there is one little light of progress in the world. And, 
that is, we have been reducing, continuously, and in the last 
year, quite substantially, the number of unresolved violations 
under the Paperwork Reduction Act.
    You might ask what is a violation under the Paperwork 
Reduction Act. Quite simply, this is a case where an agency 
actually places a burden on the public, a business, a farmer, 
or whatever, and they require that person to fill out 
information and send it to the public without any authorization 
from the Office of Management and Budget.
    Each time the government collects information from the 
public, there should be an OMB review and clearance and an OMB 
control number put on that particular piece of paperwork. And, 
the typical paperwork violation is when an agency doesn't 
bother to get OMB approval in the first place, or more 
commonly, has their approval expire and doesn't make the effort 
to seek reapproval from the Office of Management and Budget. 
Not surprisingly, we at OMB view this as unacceptable. We have 
adopted a zero-tolerance policy for these Paperwork Reduction 
Act violations, and in the last year we have done a series of 
communications that you're aware of, Mr. Chairman, with the 
CIOs of the agencies, the General Counsels of the agencies, and 
in the case of several agencies, we have had to go to the 
Deputy Secretaries of those agencies to get paperwork 
violations on their radar screens as a problem.
    The chart before you shows, in the last year, over 50 
percent decline in the continued decline in the number of these 
violations. We realize we have more work to do, we haven't 
reached elimination of these violations, but I would like to 
add that two agencies that have been a persistent problem in 
this area, USDA and Department of Housing and Urban 
Development, have both made substantial progress in the last 
year in eliminating their paperwork violations. There are 62 of 
them remaining on that chart, and we are happy to report that 
all those are on the way to being corrected, and we can provide 
the subcommittee details on where they are in the process of 
being corrected.
    The second piece of good news is in the reductions of 
discretionary paperwork burdens. While overall paperwork burden 
is up, the burdens that are within the control of the agencies 
are actually going down. They are going down by roughly 2 
million hours, particularly at Treasury, at Education and at 
HHS.
    And, I might say on millions of hours of reduction is that 
it is trivial compared to the billions of hours in total. And, 
I would suggest to you, that's not a constructive perspective 
to have on this problem. These burdens are real for the people 
who experience them. When agencies within their control can 
take out millions of hours of burden, we should say, ``That's 
good work agencies, thank you. Please do more.'' We should also 
credit the agencies when they make this kind of progress, as 
well as criticize them when they do not make this progress.
    And, we should also remember that the billions of hours 
that we have not been able to remove, they're partly OMB's 
responsibility. They are partly the agencies' responsibility. 
But they are also partly the responsibility of the U.S. 
Congress.
    Thank you very much, Mr. Chairman. Keep the heat on us. We 
need it.
    Mr. Ose. Thank you, Dr. Graham.
    [Note.--The Office of Management and Budget's report 
entitled, ``Managing Information Collection and Dissemination 
Fiscal Year 2003,'' can be found in subcommittee files.]
    [The prepared statement of Dr. Graham follows:]

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    Mr. Ose. Our next witness is Mr. Wenzel.
    You're recognized for 5 minutes. We welcome you to our 
committee.
    Mr. Wenzel. Thank you, Mr. Chairman. Thank you for this 
opportunity to testify on the IRS's continuing efforts to 
reduce unnecessary taxpayer burden, and, in particular, 
unnecessary paperwork burden.
    Accompanying me today is Mr. Michael Chesman, Director of 
the Office of Taxpayer Burden Reduction. Michael's right behind 
me.
    Mr. Chairman, our goal is to create the least amount of 
burden for taxpayers to meet their responsibilities under the 
law. Since last year's hearing, we've made progress on a number 
of fronts. For example, by raising the threshold for interest 
and dividend income an estimated $15 million, taxpayers no 
longer have to file a Form 1040 Schedule B, and, because of our 
Industry Issue Resolution Program, family day care providers no 
longer have to keep detailed records and receipts of food 
purchased for use in their business. They may now choose, 
instead, to use a standardized rate to claim the deduction for 
meals provided to children in their care.
    These small businesses will see a reduction of an estimated 
10 million burden hours a year. Other innovative programs, such 
as our Fast Track Mediation, Fast Track Settlement, and Limited 
Focus Examinations, are providing concrete burden reduction for 
taxpayers and the IRS. Each are saving us time and resources.
    We're also simplifying forms and notices to make them 
clearer and more easily understood, and we're tackling the 
major redesign of those schedules and forms with a huge impact 
on individual and business taxpayers, such as the Schedule K-1 
and Form 941.
    New technology and access to the technology have also 
proved to be important tools in the fight to reduce burden. 
This year, over 2 million taxpayers are enjoying the benefits 
of the innovative Free File Program.
    Businesses are also finding that they can unburden 
themselves of even more paper and perform more of their 
reporting and payment transactions on-line. Soon, they will 
even be able to apply for an Employer Identification Number by 
going to our Web site.
    Clearly, we've made some progress. But, clearly, too, 
reducing unnecessary taxpayer burden, in all its many shapes 
and forms, is an enormous challenge. It is especially difficult 
when seen within the context of an extremely complex and ever-
changing Tax Code.
    On the one hand, we seek to cut lines, simplify or 
eliminate forms altogether and reduce the number of taxpayers 
having to file forms and schedules. On the other hand, we often 
must add lines to other tax forms to reflect new changes in the 
Tax Code that may benefit millions of taxpayers. For example, 
we added three lines to the Form 1040 for tax year 2002 to 
accommodate statutory changes. Frequent changes to the Tax Code 
and tax-law complexity are perhaps the greatest hurdle to 
overcome as we work to reduce unnecessary taxpayer burden. 
There is even anecdotal evidence that tax law complexity may be 
a source of noncompliance and even nonfiling.
    Mr. Chairman, in conclusion, our many efforts to reduce 
unnecessary taxpayer burden are producing tangible results and 
benefits for taxpayers. We will continue to seek administrative 
and other solutions to reduce taxpayer burden.
    However, we must still address tax law complexity in a 
meaningful way. If we fail to, we will have failed in our 
mission to reduce taxpayer burden. Most importantly, we will 
have failed America's taxpayers.
    Thank you.
    Mr. Ose. Thank you Mr. Wenzel.
    [The prepared statement of Mr. Wenzel follows:]

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    Mr. Ose. Our next witness is John Henshaw, who is the 
Assistant Secretary of Labor for Occupational Safety and Health 
at the Department of Labor. Welcome.
    You're recognized for 5 minutes.
    Mr. Henshaw. Good morning Mr. Chairman, members of the 
subcommittee. Thank you for this opportunity to report on the 
Department of Labor's implementation of the Paperwork Reduction 
Act.
    I am pleased to report that the Department of Labor has 
made great progress in reducing paperwork and will still strive 
to further reduce the burdens to employers. OSHA and DOL 
agencies have worked hard with the Department's Chief 
Information Officer and the Office of Management and Budget to 
fulfill the Department's commitment to reducing paperwork 
burdens for collection of information. Our efforts to date show 
that we are moving in the right direction. In fiscal year 2002, 
DOL reported no unresolved or new violations to the Paperwork 
Reduction and between fiscal year 1995 and fiscal year 2002, 
the Department reduced paperwork burdens by approximately 29 
percent. During the same period, OSHA reduced its burden by 32 
percent.
    As part of the review of approximately one-third of OSHA's 
information collection requests each year, the public is 
invited to comment on both the usefulness of the information 
and on the accuracy of the estimated burden. As a result, the 
estimated burden that individual regulations impose may change 
substantially. It's important that we achieve accuracy.
    For example, during the most recent 3-year review, the 
estimated burden of OSHA's Lockout/Tagout Standard was 
increased by approximately 1 million hours, while the estimated 
burden of OSHA's Process Safety Management Standard was 
decreased by approximately 28 million hours.
    The subcommittee has expressed interest in DOL's 
Information Collection Requests that each require over 500,000 
burden hours annually of the Nation's employers. In my written 
statement is a report listing the status of OSHA ICRs. All of 
the 19 OSHA ICRs on this list, either have been recently 
reviewed by the agency, or will be reviewed in the next year, 
to determine their burden hours usefulness and related cost.
    In the past 3 years, OSHA has reviewed and refined a total 
burden associated with these paperwork requirements, which has 
led to a reduction of 22.3 million burden hours. This is 
approximately a 17 percent reduction for OSHA for OSHA's most 
burdensome collections.
    Through our review of Information Collection Requests, we 
identified paperwork requirements in standards that need a 
closer examination for possible program changes. The process of 
systematically reviewing existing regulations, examining their 
requirements to determine whether they are necessary and 
useful, and eliminating those requirements that impose an 
unnecessary burden is a long process that requires careful 
analysis of the data, including public comment. Nevertheless, 
this is a priority of mine.
    We have several initiatives. We have three initiatives 
underway to accomplish this. First, when we conduct reviews, 
under Section 610 of the Regulatory Flexibility Act, to examine 
the burdens and effectiveness of individual standards, we 
review public comment on any paperwork requirement.
    We are currently reviewing ethylene oxide evacuations and 
presence sensing device initiatives on mechanical power 
presses. Depending on the content of the public comments and 
the subsequent analysis, paperwork burden hours could 
substantially be affected. We also are looking at other 
standards for review.
    Our second process is under the Standards Implementation 
Project, in which we are reviewing individual requirements of 
standards to see what can be modified or eliminated without 
diminishing worker safety and health. We are now in phase 2, 
which means that we have proposed a second set of changes. We 
have received comments on our proposal and will be conducting a 
public hearing in July.
    By updating these health standards, the agency expects this 
project to reduce annual paperwork burdens by over 200,000 
hours.
    Finally, we are looking at reviewing various certification 
records requirements of OSHA standards to determine if they are 
still necessary and useful. In our crane standard for example, 
certification records provide written assurance that critical 
elements or items have been inspected and are in good working 
condition.
    In conclusion, Mr. Chairman, I believe the Department and 
its agencies are working effectively to reduce unnecessary 
paperwork for employers wherever possible, thereby allowing 
employers to focus on what's important, ensuring safe and 
healthy workplaces, creating jobs, improving productivity, and 
keeping the economy strong.
    I will be pleased to answer any questions after the opening 
statements.
    Mr. Ose. Thank you Mr. Henshaw.
    [The prepared statement of Mr. Henshaw follows:]

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    Mr. Ose. Our fourth witness on the first panel is Mr. 
Victor Rezendes, who is the Managing Director of Strategic 
Issues at the GAO, the General Accounting Office.
    Sir, we welcome you to our committee and you're recognized 
for 5 minutes.
    Mr. Rezendes. Thank you, Mr. Chairman.
    I really appreciate being here today to talk about the 
implementation of the Paperwork Reduction Act. As you mentioned 
earlier, the Act calls for a reduction in paperwork, but the 
burden has actually been increasing. As my first chart shows, 
which is also on Page 5 of my testimony for those of you who 
want to reduce their eyestrain, the burden estimate has 
increased 1.2 billion hours since the Act took effect in 1995. 
Nearly half of that increase occurred last year alone, 70 
percent occurred over the last two fiscal years. IRS and DOT 
account for 90 percent of the increase last year. IRS increased 
its estimate by 330 million burden hours, most of which 
involved adjustments to the Form 1040. DOT's 165-billion-hour 
increase almost entirely was attributable to the reintroduction 
and re-estimation of one of its information collections.
    Few agencies experienced decreases. Most notably the FCC 
had a 13-million-hour decrease.
    Because IRS constitutes such a significant portion of the 
governmentwide burden, changes in the estimates that it has can 
have a significant and determinative effect on the 
governmentwide burden. For example, just one form, the IRS Form 
1040 is estimated to impose more paperwork burden than all of 
the non-IRS collections combined. Just five IRS collections 
represent half of the total 8.2 billion-hour governmentwide 
burden estimate. One strategy to reduce paperwork burden 
governmentwide is to focus more of OIRA's resources on IRS.
    Let me now turn to violations. During the past 5 years, 
violations have fallen markedly, 70 percent in 5 years, 40 
percent last year alone as my second chart shows, which is on 
page 17 of the testimony.
    The track record at individual agencies, however, varied. 
At Agriculture and Justice, the violations have gone down every 
year. At Commerce, they increased each year. HUD and VA 
exhibited inconsistent patterns. Notably, some cabinet 
departments--Treasury, Transportation, Labor and Energy--were 
able to completely eliminate violations last year. OIRA 
deserves a great deal of credit for these decreases in 
violations. Although OIRA has made good progress, 244 
violations of law in 1 year is not acceptable.
    In addition, some longstanding violations have not been 
addressed. Of the 120 unresolved violations at the end of the 
fiscal year, 45 had been occurring for over 1 year, 9, for over 
5 years. The cost to the American taxpayer was $1.4 billion.
    While agencies have brought a number of these violations 
into compliance up to January 2003, 74 still remained 
unresolved. Agencies can and should achieve OIRA's goal of zero 
violations.
    Thank you, Mr. Chairman.
    Mr. Ose. Thank you Mr. Rezendes.
    [The prepared statement of Mr. Rezendes follows:]

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    Mr. Ose. We're going to go to questions now.
    I want to make sure--Mr. Rezendes, I'm going to take you 
first--we're going to go 10-minute rounds here.
    I just want to make sure I understand something, and, if 
you could clarify it, I would appreciate it.
    In order for an agency to put out a request for information 
to the public, that form that they use must go through Dr. 
Graham's shop for approval.
    Mr. Rezendes. Correct.
    Mr. Ose. And, if it doesn't go through Dr. Graham's shop 
for approval, do the citizens have to comply with the request 
for information?
    Mr. Rezendes. Technically, they do not. However, there 
could be statutory requirements that would supersede whether 
OIRA has approved the form or not. And, in addition, a lot of 
the collections are applications for benefits. So, there is an 
incentive on the public to complete the forms.
    Mr. Ose. All right.
    Now, you also mentioned nine such instances that have been 
in existence for more than 5 years.
    Mr. Rezendes. Yes, sir.
    Mr. Ose. Do you have a list of those?
    Mr. Rezendes. I just happen to have a list, yes, I do.
    Mr. Ose. Would you submit that to the subcommittee for the 
record.
    Mr. Rezendes. Be happy too, sure.
    [The information referred to follows:]
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    Mr. Ose. Thank you.
    Dr. Graham, is it your understanding of the requirement for 
approval of forms, do you concur with Mr. Rezendes in terms of 
the form having to be approved by your shop before it's put out 
so to speak?
    Dr. Graham. Yes, sir.
    Mr. Ose. OK. I just wanted to get that on the record. Those 
nine.
    Dr. Graham, my invitation asked for your written testimony 
to address five specific subjects. The first of those was the 
specific reductions in reporting and recordkeeping of at least 
250,000 hours accomplished since April 11th of last year and 
additional specific paperwork reductions of at least 250,000 
hours expected in the remainder of fiscal year 2003. The 
question I have, well, it is a statement actually. The question 
I have is, when you put out the statement--this was to the 
agencies--OMB stated, ``In the fiscal year 2002 Information 
Collection Budget, we asked each agency to identify at least 
two major initiatives to reduce paperwork burden on the 
public,'' and then went on to say, ``That while we encourage 
you to identify additional paperwork burden reduction 
initiatives, it is not required.''
    Now, the question I have is that, I mean, you and I have 
gone round and round and round since I got here on this issue, 
and I think you're doing a lot of good work. Why didn't OMB 
require additional paperwork reduction initiatives for fiscal 
year 2003? It's the ``require'' issue that I'm trying to get 
at.
    Dr. Graham. Well, Mr. Chairman, last year, as you recall, 
we required all but 12 of the agencies to provide us 
initiatives and a number of them did. And, what we did this 
year is, we brought the remaining 12 which had not provided 
initiatives, we required them to come up to the pace of the 
rest of the agencies.
    I think implicit in the question you're asking is the idea 
that these initiatives only take a year to do, and you are 
done. After this year, you could start a new initiative. We 
made the assessment that just layering on an OMB 
``requirement'' for another set of initiatives on top of the 
ones that are still already in progress wasn't likely to reach 
tangible results.
    Mr. Ose. So the previous year's request, if I recall 
correctly, was you had asked for two initiatives from a host of 
agencies and departments. And then this year, to those agencies 
and departments where no request had been made, you went back 
to them this year and asked for them to put forward their 
initiatives.
    Dr. Graham. That's right. And, as I recall, Mr. Chairman, 
you encouraged us to make sure that we didn't let those 12 
agencies slide another year. That's my recollection of it.
    Mr. Ose. I agree. I am interested in having across-the-
board impact here. The paperwork reduction initiatives that 
have resulted in decreases of at least 250,000 hours due to an 
agency action, those that were accomplished since April 11, 
2002, I would be interested in having that list for the record.
    And then, I'd like to know what significant initiatives are 
planned for the remainder of fiscal year 2003 for the five 
following non-IRS agencies. For the five following non-IRS 
agencies, which each levy, according to our numbers, over 140 
million paperwork hours of burden on the public.
    I'm going to read them to you, and then we'll send you a 
question on this beyond, unless you know the answer today. The 
first is Health and Human Services, the second is Department of 
Transportation, the third is Department of Labor, the fourth is 
the Environmental Protection Agency, and the fifth is the 
Securities and Exchange Commission. Those five agencies have 
significant influence on the paperwork burden for the public, 
and we'd appreciate knowing what specific initiatives we've got 
going now to reduce the paperwork burden on those.
    Now I'm going to recognize the gentleman, Mr. Janklow.
    Thank you.
    Mr. Janklow. Thank you very much, Mr. Chairman. Thank you.
    If I could, Dr. Graham, I'm puzzled. You said, I believe, 
in your testimony, that, although there have been millions of 
hours worth of successes, we're dealing with billions of hours 
of paperwork. Well, if we assume we've had 10 million hours 
worth of success, versus 1 billion hours of paperwork, there's 
been a 1 percent reduction. At that rate, to get to zero, I'd 
have to be, like, 163 years old. And, I'm just wondering, is 
there better light at the end of the tunnel than a 1 percent 
reduction per year? And, I say this understanding that you 
showed up at the scene of this crime. You know, at least you're 
not one of the perpetrators yet. You're just an investigating 
officer. But, what does it take to get people moving? What's 
the problem. I mean, is it they ignore you? Is it that they 
don't understand you? Is it that they don't care? Or they're 
incompetent. You know, World War II only lasted 3\1/2\ years. 
And, it seems like this is going to take decades to do. What's 
the problem?
    Dr. Graham. Well, I think there is a problem. But let me 
try to break it into pieces for you, sir.
    The chairman of this subcommittee has for several years 
been pushing us to report our data in a way that you could tell 
whether increases in paperwork burden were due to discretionary 
actions on the part of agencies or whether they related to 
statutory demands placed by Congress or whether they related to 
demographic factors or simply the growth of the economy or 
changes in the population, for that matter.
    We have done that in this year's report, and that analysis 
is part of the ICB. And, what you'll find is, that, if you look 
at the subset of the paperwork burdens that are within the 
control of the agencies, the people at this table here today, 
if you can think of them in some ways as the more discretionary 
types of paperwork burdens, they're actually going down in net 
terms and at some of the agencies, the ones I mentioned, 
they're going down quite significantly.
    So the big--and I hate to turn the table a little bit on 
you here. If we're going to make big progress on this problem, 
we can't do it alone at OMB. We can't do it alone with the 
agencies to my left. We need the U.S. Congress to join us in 
that effort.
    Mr. Janklow. Look, nobody says this group's blameless. As a 
matter of fact, the public blames them more than they blame 
your agency. They think we're, you know, we're co-conspirators 
at least, if not principals in the crime.
    But, I listened to Mr. Rezendes' testimony, and I listened 
to Mr. Wenzel's testimony, and they look like two trains 
passing in the night on different tracks. Either Mr. Rezendes 
is correct with respect to the substantially increased burden 
in the IRS or Mr. Wenzel you are. What do you disagree with Mr. 
Wenzel with respect to what Mr. Rezendes said about your 
agency?
    Mr. Wenzel. I want to comment on the example that was given 
regarding the three additional lines that were added to the 
Form 1040 this year, Line 23, Line 26, and Line 49. These lines 
deal with tax credits that the Congress passed into law that 
were required to be implemented for tax year 2002. These are 
good credits. They're really favorable. One was for teachers, 
one was for tuition, and one was for retirement credit. 
Obviously they needed to be added onto the 1040, and that 
increased the number of burden hours.
    We view the changes as mandatory, required the law that was 
passed, and believe the form was changed that is as clear and 
as concise as possible to minimize taxpayer burden.
    Mr. Janklow. Mr. Rezendes, have you had--were you asked to 
or have you estimated what percent or what volume of the 
paperwork problem, if I can call it that, within the government 
can be attributable to be Congress? How guilty are we in 
mandating the types of things that are creating problems for 
the American people.
    Mr. Rezendes. You're asking me?
    Mr. Janklow. Yes.
    Mr. Rezendes. In looking at the ICBs, which are the 
documents that the agencies submit, there is one column that 
breaks out what is attributable to statutory increases. And, 
there was 120 million hours attributable to statutory increases 
this year.
    But if I could comment on your question earlier, I think 
Dr. Graham correctly pointed out in his testimony earlier that 
there are three ways to cut paperwork. You're either going to 
reduce a question on a form or eliminate the form, you're going 
to provide categorical grant exclusion to a certain class of 
people from not having to fill out that form, or three, you're 
going to use technology. I think your point earlier was 
technology has not been utilized to the extent it needs to, and 
I think IRS is a good case example of that. While they're 
certainly making a lot of progress in technology, there's a lot 
further way to go. I also think at IRS there's some ways to 
look at their form design. We are about to issue a report this 
afternoon that's being released to the Senate Finance 
Committee, which will be talking about that. I can't talk about 
it too much now, but we are talking about the way to redesign 
forms and get others involved in the design of those forms.
    Mr. Janklow. But, sir, do we really need to have a special 
report to the Congress on how to redesign a form?
    Mr. Rezendes. Well, yes. If you are going to do a 
questionnaire to somebody, you want to pretest it. You want to 
see how are they answering the questions, are they flipping 
back, are they confused, are they in the right order? Are they 
getting the information you need in a timely way?
    Mr. Janklow. You think that's the way the normal business 
does it, I mean the small business? They field test their 
forms?
    Mr. Rezendes. Yeah. By and large, that's standard industry 
practice.
    Mr. Janklow. That's why we need to change it.
    Dr. Graham, a question for you. With respect to the--you 
testified that you had to go all the way to the Deputy-
Secretary level at some agencies. What agencies were those?
    Dr. Graham. U.S. Department of Agriculture, Department of 
Housing and Urban Development.
    Mr. Janklow. Why would you ever go to that level to get 
compliance with an act of Congress and your mandates, the 
mandates of the OMB? What's wrong within those two departments 
that you have got to go all the way to the Deputy/Secretary 
level to get compliance with the law?
    Dr. Graham. That's a good question. And frankly, you have 
more experience in the public sector management process than I 
do.
    We were struck by the fact that at some agencies, when we 
started at the CIO level, we were able to make progress 
immediately. But, at other agencies, the way they're organized 
the CIO doesn't necessarily have the influence within the 
agency to make this kind of progress happen, that violation 
reduction. In other agencies, we went to the general counsel, 
who has a good bit of influence, and we made progress at those 
agencies. But, there were two of them, I just mentioned them, 
where we were not able to get attention of the people who need 
to the following whether or not they're violating the Paperwork 
Reduction Act. We couldn't get their attention without the 
Deputy Secretary.
    Mr. Janklow. Let me ask you, sir, and I say it 
nonfacetiously. We're struggling to deal with a budget deficit 
this year that may be anywhere from $400 to $500 billion, or 
$300 to $500 billion. Would it be helpful, as we all talk about 
waste, fraud and abuse, if we were to be able to identify who 
these people, inefficient people, are so we can just eliminate 
them from the government and the funding and get them out. 
Would that be helpful and would that be an incentive to some of 
the others to maybe think that maybe they ought to follow the 
law?
    Dr. Graham. I think we definitely need to find ways to get 
people to take more seriously the paperwork.
    Mr. Janklow. Would that be a way to make it----
    Dr. Graham. I don't have a good sense of what the best 
solution to that is. We have learned, at different agencies, 
different solutions work. And, I don't have a good sense of 
whether the particular proposal you have is well-intentioned. I 
just don't have a good feel of whether it would work.
    Mr. Janklow. Then we should have a pilot project this year 
at HUD and Ag.
    Dr. Graham. Hey. HUD and Ag have made a lot of progress.
    Mr. Janklow. Well, we keep saying a lot of progress, sir, 
but then the testimony is the amount of paperwork has gone up. 
And so, I don't understand.
    Dr. Graham. I was just, actually, referring narrowly to 
just the violations question. And, for those of us who have 
been here for several years at these hearings and who have seen 
what we have observed from those two agencies, for them to have 
made the progress they have made on paperwork violations, I 
mean, that is a lot of movement.
    Mr. Janklow. Let me ask you this, sir, if I could ask you. 
Unfortunately, you're the focus of a lot of my questions. But 
could you tell us what agencies we might want to ask to come 
before this committee, or this subcommittee to respond to 
questions? Is it HUD and Ag? Are there any others that are 
troublesome, so maybe we could help them discuss it in the 
public arena, that it might give them additional incentive?
    Dr. Graham. Well, I think--was it last year? The chairman 
may remember better than I do. I believe we had--it may have 
been USDA and some of those agencies. And, I think that is 
helpful. I mean, people have an image that OMB can make a 
requirement and these agencies are going to march off and 
devote resources to solving these problems. The process of 
government is more complicated than that. It requires a lot of 
encouragement on the part of the agency for multiple quarters 
to make things happen because agencies have a lot of issues and 
priorities in front of them.
    Mr. Janklow. Mr. Rezendes. And, this will be my last 
question. Mr. Rezendes or you, Dr. Graham, do we have an 
estimate as to how many forms there are in the Federal 
Government that the public has to fill out?
    Mr. Rezendes. I'm told 8,000.
    Mr. Janklow. Do you know, Dr. Graham, whether or not you'd 
agree or disagree with that?
    Dr. Graham. I don't know for sure. But, I remember seeing 
some data that just a couple of forms account for a very high 
fraction of the overall burden. And, my colleague from IRS, 
sitting to my left could probably tell you which forms those 
are. So I think while it's useful to look at the number of 
forms out there, the burden is concentrated on a couple of key 
forms.
    Mr. Janklow. My time's up.
    Mr. Ose. Congressman Janklow, I have a form here regarding 
the paperwork burden in millions of hours by agency. It's got 
the Treasury, 81 percent of the government's paperwork burden 
primarily focused on the IRS.
    I want to followup on something, Dr. Graham. In previous 
testimony, you have been very, very thorough, and you've talked 
about the necessity of evaluating whether or not information is 
worth collecting, as well as whether it's worth reporting. I 
mean, that's kind of been a consistent theme. What efforts have 
you made over the past year in giving, what I thought was one 
of the more creative things, prompt letters to agencies, asking 
the question do you really need this information? Could you 
give us some examples of that, if any?
    Dr. Graham. Well, we have been engaged not in prompt 
letters specifically, but in meetings in my office with 
officials from agencies on the subject of particular paperwork 
collections. And, I want you to understand, Mr. Chairman, that 
a year ago these meetings on paperwork-reduction issues were at 
my staff level, OK. There have been, in the past year, with HUD 
and with USDA particularly, meetings in my office, in my 
presence, looking people in the eye and asking why do we have 
to have the situation we're having.
    So, sometimes a public prompt letter will do good, other 
times, simply gathering people in the room and asking, this 
seems like a pretty straightforward issue, can't we solve that 
problem, and we've done that. And, that's what violation 
reduction is about.
    Mr. Ose. Well, one of the issues we talked about in this 
regard was, as it particularly relates to Agriculture and 
reporting requirements for different operating entities and 
what have you, whether or not we could simply add a box to the 
form that says, ``No,'' and could you check that box, and it 
would say, ``No change from last year.''
    Has that been the subject of any discussions such as you've 
described, or has it been focused more on the violations of the 
forms?
    Dr. Graham. We had a meeting on the subject with Bureau of 
Reclamation and another agency. But, we had a discussion on 
that subject.
    Mr. Ose. Regarding the water use in the Central Valley 
Project?
    Dr. Graham. Yes.
    Mr. Ose. What was their response?
    Dr. Graham. You know, I want to be careful I remember this 
exactly right. I may have to give this to you in writing, but I 
think there was an opportunity for people to express comment on 
the need for that, and the agency said they didn't get any 
comments so they don't have to do that.
    But I will get you in detail, what the response was, if you 
are interested.
    Mr. Ose. We are going to add the Bureau of Reclamation the 
next time, because we are going to have this discussion.
    Dr. Graham. Please get that question to me in writing so I 
can get a fair representation of exactly what the sequence of 
events was. It was not without attention that it got to the 
point where it was.
    [Note.--The information is provided on page 20 of OMB's May 
23, 2003 response to post-hearing questions located at the end 
of the hearing.]
    Mr. Ose. I can guarantee you, if someone wants comment, we 
will get you comment on the necessity of having that little box 
there.
    The other issue is that I'm looking at table A-2 in the 
Information Collection Budget and table A-1 going back to the 
question of the burden is it generated by congressional action 
with new statutes? Is it generated by agency action? Is it 
generated by something else?
    And, if I look at the fiscal year 2002, changes due to 
agency action and the overall burden, it was a nominal 
decrease, statistically not meaningful against the total; in 
fact it is rated here at 0.0 percent in 2002, changes due to 
agency action. And, then in 2003, while the number is larger 
the meaningful impact remains at 0.0. And, this, again, is in 
terms of agency action; in other words, interaction with your 
office and the like.
    Now, there was also a question earlier today about how much 
burden has been placed on the American public due to new 
statutory requirements. And, this Information Collection Budget 
reports on that. In fiscal year 2002, that number was 1.5 
percent; in other words, there was 1.5 percent greater 
paperwork burden as a result of congressional action than in 
the previous year. And then, in fiscal year 2003, that number 
was 0.0, so it wasn't meaningful.
    My point in bringing this up, there doesn't appear to be 
any significant change from 1 year to the next, whether it's 
agency action or added burden from Congress. And, I just keep 
coming back to that question. This is table A1 and table A2 on 
pages 40 and 41. And, it shows 0.0 for fiscal year 03 as a net 
result, which I find unsatisfactory. And, that accounts for 
every agency and department in the aggregate, not by agency, 
but in the aggregate. And, I am trying to figure out how to 
push that 0.0 first to 1.0 and then 2.0 and then 3.0 so we get 
back to complying with the Paperwork Reduction Act.
    What do you suggest we do in that regard? You are there on 
the front lines and interacting with the agencies. What's the 
key here?
    Dr. Graham. There is no one single key, but I think one 
thing that will be helpful is when we talk about the overall 
burden, which is on the order of billions of hours, we have to 
understand that agencies on their own actions are never going 
to move the dial on the billions, but they are responsible and 
they can make a difference on the order of millions. We have 
demonstrated to you at several agencies that they have made 
that net progress on the order of millions.
    So, I think it is very important at the same time that we 
criticize the agencies and we criticize OMB for not moving the 
billions, that we understand that's not going to happen. We 
alone are not going to move the billions. We should acknowledge 
the agencies when they make progress on the order of millions, 
because that's the scale that's within their control on these 
types of issues. They cannot on their own change the size of 
the economy, they can't change the statutes they're 
implementing. Those are not within the control of the agencies.
    Mr. Ose. Well, the primary burden as you pointed out is 
over at Treasury anyway. That's where the big-dog-hunts kind of 
thing.
    Dr. Graham. When you look at the change from year to year, 
when we make progress like that on that flip chart of reducing 
violations of paperwork, the recorded burden and the statistics 
that you're looking at are going up because now these burdens 
are counted accurately. So, the more progress we make on those 
violations, OK, the way these statistics are generated, burden 
will now go up because these data are in the system. So it's 
important to realize that you have to take out--when you look 
at the increases, the 8 percent in the last year, we can't 
control what Congress does, we can't control the violations 
problem. It's only that fraction which is in the control of the 
agencies that we can get our hands on.
    Mr. Ose. Well, the same report that I just cited, tables A1 
and A2 show in the aggregate the violation to be not 
meaningful, 0.1 percent of the total.
    Dr. Graham. When you're taking a percent of billions you 
are going to get a lot of zeroes. I think if you look at the 
question of why we are up 8 percent compared to last year, OK, 
and you break that out, it turns out that, what was in the 
agency's control, was a pretty small fraction of that. And, 
that I think is an important message.
    Mr. Ose. Willy Sutton used to always say, ``Why do you rob 
banks? That's where the money is.'' I keep looking at this 
chart, Treasury has got a huge piece of this. And, Mr. Wenzel, 
I do want to compliment you. When you do something right, you 
need to be complimented, applauded, and what have you. The 
discretionary act you all took relative to the reporting of 
dividends and interest, that was discretionary. I mean, the 
Commissioner made the decision, raised the threshold, 
eliminated the reporting requirement for hundreds of thousands 
if not millions of Americans.
    The question I have is are there other opportunities 
discretionary in nature that we need to be asking you to go 
ahead and implement?
    Mr. Wenzel. Mr. Chairman, absolutely appropriate question 
in terms of the example you gave, and no we haven't stopped 
there. Our Office of Taxpayer Burden Reduction and the staff 
and other parts of the IRS, including our National Taxpayer 
Advocate Office, for example, are providing input in terms of 
opportunities like the Schedule B, and we have committed 
ourself in going forward to go over every single line on every 
form on every schedule that is currently part of the IRS's 
inventory. We are looking at both individual forms and business 
forms, and exempt organizations, to see where there's 
opportunities like the Schedule B where we can make changes 
that are at the discretion of the Commissioner, based on what 
the Secretary of the Treasury delegated to the Commissioner of 
the Internal Revenue Service.
    Mr. Ose. One of the things on that particular issue is that 
you get this information in the form of W2s and the like from 
other sources. So, you have a source of information other than 
the taxpayer that's generally computer-generated or 
electronically-generated. Are there other such opportunities? 
For instance, mortgage interest, I suspect you get statements 
filed electronically or by magnetic tape?
    Mr. Wenzel. That's correct, Mr. Chairman. It's the form 
1098 and a very high percentage of that form is now transmitted 
to the Internal Revenue Service electronically as are the 1099s 
that include the dividends and interest.
    Mr. Ose. If that's the case, why not set--I mean if that's 
the case that you're getting that information electronically 
transmitted to you, you're still requiring the taxpayer to turn 
in their form and what have you, and you got to write the 
number in and what have you, what's the purpose of asking the 
taxpayer to attach the form that they receive from the 
financial institution to whom they've paid interest?
    Mr. Wenzel. Generally all we require in terms of 
attachments is the W2 statement. Attaching other forms, the 
1099s and so forth are optional.
    Mr. Ose. Do you have specific examples similar in nature to 
the dividend interest that we just talked about that we can 
talk about today, specific things that the IRS is looking at?
    Mr. Wenzel. We have some of the initiatives underway with 
small business and with the larger corporations.
    Mr. Ose. You talking about Schedule Cs and the like?
    Mr. Wenzel. Schedule C is part of the 1040. And, as I 
mentioned, we are going over lines on every form and on every 
schedule and when I our new Commissioner appears before this 
committee next year, I believe he will report other positive 
results similar to what we have achieved with the Schedule B.
    But, the area that we really need to start and we're doing 
it right now, is to reduce burden on business tax returns. One 
of the forms that right now is under our scrutiny because it's 
required to be filed four times a year is the Form 941. As you 
know, that's where employers are required to report the 
withholding and Social Security taxes and it requires a lot of 
preparation and a lot of work.
    Incidentally, I know that you were interested in this, but 
the one initiative that we took at the IRS that wasn't required 
by legislation was the four lines added to the 941 this last 
year, which when calculated, increased the burden hours. We 
added the four lines at the request of the taxpayer and his or 
her third-party preparer. All those four lines are is the name 
of the individual who prepared the form, the telephone number, 
and other important information, because the taxpayer has, 
through focus groups and other outreach activities has asked 
for them the taxpayer does not want to be burdened by taking a 
call from an IRS employee when they are paying somebody. So, we 
were able to add the four lines to the form at their request. 
So now, when a call comes in from a third-party preparer, we 
see it is already authorized by the taxpayer and we deal with 
that individual by taking the information from him.
    Mr. Ose. Gentleman from South Dakota for 15 minutes.
    Mr. Janklow. Thank you, Mr. Chairman. When Congress is 
contemplating legislation, do any of the administrative 
agencies let Congress know the extent to which they think it 
will add to the paperwork burden to the American people? Is any 
of that kind of testimony or information given to Congress at 
the time we're acting? Any of you know?
    Dr. Graham. I think there is an effort by the agencies and 
certainly by the OMB to indicate the impacts of legislative 
proposals. But, quite frankly, in the dialog between the 
executive branch and the legislative branch on the burdens and 
benefits of legislative proposals, oftentimes there are other 
sources of that information that are more credible than even 
the executive branch, and there are arms like the Congressional 
Budget Office, the GAO and so forth. And, my suggestion to you 
is to not rely exclusively on the executive branch.
    Mr. Janklow. I wouldn't.
    Dr. Graham. And, I think you're on a good track.
    Mr. Janklow. It's not the legislative agencies would have 
any expertise in understanding how great an additional burden 
this might be, and it's very valid to complain or to suggest 
that, while we criticize, we add to the burden. And, so that's 
why I was asking if anybody gives insight or any estimate to 
Congress or the various houses or committees as to what impact 
it might have.
    Mr. Henshaw, if I could ask you, sir, what is it that could 
be done to make the Labor Department get to zero in a year to 
have no problems? What's it going to take?
    Mr. Henshaw. Congressman, I think zero--I don't know zero 
burden, and to carry out the statutes that are required under 
the Department of Labor, I don't know if zero is attainable to 
still fulfill the requirements under the statutes. I can speak 
directly to the occupational safety and health.
    Mr. Janklow. When I say zero, it's zero within the 
framework of carrying out the statutes. I understand that, if 
you're ordered to do something by law, that shouldn't count 
against you. I am talking about the discretionary stuff.
    Mr. Henshaw. The discretionary stuff you referred to as a 
war, there's continuing battles. And, we are continuing to 
pursue to reduce those burdens, the discretionary burdens. To 
give you an example, at least from the Occupational Health and 
Safety Administration, what we are trying to do, we have the 
standards improvement project. Some of our standards are quite 
old. We ought to do away or improve those standards and do away 
with the requirements that don't add value. And, we're in the 
process of doing that. When we determine what they are, then 
we'll reduce those burdens.
    Mr. Janklow. Is there anything we can do to help you?
    Mr. Henshaw. Keep the pressure on, and you're obviously 
doing a good job of that. I come from the business side and I 
understand the burdens that government places on business, 
small and large. My father was a small business person. And, we 
have to be mindful of everything we do, whether in fact it's 
going to cause a burden or does it add a benefit or is the 
benefit worth it.
    Mr. Janklow. Do you think that psychology exists within the 
agency?
    Mr. Henshaw. I think it exists in parts of the agency. It 
needs to be up front and foremost in everything agencies do. 
And, I think in the Department of Labor and certainly in OSHA, 
it's up front and foremost in our agency.
    Mr. Janklow. I think in your testimony, you said employers 
with 10 or fewer employees don't have to fill out the logs; is 
that correct?
    Mr. Henshaw. The recordkeeping log, yes.
    Mr. Janklow. Would there be any effectiveness in increasing 
that number beyond 10? Let's say we were to take it to 12 or 
14; has anyone estimated how much of a savings that would be?
    Mr. Henshaw. I don't know----
    Mr. Janklow. Would that be a significant increase?
    Mr. Henshaw. Given the fact that most of the employers out 
there in this country are small businesses, I don't know what 
percentage are less than 10 or less than 20. I am sure we have 
that number somewhere. In the recordkeeping rule that was 
revised in the draft proposal that was out in 1996, there was a 
suggestion that the threshold be moved up to 19 employees. 
During the comment period, it was discussed whether that would 
add value, whether that's the right thing to do in respect to 
the tradeoffs of job safety and health, which is what our 
statute requires. And, it was determined based on those 
comments that bringing it up to 19 would not add any value in 
respect to accomplishing the requirements under the statute, so 
we left it at 10. And so, the new rule that came out in January 
2001 maintained the same limitation. If you're 10 or less--10 
or less, you don't have to fill out the logs.
    Mr. Janklow. I am puzzled as to how--what's the basis that 
they would determine a 90 percent increase in the threshold 
would be--from 10 to 19 would not bring much value?
    Mr. Henshaw. The tradeoff in respect to the benefit versus 
the value. Certainly it would have reduced burden on those that 
were between 10 and 19.
    Mr. Janklow. All right. But when you talk about the benefit 
ratio, what would be the negative side of it? What is it that 
you wouldn't be giving? Is it a data base you need to make 
decisions? Is this what you utilize it for?
    Mr. Henshaw. That's correct. Not only for us but the 
employer. Keep in mind that the majority of our fatalities that 
occur in this country work for small employers. The majority of 
the injuries and illnesses or a lot of the injuries and 
illnesses that occur in workplaces are in small workplaces. Our 
techniques are around enforcement, developing the right kind of 
standards that impact those businesses. But, it's just not the 
standards, it is also outreach, education and assistance, 
compliance assistance. We wouldn't know which industries to 
focus on in our free consultation services, for example, to get 
those consultation services to those businesses--which is free 
of charge--so they can reduce the hazards.
    Mr. Janklow. Are all these injury/illness logs submitted to 
OSHA?
    Mr. Henshaw. We don't require those to be submitted. They 
are required to keep them, but we don't require them to be 
submitted. However, we do do an initiative of about 95,000 
workplaces where we do require those logs to be sent into the 
agency.
    Mr. Janklow. Are they sent in electronically?
    Mr. Henshaw. Yes, partially. If it is available 
electronically, not all.
    Mr. Janklow. It is the discretion of the filer?
    Mr. Henshaw. To do it electronically or hard copy.
    Mr. Janklow. So 100 percent are available to be filed 
electronically?
    Mr. Henshaw. Absolutely.
    Mr. Janklow. Now, with respect to having the businesses 
above 10 keep the logs--and you said you needed them for data 
base purposes--but they don't send them to you, what good is 
that? Why don't you have them send them to you if they can be 
done electronically and then you'll have the data and maybe 
you'll be able to raise thresholds then.
    Mr. Henshaw. We have 7 million work sites out there in this 
country sending all those data to us; we don't need those data. 
Our data initiative addresses about 95,000 workplaces and we 
request data from those workplaces so we can do our targeting. 
We don't want to do enforcement on facilities that have low 
injury rates. We want to focus on enforcement on those 
facilities that have high injury rates.
    Mr. Janklow. I probably didn't ask it very well. If I am an 
employer with 12 employees, I am required to keep the logs. But 
unless you come around to my place, you don't know what's in 
the logs, correct?
    Mr. Henshaw. Unless they are part of the data initiative.
    Mr. Janklow. Of the 95,000. How many people keep logs in 
the country? You have 95,000 over here that are part of the 
initiative. How many businesses keep logs?
    Mr. Henshaw. I don't have that figure.
    Mr. Janklow. Tens of millions?
    Mr. Henshaw. If there are 7 million work sites out there--
--
    Mr. Janklow. You have 95,000 versus 7 million. If it's 
100,000 it would be, what, one, seven-hundredths?
    Mr. Henshaw. The value of the employer keeping the log is 
one for their own records so they can make improvements or know 
where the injuries and illnesses are.
    Mr. Janklow. I understand that, sir. But my point is if 
you're going to make them keep them, why can't all of them who 
want to submit them to you electronically and you have the 
software that compiles this and gives you the reports you need, 
now you really have a database that will give you the 
information; and maybe over time, once you have established 
that, you'll be able to reduce that as a burden also for 
people. Am I making sense?
    Mr. Henshaw. I think we are adding burden as opposed to 
taking away burden. We require all workplaces now to mail that.
    Mr. Janklow. I said let them send it in voluntarily if they 
wanted to, only electronically.
    Mr. Henshaw. On the data initiative, they have the option.
    Mr. Janklow. That's the 95,000. I am talking about the 
other 6,910,000.
    Mr. Henshaw. There's nothing to prohibit them from sending 
it to us if they want, but we're not asking them to do that. 
And, if we ask them to do that, I think that would be an 
additional burden.
    Mr. Janklow. Dr. Graham, what's the most frustrating part 
about getting this done? Where are you really having the most 
difficulty?
    Dr. Graham. It's a good question. I think the biggest 
challenge in this area of reducing needless paperwork is, quite 
frankly, that there are so many other priorities that agencies 
face that, at the staff level, they would frankly prefer them 
spend their time doing. Apathy is our biggest enemy in the 
battle against government paperwork. And, that's why the 
efforts of this subcommittee are very important because we need 
to raise the profile of this issue. It's an accumulation of 
lots of little paperwork requirements that create billions. 
And, even if you look at non-IRS, it's still a big enough 
problem to care about and work hard on.
    So, I think the root of the problem is there aren't enough 
people saying this needs to be a priority of the Federal 
Government. As much as I know this subcommittee has as its 
priority, I am not sure a lot of other subcommittees have it as 
a priority.
    Mr. Janklow. Mr. Rezendes do you agree that those are the 
biggest issues?
    Mr. Rezendes. IRS is 81 percent of the total governmentwide 
burden.
    Mr. Janklow. I think what everybody is suggesting is we 
ought to ignore everybody else and focus on IRS for a while.
    Mr. Rezendes. I'd agree to that. That's really where you 
have to put your money. That's really where it's going to have 
the biggest impact. And, there's two pieces to that. One is 
obviously legislation simplifying the Tax Code could probably 
do more to simplify IRS's paperwork burden requirement than 
anything else; and two, using technology at IRS in redesigning 
their forms on a more electronic basis will give an improvement 
pending simplification.
    Mr. Janklow. Mr. Wenzel, when I listen to your testimony, I 
believe you indicate it's 31 million hours you were able to 
reduce in the last year; is that correct?
    Mr. Wenzel. Yes.
    Mr. Janklow. Of that 31 million hours, 20 million of it 
came from eliminating the reporting threshold. So eliminating a 
reporting threshold that is 20 million hours' worth of savings, 
10 million hours was from reduced recordkeeping for day care 
centers and 1 million was just by taking out the less-than-zero 
checkbox. That's it? I mean, is that the result of a real hard 
year-long effort? How hard was it--I am not trying to be 
facetious. It couldn't have been very hard to change the 
threshold.
    Mr. Wenzel. No. In that case, the change to Schedule B was 
at the discretion of the Commissioner.
    Mr. Janklow. It couldn't have taken long once the decision 
was made, so that takes care of two-thirds of the savings. And 
then, getting rid of the less-than-zero checkbox couldn't have 
taken long. So, we're down to reduced recordkeeping for day 
care providers. I can't believe that's where the major focus of 
the IRS has ever been anyhow. Frankly most day care providers 
don't care what the recordkeeping is. They don't keep them.
    Mr. Wenzel. You're absolutely right. As I mentioned 
earlier, based on just a couple of those examples, we are fully 
committed now, putting the resources that need to be put in for 
a complete review of every form and every schedule.
    Mr. Janklow. Are you doing it now?
    Mr. Wenzel. We have started it.
    Mr. Janklow. How long will it take?
    Mr. Wenzel. With the number of forms, it's difficult to 
estimate other than commit to you we want to get this done as 
quickly as we can.
    Mr. Janklow. Are you starting with the forms that take the 
most amount of paperwork and then working down?
    Mr. Wenzel. Absolutely. We do a complexity analysis anytime 
new legislation comes to the IRS in terms of implementing a new 
tax law provision early on in the process, determine the real 
complexity of what the new law is and the burden that's going 
to be placed on individuals or businesses. And, obviously in 
terms of the effort I described, we really need to look at 
those that would have the best effect in terms of the number of 
individuals or businesses and the quickest results.
    Mr. Janklow. Thank you very much.
    Mr. Ose. Thank the gentleman.
    Dr. Graham, the small business paperwork law that was 
passed out of the House and the Senate and signed into law has 
a number of requirements. I'm trying to check on the status of 
those. The operative date is June 28th of this year. The 
requirement was that OMB publish a list of all compliance 
resources available to small businesses in the Federal 
Register. Is this list going to get done? Is it going to be up 
on the Web site for OMB by June 28th? Have you thought about 
how to organize the list so it will be useful for small 
business? And, we had a discussion last time you were here 
about the codes and which codes to use and all that sort of 
stuff. Which code standard is going to be used in terms of 
listing the categories?
    Dr. Graham. Mr. Chairman, the work that you're referring to 
is being done in the context of the interagency task force that 
is mandated within the statute. It's being co-chaired by myself 
and Mark Forman, who is sort of our electronic government guru. 
And, the agencies have been working for several months now on 
the project. They have had two plenary meetings and then three 
subgroups who have broken up pieces of the charge that were in 
the statute. They don't have the results yet and I haven't been 
briefed on the results of those activities. What I have been 
told at a general level is they're still on target for the date 
you mentioned, which was specified in the statute. My guess is 
that, if we were to miss it, we wouldn't miss it by a lot.
    Mr. Ose. There is a requirement to simplify the point of 
contact as a liaison. Do you know how many agencies have 
identified that single point of contact requirement?
    Dr. Graham. I don't. My understanding is that's part of the 
work of the task force.
    Mr. Ose. We're going to be sending a specific question on 
that and we'd like to get that down. How many meetings of the 
task force have been held?
    Dr. Graham. Two plenary meetings and there are three 
subgroups that are working. Some of that is electronic and 
phone. I don't know if those are full meetings, but there's 
been definite progress.
    Mr. Ose. I'm not going to ask whether you are going to make 
the June 28th, because then I am going to have to ask if you 
don't make the June 28th, when will you? I don't want to 
encourage you to miss June 28th.
    Dr. Graham. We may make the June 28th. I haven't given up 
on that one bit. I just don't want to overpromise.
    Mr. Ose. I understand. Underpromise and overdeliver. Mr. 
Henshaw, I want to go back to this illness injury log question. 
Your testimony is based on a 1996 rule and then you also 
mentioned a January 2001 rule that was published in the Federal 
Register.
    Mr. Henshaw. That was the completion of that rule.
    Mr. Ose. Affirming the 10-employee level threshold.
    Mr. Henshaw. Correct.
    Mr. Ose. The date of that publication is January----
    Mr. Henshaw. January 2001. I don't know the precise day in 
January.
    Mr. Ose. OK. Now the question I have, if you were going to 
change that threshold, you would have to go back through due 
process, put it out for comment and the like; is that correct?
    Mr. Henshaw. That's correct.
    Mr. Ose. And, yet following up on Mr. Janklow's testimony, 
you don't know how much of an impact; raising it to, say, 19 or 
keeping it at 10 or 14--you haven't quantified that?
    Mr. Henshaw. I didn't have the information when you asked 
it, Congressman, but I have it now from my compatriots behind 
me. The 10 and above represents 14 percent of the total 7 
million work sites. So if we add--I don't know what the 19 
would be, what percentage of that 14 percent. I don't know what 
percentage that would be, but what we have right now, the 
requirement impacts 14 percent of the 7 million work sites.
    Mr. Ose. Following on Mr. Janklow's questions also, in 
terms of the work sites across the Nation, you mentioned 7 
million work sites. And, you're collecting data from 95,000 
work sites off these illness/injury logs, which is roughly 1\1/
3\ percent of the total work sites. How did you come to a 
sample size? How did you come to a sample size of that number?
    Mr. Henshaw. The rationale behind--this is part of our data 
initiative, which is used for our enforcement. So, we make sure 
we don't go to places that don't need enforcement. And so, what 
we look at is industries that have or you would expect to have 
a high injury and illness rates. So we look at SIC codes, first 
of all, and see whether, in fact, those SIC codes are typically 
those areas that have high injuries. Manufacturing is a good 
example. And, that's the basis by which we pick the 95,000, it 
is based on injuries and their historical injury and illness 
rates and our inspection history.
    Mr. Ose. Now, how do you know--going back to the due 
process, how do you know as industry evolves that safety 
records don't also evolve and thereby invalidate where you're 
looking? If you're only sampling those 95,000 and it's based on 
basically almost 10-year-old data, I mean how do you know that 
something hasn't evolved to shift the----
    Mr. Henshaw. It's based on last year's data. So we're 
gathering the most recent annual injury and illness statistics 
for that facility.
    Mr. Ose. So you use those 95,000 for the previous year to 
build your data inquiry base for the coming year?
    Mr. Henshaw. Yes. Every year we ask for 95,000 facility 
records and then we base our inspections on that last year's 
report.
    Mr. Ose. We have a number of written questions that we will 
followup with you.
    I have one last question I want to ask Mr. Henshaw. Last 
April, when Secretary Chao was here, we brought to her 
attention 38 Department of Labor information collections of 
500,000 hours or more of burden. Now, you have attached to your 
testimony a status report for paperwork changes associated with 
about half of the 19 particular items and I have a list here of 
a significant nature. But, we haven't seen anything in the 
Federal Register relative to proposals for paperwork changes 
related to those.
    What I'm trying to find out is what specific program 
decreases and increases were made for any of these 19 since 
last April or are planned for the coming fiscal year? And, I'd 
be happy to give you this list or send it to you in writing so 
you can see it. It's got things ranging from noise to access to 
employee exposure medical records, to powered industrial 
trucks. Every one of these is over 500,000 hours in paperwork 
burden.
    You can expect this question in writing to find out what 
exactly Department of Labor has done in the past 12 months to 
affect either increase or decrease to the paperwork burden in 
these 19 areas. I just want to let you know that.
    Now, Mr. Janklow, I'd be happy to yield for a final round 
to you.
    Mr. Janklow. I'll be very brief, Mr. Chairman.
    Mr. Graham, if I could ask you this. In reviewing the 
testimony of the next panel of witnesses--because you're going 
to be gone--one of the witnesses has submitted testimony that 
basically says that he's required to fill out forms for his 
business, that he received a 2002 economic census from the 
Department of Commerce, OMB form 0607-0887. He says in the 16 
years of doing business, he's never received this form before 
and that it asks for all kinds of information. He's been told 
by the Department of Commerce that the Department of Commerce 
has told NFIB that the information provided on this form 
doesn't have to be 100 percent accurate and that the responses 
can be estimates. He says then on page 6 it says you are 
notified, though, if you don't fill out the form, you could be 
subject to a $500 fine.
    What efficiency could there possibly be in sending me a 
form from the Federal Government that tells me I have to fill 
it out or be fined $500, and then I can estimate whatever it is 
that I put down there? Who in the world could use that 
information? And, let me ask you this: Is this the information 
that we then collect and pass out to the American people as 
fact, these estimates that are given to us by tens of 
thousands, if not millions, of reporters?
    Dr. Graham. It's a good question and I will be eager to 
hear more about it. And, I'll be happy to look into it. If you 
determine after hearing the full testimony that there's 
questions there, I am happy to look into it.
    Mr. Janklow. Thank you. No other questions, Mr. Chairman.
    Mr. Ose. I want to followup on something. Is there an OMB 
number?
    Dr. Graham. He said there is an OMB number. It's not a 
violation apparently.
    Mr. Ose. I want to thank the witnesses for joining us this 
morning. As always, it is a pleasure to be educated on these 
subjects and to interact. We do have a number of questions 
we'll be submitting to you in written form for response. The 
record will be open for 10 days. We would appreciate a timely 
response. Thank you for appearing. We're going to take a 2-
minute recess here.
    [Recess.]
    Mr. Ose. We are going to move to our second panel here we 
are in a little bit of a time dilemma here. We expect some 
votes here in the next 20 minutes. There will be a series of 
votes. So, one of the things we do on this panel routinely, or 
on this committee routinely, is we swear in our witnesses so if 
you all please rise.
    [Witnesses sworn.]
    Mr. Ose. Let the record show that the witnesses have 
answered in the affirmative.
    Joining us on our second panel today are Joanne Peterson, 
who is the president and CEO of Abator, Pittsburgh, PA; we have 
Mr. Victor Schantz, who is the president of Schantz Organ Co. 
from Orrville, OH, a constituent of a very good friend of mine, 
Mr. Regula; and we have Mr. Frank Fillmore, Jr., who is the 
president of the Fillmore Group in Ellicott City, MD, to give 
us a real life experience.
    I do want to recognize in particular that Mr. Schantz is 
accompanied by his daughter. Welcome. Nice to see you. I 
believe you're up here on the Hill. Welcome. As you saw in the 
first panel, we have a 5-minute rule. Your testimony has been 
received. We've read it. We have a number of questions. We'll 
move through each. If you could take the 5 minutes allocated 
and summarize, that would be great.
    So, Ms. Peterson, you're recognized first for 5 minutes. 
Welcome.

 STATEMENTS OF JOANNE E. PETERSON, PRESIDENT AND CEO, ABATOR, 
 PITTSBURGH, PA; VICTOR SCHANTZ, PRESIDENT, SCHANTZ ORGAN CO., 
   ORRVILLE, OH; AND FRANK C. FILLMORE, JR., PRESIDENT, THE 
            FILLMORE GROUP, INC., ELLICOTT CITY, MD

    Ms. Peterson. Thank you, Chairman Ose, for holding this 
hearing on the burden of Federal paperwork. I appreciate the 
opportunity to testify and I thank the members of the 
subcommittee for seeking ways to reduce the burden on small 
business. Small business faces complex and diverse challenges 
and priorities. One challenge that we have to overcome is the 
complicated and expensive process to do business with State and 
Federal agencies. Another is the significant cost in preparing 
and filing routine paperwork.
    Ohio directed Abator to qualify for its State term list. 
This involves successful completion of a Federal GSA 
solicitation process. Federal acquisition and GSA clauses run 
56 pages, the document itself another 84, and the attachment 68 
pages. That's an awful lot of fine print. I'm not sure why Ohio 
has decided to use this Federal procurement process. I am 
certain, however, that it will be expensive. We have already 
spent $840 in labor and another $125 in processing fees for 
credit and customer satisfaction checks. We could spend another 
$175 an hour in legal reviews or engage a Federal procurement 
consultant that would run us $8,000 to $25,000. We won't do 
either, given our current economic position. By the way, the 
contractors pay the GSA an industrial funding fee of 1 percent 
of sales.
    I applaud the GSA's efforts to recoup part of its operating 
costs through this mechanism, but I hope it will explore ways 
to reduce the paperwork burden on the small businesses that are 
striving to support them. We have no experience in bidding 
Federal contracts, so I'll talk about a recent State bid. It 
required 289 complete bid packages in triplicate and we hand-
delivered over 44,000 pages to avoid the shipping charges since 
our other costs ran about $12,000. Adding the Federal 
solicitation to this already burdensome process puts small 
firms like us at a competitive disadvantage.
    I am grateful for President Bush's Contract Unbundling 
Initiative. Abator, as a member of the Women Impacting Public 
Policy and the Women Business Entrepreneur National Council, 
supports this initiative. We hope that it will lead to greater 
Federal participation by small minority and historically 
underutilized businesses. Though our efforts go unrewarded, we 
have completed reams of paperwork to support prime vendors on 
various Federal contracts. We remain undeterred and we will 
complete the GSA solicitation process despite the intimidating 
amount of paperwork.
    All business bears the burden of annual tax reporting. We 
spent about $7,700 last year, funds that we could have used to 
invest in equipment, hiring new employees, or coping with the 
increasing insurance cost. Streamlining the process would help 
reduce our cost.
    Last year, we spent another $1,575 in reorganizing our 
pension plan's paperwork to comply with Federal regulations. We 
didn't change the plan, only the paperwork, and that money 
could have been used to provide larger pension contributions.
    Independent employment status is another issue for us. We 
believe that section 1706 of the Tax Reform Act of 1986 
discriminates against technical experts restricting their 
access to entrepreneurial independent status. We filed our SS-8 
form in 1986. Twenty questions ran 50 pages. We repeatedly 
requested a ruling. It took 11 years for the IRS to 
investigate. Eventually we received a letter that says we 
appear to be complying with the law. We felt relieved because 
an adverse ruling could have closed our doors, but we remain 
concerned because the text contains many gray areas and the IRS 
can always change its mind.
    Since section 1706 we have lost revenues because customers 
feared their organizations may be at risk and they have 
canceled contracts because the regulations are murky and 
inconsistently applied.
    Finally, we have had experience in filing three green card 
applications. The process was a nightmare. Immigration and 
Naturalization Service phone numbers always ring busy and we 
never once managed to speak to a live INS representative. Twice 
they lost the paperwork. In 36 months, no progress was made. We 
requested some assistance from Senator Santorum and, through 
his staff, we facilitated a subsequent approval and award 
process.
    Small business is supposedly the backbone of the economy 
and a high-tech industry is a major slice of our economic 
future. Many small business owners find ourselves spending 
limited resources on excessive and often redundant paperwork. 
Any assistance your committee can offer in freeing up our 
resources to be used productively would be greatly appreciated.
    Mr. Ose. Thank you Ms. Peterson. We got the cross hairs on 
paperwork up here.
    [The prepared statement of Ms. Peterson follows:]

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    Mr. Ose. Mr. Schantz, I talked with Mr. Regula last night. 
I was hopeful that he would come to introduce you. I did call 
him a few minutes ago, or at least his office, to alert him. We 
can hold for 5 minutes and go to Mr. Fillmore and give Mr. 
Regula a chance to get out of his conference committee or you 
can go ahead. Your choice. What would you like to do?
    Mr. Schantz. Congressman, I know Ralph's busy and I know 
it's a busy day for him after last night and I would be happy 
to proceed and let him off the hook.
    Mr. Ose. Gentleman is recognized for 5 minutes.
    Mr. Schantz. Chairman Ose and Congressman Janklow, I 
appreciate the opportunity to be here today and I want to thank 
the National Small Business United Group for making me aware of 
the fact that this opportunity existed.
    Schantz Organ Co., in Orrville, OH, is a 130-year-old 
family business. My great granddad, my granddad, my dad, and I 
basically had the same job. My grandfather was a Swiss wood 
worker and he was a good mechanic and he became fascinated with 
musical instruments. Today, we build pipe organs for churches 
throughout the United States. We recently completed our first 
international project. We restored a famous pipe organ in 
Melbourne Town Hall in Melbourne, Australia.
    We employ 95 craftsmen and women. Our annual sales volume 
is $7\1/2\ million. We build about 20 custom-designed hand-
crafted instruments each year. And, there are about 65 firms 
engaged in the pipe organ business in the United States and 
probably account for 1,000 workers. We generate an estimated 
$80 million of sales revenue each year, so we are one of those 
tiny little micro-industries that are in community after 
community all across the United States. These businesses 
support the local churches, the libraries, the schools, United 
Ways, charitable organizations of all kinds, and help make 
America the kind of place it is.
    As we have heard, small businesses are being pounded by 
regulatory burdens. And, the Small Business Administration 
reports that the average per-employee cost of all Federal 
regulation for companies with fewer than 20 is about $6,975 per 
year. That per-employee cost is $2,512 more than what firms in 
excess of 500 employees pay.
    So, I am grateful to the committee and the chairman's 
leadership in passing the Small Business Paperwork Relief Act 
of 2002. I think it is a step in the right direction, but more 
has to be done. To illustrate this, I want to give you an idea 
of the forms that our company fills out each year. This file 
folder represents Federal income tax compliance forms. For a C 
corporation in the State of Ohio, we have the 1120 tax form. 
The 940 and 941 are quarterly reports. I only have one of each 
of those in here but they have to be done four times a year. 
The W3 reporting requirement is to get all the employee's 
information to the Federal Government on a form like this. 
1096s are the duplication of the 1099 reporting.
    But, in spite of the fact that this is what we go through 
each year for one small corporation, that's not why I am here 
today. This file folder contains one report from the Department 
of Labor 5500 report for health and pension plans. TEFRA, 
DEFRA, COBRA, ERISA, EGTRA, HIPAA, over the last number of 
years have created a paperwork process in which employers have 
to report information that, in my opinion, has become such a 
difficult thing to do that small businesses have had to punt. 
Now the work is done by third-party administrators and 
insurance companies along with employers trying to find a way 
to comply with these data for which results are hard to figure 
out. But that's not why I'm here.
    These are the annual censuses sent to us by the Department 
of Commerce, the Bureau of the Census, the Department of Labor, 
to annually have us fill out information. One is concerning our 
plant capacity. If there was a war and we had to have a defense 
industry, how much is the plant utilization in the United 
States currently being utilized? Another asks what the cost of 
health insurance in the United States?
    This is the census data from OSHA. Not only do we keep our 
OSHA logs but we also have to send that information into the 
government as to what our accident rates are. The accidents and 
injuries are not occurring in little businesses like this. 
We're keeping the logs, but that's not where the problem is. 
And, this is not why I'm here.
    This is the EPA toxic chemical reporting inventory. For the 
first time this year in the United States, little companies 
around the United States have to report because of the lead 
component--lead has been determined to be a toxic chemical; and 
the reporting threshold was decreased from 10,000 pounds to 100 
pounds. And, for the first time, micro-industries all across 
the United States have to comply.
    I am not going to make this in 5 minutes. I am sorry. The 
EPA inventory is the most egregious example I have been able to 
find. Now I want to point out the dripping irony. There are 195 
pages of instructions on how to fill this form out. On page 30, 
your Paperwork Reduction Act notice estimates this form alone 
to take 52 hours to fill out, between form R and form A, it's 
82 hours estimated for a company to fill this thing out. Do you 
see? If you make something of an alloy, if you make something 
that is bronze or stainless steel using lead in the alloy, the 
threshold is 25,000 pounds.
    We make an alloy to make organ pipes. However, our 
threshold is 100 pounds. It doesn't make any sense. I came here 
today to try and get some common sense into this process, and I 
will just say this quickly and stop. If the Paperwork Reduction 
Act of 2002 is to have any validity as an effective piece of 
legislation that reduces the regulatory burden on small 
business in America, then there has to be a commonsense 
advocate for small business in the Congress that can recognize 
when regulation has gone too far. This lead rule came about 
because of an Executive order at midnight.
    Two specific ways where this could be accomplished are 
simply to raise the reporting threshold of the Department of 
Labor 5500 report from companies like me, or smaller, up to 250 
employees or 500 employees where the problem is. Raise the 
threshold for the EPA toxic substances reporting industry to 
25,000 pounds for lead alloys across the board, or exempt small 
businesses from having to do it in the first place. Spending 
time on burdensome paperwork is not where productivity occurs 
in the United States.
    If we can avoid wasting the labor of the people under the 
guise of caring for them, they will be happy: Thomas Jefferson. 
Thank you.
    Mr. Ose. Thank you, Mr. Schantz.
    [The prepared statement of Mr. Schantz follows:]

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    Mr. Ose. Mr. Fillmore, the bells that rang, those are kind 
of like our signals. We had two bells followed by five, which 
means we have two votes minimum. First is a 15-minute vote. We 
have 12 minutes and 40 seconds from being overdue. What I would 
like to ask is for you to do your 5-minute testimony.
    The unfortunate circumstances we find ourselves in are that 
Mr. Janklow and I will be over in the House for probably 45 
minutes voting, and to interrupt the hearing I think would be 
counterproductive. I want to ask if you all would be willing 
for us to submit our questions to you in writing and have you 
respond to them in writing as opposed to sitting here for 45 
minutes, coming back and the like? Are you in agreement? We are 
talking productivity. We are trying to make the best use of our 
time. Mr. Janklow.
    Mr. Janklow. I will be very brief. The eloquence of the 
first two witnesses--and I have read your testimony, Mr. 
Fillmore--I would have no questions for any of them. My 
questions would detract from the substance of what you had to 
say under oath before this committee. Thank you.
    Mr. Ose. Mr. Fillmore, why don't you proceed for 5 minutes?
    Mr. Fillmore. Chairman Ose, Ranking Member Tierney, Member 
Janklow, I thank you for the opportunity to testify before you 
today on the impact of government paperwork on small 
businesses. My name is Frank Fillmore and I am a principal in 
the Fillmore Group, an international information technology 
consulting firm with offices in Baltimore and Ellicott City, 
MD. We have five full-time employees who provide data base 
software consulting and training to large companies like IBM 
and Freddie Mac and small not-for-profit firms like the U.S. 
Golf Association.
    I also have the pleasure of serving on the Maryland 
Leadership Council, the National Federation of Independent 
Business, and I am honored to present this statement on behalf 
of NFIB's 600,000 small business members nationwide.
    As the proprietor of a small business, especially one that 
bills by the hour, I am acutely aware of how I spend my time 
and constantly evaluate how to best spend the next hour, 
whether on a customer project, on marketing and sales leads, 
which is our seed corn, or on personnel and administrative 
issues to keep the ship from running aground. In many ways it 
is probably similar to the ways that you have to manage your 
House of Representatives offices.
    Small businesses like mine are the greatest source of job 
growth in the economy. They unfortunately bear a 
disproportionate share of the regulatory burden. In fact, the 
burden of the regulatory compliance is as much as 50 percent 
more for small businesses. My business is no different. There 
is no single government requirement that causes us more 
headaches and lost time. Imagine when a form arrives in the 
mail from the Federal Government. It often comes with a strict 
deadline and, many times, with a penalty for failure to 
respond. Small businesses don't have the luxury of a special 
department or even one or two employees that can devote all of 
their time to work on government forms and regulations. The 
paperwork is left to be done by me, the proprietor, who has to 
divert precious management and sales time to filling out these 
time-consuming forms.
    Since there is little time during the course of a normal 
workday, a colleague or I must complete these forms over 
weekends or late at night. It becomes even more frustrating 
when the information requested is redundant and available from 
other agencies or even other units of the same agency.
    Right now I am holding a 2002 economic census form from the 
Department of Commerce. That's the OMB form number that you 
mentioned earlier, Member Janklow, 0607-0887. I don't remember 
completing this form before in over 16 years of business, so 
the government must have found other ways to develop policy 
without the data that it demands.
    I understand the agency's need to gather information, but 
the financial data are certainly available from the Internal 
Revenue Service. Personnel and payroll data are readily 
available from the Maryland State Department of Labor, 
Licensing and Regulation. In other words this information is 
collected by other agencies. Why should I have to submit it 
time after time to agency after agency? This particular census 
form will probably take, in my estimation, between 4 and 8 
hours to complete. Four hours may not seem like much, but 
multiplied dozen of times with requirements from Federal, State 
and local governmental agencies, the drain on the finite number 
of hours I have to sell my inventory becomes enormous.
    The Commerce Department has told the NFIB that the 
information provided on the form does not have to be 100 
percent accurate, again as Member Janklow mentioned before, and 
my responses to the questions can be estimates. Unfortunately, 
the form does not get around to telling me that until page 6. 
What it does tell me in big bold letters on the first page is 
that were I not to submit this form, I could be liable for a 
$500 fine.
    Given the Federal Government's tendencies to come down very 
hard on businesses, I would be reluctant to provide incomplete 
or estimated information. Each request by itself may not seem 
like much. When accumulated together, however, it is like death 
by a 1,000 cuts.
    The net result for our firm is stifled software 
development, eroded customer relationships, and diminished time 
to plan and just think, each of which is crucial to me as a 
business owner in these uncertain economic times.
    Let me state this in clear language: Paperwork requirements 
directly impact the bottom line of my business. Time burdens 
are not the only problem I have with paperwork requirements. 
Often government forms require the disclosure of information 
that I consider proprietary and sensitive in nature. 
Particularly the census form requires financial data on sales 
and revenue. The Fillmore Group is privately held and we do not 
publish financial statements. The only two entities that 
receive that information today are the IRS and my banker. The 
form further requires that I split that revenue either via 
dollar amounts or percentage basis into 52 different categories 
and subcategories. While that may seem reasonable to a 
methodical analyst at the Department of Commerce, that's a far 
greater level of detail than we have ever used to manage our 
business in the past. To try to comply would be unduly 
burdensome, fraught with error over interpretations over the 
services we provide our customers versus the categorizations in 
the form.
    I make recommendations in my testimony on how technology 
used in the private sector can solve many of the paperwork 
problems that plague small businesses. But, in the interest of 
time, I will just defer to those in the written testimony and 
conclude my remarks.
    Mr. Ose. Mr. Fillmore, thank you.
    [The prepared statement of Mr. Fillmore follows:]

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    Mr. Ose. Mr. Schantz, thank you. Ms. Peterson, thank you.
    I am looking at a clock that is clicking down to 5 minutes 
here and I've got to get over there and vote. We have a number 
of questions for each of you individually we would like to 
forward to you in writing for you to respond.
    Mr. Schantz, the items you have in front of you, I could 
take them into the public record, but, if they have proprietary 
information, I'm not sure you want to do that. So we will 
decline your offer to submit them to the public record.
    Mr. Schantz. We will give you examples.
    Mr. Ose. We will ask for a list without the specific 
proprietary data, being respectful of your privacy. This issue 
is not going away. Four and a half years ago I was on the other 
side of this dais, and I have not forgotten. So I do thank you 
all for coming.
    Again, I apologize for the abrupt ending of this hearing. 
We will send you questions in writing. If you could respond 
timely in 10 days, that would be great. It is good to see 
business people down here and I appreciate all of you for 
taking up the fight. Thank you.
    [Whereupon, at 12:05 p.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]

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