    [Senate Hearing 108-168]
    [From the U.S. Government Publishing Office]

             LEGISLATIVE BRANCH APPROPRIATIONS FOR FISCAL YEAR 2004

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                            THURSDAY, MARCH 27, 2003

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 1:30 p.m., in room SD-124, Dirksen
    Senate Office Building, Hon. Ben Nighthorse Campbell (chairman)
    presiding.
        Present: Senators Campbell and Durbin.

                           GENERAL ACCOUNTING OFFICE

    STATEMENT OF DAVID WALKER, COMPTROLLER GENERAL
    ACCOMPANIED BY:
            GENE L. DODARO, CHIEF OPERATING OFFICER
            STANLEY J. CZERWINSKI, CONTROLLER
            ANTHONY CICCO, JR., CHIEF INFORMATION OFFICER AND DEPUTY CHIEF
                MISSION SUPPORT OFFICER

              OPENING STATEMENT OF SENATOR BEN NIGHTHORSE CAMPBELL

        Senator Campbell. The subcommittee will come to order.
        This is my first hearing as chairman of the Legislative
    Branch Subcommittee, and today's hearing is the first of four
    hearings we plan to have to review the fiscal year 2004
    legislative branch budget request, which totals roughly $3.8
    billion. Two of our three witnesses this afternoon are also new
    to this subcommittee. This afternoon we will take testimony
    from three agencies, the General Accounting Office, the
    Government Printing Office, and the Congressional Budget
    Office.
        We will hear first from Mr. David Walker, Comptroller
    General. Mr. Walker is accompanied by his Chief Operating
    Officer, Mr. Gene Dodaro, and Mr. Stan Czerwinski, GAO's
    Controller. GAO's budget request of $472 million will
    accommodate all inflationary increases with no real significant
    change in its operations. We do want to understand the urgency
    of $4.8 million of your budget request, whether it is truly
    needed in the supplemental, or whether it can await the fiscal
    year 2004 appropriations.
        GAO will be followed by witnesses from the Government
    Printing Office, Mr. Bruce James, the new Public Printer, who
    will appear for the first time before this subcommittee. Mr.
    James will be accompanied by Mr. George Taylor, Deputy Printer,
    Mr. Frank Partlow, Chief of Staff, and Ms. Judith Russell,
    Superintendent of Documents.
        Mr. James, we look forward to hearing about the changes you
    are planning at GPO. We are very pleased to have underway a
    comprehensive general management review by the GAO requested by
    this committee, which we expect will help you as you make your
    plans. GPO's budget totals $135.6 million, and does include $10
    million for anticipated restructuring efforts.
        Finally, we will hear from Dr. Douglas Holtz-Eakin, the
    Director of the Congressional Budget Office, who will appear
    for the first time before this subcommittee. He will be
    accompanied by Mr. Barry Anderson, his deputy. The CBO's budget
    of roughly $34 million would provide for some additional
    employees and its cost of the Federal Accounting Standards
    Advisory Board.
        We are expecting a number of votes this afternoon, and so
    we will not have you read your statements. We will put them in
    the record, and Mr. Walker, you may proceed.
        Mr. Walker. Thank you, Mr. Chairman, for the opportunity to
    be here today and congratulations on your new position as
    chairman of this subcommittee. In addition to Mr. Dodaro and
    Mr. Czerwinski, I would also like to introduce Tony Cicco, our
    Chief Information Officer and Deputy Chief Mission Support
    Officer, who is also with me today. Now, to summarize a few
    highlights for the committee. We realize that you face tough
    budget choices this year and will continue to face them in the
    years ahead. As such, we are requesting, for fiscal year 2004,
    a modest increase of 4.1 percent in our current budget of $473
    million. This request includes the $4.8 million supplemental we
    previously requested for safety and security needs. If the
    Congress is able to fund our fiscal year 2003 supplemental
    request for security needs, we could reduce our fiscal year
    2004 budget request accordingly to a net 3.1 percent increase.
        Fiscal year 2002 was an outstanding year for GAO. We
    achieved record or near record performance results in virtually
    every key category. For example, over $37 billion in measurable
    financial benefits, a return on investment of $88 for every $1
    appropriated to us. Our performance results have increased
    significantly over the last 4 years, and we continue to lead by
    example. We are in the vanguard of the overall government
    transformation effort and are positioning GAO for the future.
        We also plan to work with our oversight committees and
    possibly this committee to seek human capital legislation that
    would make permanent some of the human capital flexibilities
    provided to us by Congress in fiscal year 2001 and recently
    extended to the executive branch in the homeland security
    legislation. We also plan to file the required statutory report
    on our fiscal year 2001 human capital legislation in the coming
    weeks.

                               PREPARED STATEMENT

        Mr. Chairman, we will just submit our testimony for the
    record and would welcome your questions.
        [The statement follows:]

                     Prepared Statement of David M. Walker

        Mr. Chairman and Members of the Subcommittee: I am pleased to
    appear before the Subcommittee today as the Comptroller General of the
    United States and head of the U.S. General Accounting Office (GAO). GAO
    is a key source of objective information and analyses and, as such,
    plays a crucial role in supporting congressional decision-making and
    helping improve government for the benefit of the American people. My
    testimony today will focus on GAO's (1) fiscal year 2002 performance
    and results, (2) efforts to maximize our effectiveness, responsiveness
    and value, and (3) our budget request for fiscal year 2004 to support
    the Congress and serve the American public. In summary:
      --In fiscal year 2002, GAO's work informed the national debate on a
            broad spectrum of issues including helping the Congress answer
            questions about the associated costs and program trade-offs of
            the national preparedness strategy, including providing
            perspectives on how best to organize and manage the new
            Transportation Security Administration and Department of
            Homeland Security. GAO's efforts helped the Congress and
            government leaders achieve $37.7 billion in financial
            benefits--an $88 return on every dollar invested in GAO. The
            return on the public's investment in GAO extends beyond dollar
            savings to improvements in how the government serves its
            citizens. This includes a range of accomplishments that serve
            to improve safety, enhance security, protect privacy, and
            increase the effectiveness of a range of federal programs and
            activities.
      --The results of our work in fiscal year 2002 were possible, in part,
            because of changes we have made to transform GAO in order to
            meet our goal of being a model federal agency and a world-class
            professional services organization. We had already realigned
            GAO's structure and resources to better serve the Congress in
            its legislative, oversight, appropriations, and investigative
            roles. Over the past year, we cultivated and fostered
            congressional and agency relations, better refined our
            strategic and annual planning and reporting processes, and
            enhanced our information technology infrastructure. We also
            continued to provide priority attention to our management
            challenges of human capital, information security, and physical
            security. We have made progress in addressing each of these
            challenges, but we still have work to do and plan to ask for
            legislation to help address some of these issues.
      --GAO is requesting budget authority of $473 million for fiscal year
            2004. Our request represents a modest 4.1 percent increase in
            direct appropriations, primarily for mandatory pay and
            uncontrollable costs. This budget will allow us to maintain
            current operations for serving the Congress as outlined in our
            strategic plan and to continue initiatives to enhance our human
            capital, support business processes, and ensure the safety and
            security of GAO staff, facilities, and information systems.
            Approximately $4.8 million, or about 1 percent, of our request
            relates to several safety and security items that are included
            in our fiscal year 2003 supplemental request. If this
            supplemental request is granted, our fiscal year 2004 request
            could be reduced accordingly.

                    FISCAL YEAR 2002 PERFORMANCE AND RESULTS

        Fiscal year 2002 was a year of challenges, not just for GAO but
    also for the Congress and the nation. The nation's vulnerabilities were
    exposed in a series of events--America's vulnerability to sophisticated
    terrorist networks, bioterrorism waged through mechanisms as mundane as
    the daily mail, and corporate misconduct capable of wiping out jobs,
    pensions, and investments virtually overnight. As the Congress's
    priorities changed to meet these crises, GAO's challenge was to respond
    quickly and effectively to our congressional clients' changing needs.
        With work already underway across a spectrum of critical policy and
    performance issues, we had a head start toward meeting the Congress'
    needs in a year of unexpected and often tumultuous events. For example,
    in fiscal year 2002 GAO's work informed the debate over national
    preparedness strategy, helping the Congress determine how best to
    organize and manage major new departments, assess key vulnerabilities
    to homeland defense, and respond to the events of September 11 in areas
    such as terrorism insurance and airline security. GAO's input also was
    a major factor in shaping the Sarbanes-Oxley Act, which created the
    Public Company Accounting Oversight Board, as well as new rules to
    strengthen corporate governance and ensure auditor independence.
    Further, GAO's work helped the Congress develop and enact election
    reform legislation in the form of the Help America Vote Act of 2002 to
    help restore voter confidence.
        In fiscal year 2002, GAO also served the Congress and the American
    people by helping to:
      --Contribute to a national preparedness strategy at the federal,
            state, and local levels that will make Americans safer from
            terrorism
      --Protect investors through better oversight of the securities
            industry and the accounting profession
      --Ensure a safer national food supply
      --Expose the inadequacy of nursing home care
      --Make income tax collection fair, effective, and less painful to
            taxpayers
      --Strengthen public schools' accountability for educating children
      --Keep sensitive American technologies out of the wrong hands
      --Protect American armed forces confronting chemical or biological
            weapons
      --Identify the risks to employees in private pension programs
      --Identify factors causing the shortage of children's vaccines
      --Assist the postal system in addressing anthrax and various
            management challenges
      --Identify security risks at ports, airports, and transit systems
      --Save billions by bringing sound business practices to the
            Department of Defense
      --Foster human capital strategic management to create a capable,
            effective, well-managed federal workforce
      --Ensure that the armed forces are trained and equipped to meet the
            nation's defense commitments
      --Enhance the safety of Americans and foreign nationals at U.S.
            installations worldwide
      --Assess ways of improving border security through biometric
            technologies and other means
      --Reduce the international debt problems faced by poor countries
      --Reform the way federal agencies manage their finances
      --Protect government computer systems from security threats
      --Enhance the transition of e-government--the new ``electronic
            connection'' between government and the public.
        During fiscal year 2002, GAO's analyses and recommendations
    contributed to a wide range of legislation considered by the Congress,
    as shown in the following table.

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     Table 1.--Selected Public Laws to Which GAO Contributed During Fiscal
                                   Year 2002

        Prescription Drug User Fee Amendments of 2002, Public Law 107-188
        Best Pharmaceuticals for Children Act, Public Law 107-1092
        No Child Left Behind Act of 2001, Public Law 107-110
        Food Stamp Reauthorization Act of 2002, Public Law 107-171
        Help America Vote Act of 2002, Public Law 107-252
        Homeland Security Act of 2002, Public Law 107-296
        Public Health Security and Bioterrorism Preparedness and Response
    Act of 2002, Public Law 107-188
        Aviation and Transportation Security Act, Public Law 107-71
        Department of Defense Appropriation Act, 2003, Public Law 107-248
        Department of Defense and Emergency Supplemental Appropriations for
    Recovery From and Response to Terrorist Attacks on the United States
    Act, 2002, Public Law 107-117
        Bob Stump National Defense Authorization Act for Fiscal Year 2003
    Public Law 107-314
        Foreign Relations Authorization Act, Fiscal Year 2003, Public Law
    107-228
        Small Business Paperwork Relief Act of 2002, Public Law 107-198
        Federal Information Security Management Act of 2002, Public Law
    107-347
        Sarbanes-Oxley Act of 2002, Public Law 107-204
        National Defense Authorization Act for Fiscal Year 2002, Public Law
    107-107
        Legislative Branch Appropriations, Fiscal Year 2002, Public Law
    107-68
        Improper Payments Information Act of 2002, Public Law 107-300
        Trade Act of 2002, Public Law 107-210
        Terrorism Risk Insurance Act of 2002, Public Law 107-297
        E-Government Act of 2002, Public Law 107-347

        Source: GAO.

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        By year's end, we had testified 216 times before the Congress,
    sometimes on as little as 24 hours' notice, on a range of issues. We
    had responded to hundreds of urgent requests for information. We had
    developed 1,950 recommendations for improving the government's
    operations, including, for example, those we made to the Secretary of
    State calling for the development of a governmentwide plan to help
    other countries combat nuclear smuggling and those we made to the
    Chairman of the Federal Energy Regulatory Commission calling for his
    agency to develop an action plan for overseeing competitive energy
    markets. We also had continued to track the recommendations we had made
    in past years, checking to see that they had been implemented and, if
    not, whether we needed to do follow-up work on problem areas. We found,
    in fact, that 79 percent of the recommendations we had made in fiscal
    year 1998 had been implemented, a significant step when the work we
    have done for the Congress becomes a catalyst for creating tangible
    benefits for the American people.
        Table 2 highlights, by GAO's three external strategic goals,
    examples of issues on which we testified before Congress during fiscal
    year 2002.

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                             TABLE 2.--ISSUES ON WHICH GAO TESTIFIED DURING FISCAL YEAR 2002
    ----------------------------------------------------------------------------------------------------------------
     Goal 1--Well-Being and Financial   Goal 2--Changing Security Threats and     Goal 3--Transforming the Federal
     Security of the American People         Challenge of Globalization                  Government's Role
    ----------------------------------------------------------------------------------------------------------------
    Aviation security                  A-76 competitive sourcing               Contract management
    Bioterrorism                       Anthrax vaccine                         Contracting for services
    Blood supplies                     Ballistic missile defense               Corporate governance and
    Child welfare                      Chemical and biological preparedness     accountability
    Childhood vaccines                 Combating terrorism                     Debt collection
    Coast Guard's security missions    Compact with Micronesia                 DOD financial management
    Customs' cargo inspections         Conflict diamonds                       Electronic Government Act of 2002
    Disability programs                Debt relief for poor countries          Electronic-government security
    EPA cabinet status                 Encroachment on training ranges         Enterprise architecture
    FBI reorganization                 Export controls                         Federal budget issues
    Federal property management        Food aid                                Federal building security
     reform                            Foreign language needs                  Federal financial management reform
    Food safety                        Gulf War illnesses                      Federal rulemaking requirements
    Highway trust fund                 Information security aspects of         Freedom to Manage Act
    Housing                             homeland security                      Human capital strategy
    HUD management reform              International trade                     Illegal tax schemes and scams
    Identity theft                     Nuclear smuggling                        Intergovernmental aspects of
    Immigration enforcement            Organizational aspects of homeland       homeland security
    Indian tribal recognition           security                               IRS modernization
    Intercity passenger rail           SEC's human capital challenges          Medicaid financial management
    Long-term care                     Strategic seaport protection            NASA's management challenges
    Medicare payments                  Terrorism insurance                     President's Management Agenda
    Nuclear waste storage              U.S. overseas presence                  Purchase card controls
    Nursing homes                      Weapons of mass destruction             Securing America's borders
    Postal Service challenges                                                  U.S. government's financial
    Public health aspects of homeland                                           statements
     security
    Retiree health insurance
    SBA's human capital challenges
    Social Security reform
    Transit safety and security
    VA health care
    Welfare reform
    Wildfire threats
    Workforce development
    ----------------------------------------------------------------------------------------------------------------
    Source: GAO.

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        Congress and the executive agencies took a wide range of actions in
    fiscal year 2002 to improve government operations, reduce costs, or
    better target budget authority based on GAO analyses and
    recommendations, as highlighted in the following sections.
        Federal action on GAO's findings or recommendations produced
    financial benefits for the American people: a total of $37.7 billion
    was achieved by making government services more efficient, improving
    the budgeting and spending of tax dollars, and strengthening the
    management of federal resources (see fig. 1). For example, increased
    funding for improved safeguards against fraud and abuse helped the
    Medicare program to better control improper payments of $8.1 billion
    over 2 years, and better policies and controls reduced losses from farm
    loan programs by about $4.8 billion across 5 years.

        In fiscal year 2002, we also recorded 906 instances in which our
    work led to improvements in government operations or programs (see fig.
    2). For example, by acting on GAO's findings or recommendations, the
    federal government has taken important steps toward enhancing aviation
    safety, improving pediatric drug labeling based on research, better
    targeting of funds to high-poverty school districts, greater
    accountability in the federal acquisition process, and more effective
    delivery of disaster recovery assistance to other nations, among other
    achievements.

        As shown in table 3, we met all of our annual performance targets
    except our timeliness target. While we provided 96 percent of our
    products to their congressional requesters by the date promised, we
    missed this measure's target of 98 percent on-time delivery. The year's
    turbulent events played a part in our missing the target, causing us to
    delay work in progress when higher-priority requests came in from the
    Congress. We know we will continue to face factors beyond our control
    as we strive to improve our performance in this area. We believe the
    agency protocols we are piloting will help clarify aspects of our
    interactions with the agencies we evaluate and audit and, thus,
    expedite our work in ways that could improve the timeliness of our
    final products. We also believe that our continuing investments in
    human capital and information technology will improve our timeliness
    while allowing us to maintain our high level of productivity and
    performance overall.

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                                    TABLE 3.--ANNUAL PERFORMANCE MEASURES AND TARGETS
    ----------------------------------------------------------------------------------------------------------------
                                            Fiscal  Fiscal  Fiscal  Fiscal  Fiscal   Fiscal           Fiscal  Fiscal
                                             Year    Year    Year    Year    Year     Year   4-year    Year    Year
              Performance measure            1998    1999    2000    2001    2002     2002    avg.     2003    2004
                                            Actual  Actual  Actual  Actual  Target   Actual  Actual   Target  Target
    ----------------------------------------------------------------------------------------------------------------
    Financial benefits (dollars in           $19.7   $20.1   $23.2   $26.4   $30.0  \1\ $37   $26.9  \2\ $32   $35.0
     billions)............................                                               .7               .5
    Other benefits........................     537     607     788     799     770      906     775  \2\ 800     820
    Past recommendations implemented            69      70      78      79      75       79     N/A       77      77
     (percent)............................
    New recommendations made..............     987     940   1,224   1,563   1,200    1,950   1,419  \2\ 1,2   1,250
                                                                                                          50
    New products with recommendations (in       33      33      39      44      45       53      42       50      50
     per-  cent)..........................
    Testimonies...........................     256     229     263     151     200      216     215  \2\ 180     200
    Timeliness (in percent)...............      93      96      96      95      98       96      96       98      98
    ----------------------------------------------------------------------------------------------------------------
    \1\ Changes GAO made to its methodology for tabulating financial benefits caused about 11 percent of the
      increase in fiscal year 2002.
    \2\ Four targets published in GAO's performance plan for fiscal year 2003 were subsequently revised based on
      more current information. Two were raised; two were lowered. The original targets were financial benefits, $35
      billion; other benefits, 785; recommendations made, 1,200; and testimonies, 210.

    N/A=not applicable.
    Source: GAO.

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            MAXIMIZING GAO'S EFFECTIVENESS, RESPONSIVENESS AND VALUE

        The results of our work were possible, in part, because of changes
    we have made to maximize the value of GAO. We had already realigned
    GAO's structure and resources to better serve the Congress in its
    legislative, oversight, appropriations, and investigative roles. Over
    the past year, we cultivated and fostered congressional and agency
    relations, better refined our strategic and annual planning and
    reporting processes, and enhanced our information technology
    infrastructure. We also continued to provide priority attention to our
    management challenges of human capital, information security, and
    physical security. Changes we made in each of these areas helped enable
    us to operate in a constantly changing environment.

    Congressional and Agency Relations
        Over the course of the year, we cultivated and fostered
    congressional and agency relations in several ways. On October 23,
    2001, in response to the anthrax incident on Capitol Hill, we opened
    our doors to 435 members of the House of Representatives and their
    staffs. Later in the year, we continued with our traditional hill
    outreach meetings and completed a 7-month pilot test of a system for
    obtaining clients' views on the quality of our testimonies and reports.
    We also developed agency protocols to provide clearly defined,
    consistently applied, well-documented, and transparent policies for
    conducting our work with federal agencies. We have implemented our new
    reporting product line entitled Highlights--a one-page summary that
    provides the key findings and recommendations from a GAO engagement. We
    continued our policy of outreach to our congressional clients, the
    public, and the press to enhance the accessibility of GAO products. Our
    external web site now logs about 100,000 visitors each day and more
    than 1 million GAO products are downloaded every month by our
    congressional clients, the public, and the press.
        In light of certain records access challenges during the past few
    years and with concerns about national and homeland security unusually
    high at home and abroad, it may become more difficult for us to obtain
    information from the Executive Branch and report on certain issues. If
    this were to occur, it would hamper our ability to complete
    congressional requests in a timely manner. We are updating GAO's
    engagement acceptance policies and practices to address this issue and
    may recommend legislative changes that will help to assure that we have
    reasonable and appropriate information that we need to conduct our work
    for the Congress and the country.

    Strategic and Annual Planning
        GAO's strategic planning process serves as a model for the federal
    government. Our plan aligns GAO's resources to meet the needs of the
    Congress, address emerging challenges and achieve positive results.
    Following the spirit of the Government Performance and Results Act, we
    established a process that provides for updates with each new Congress,
    ongoing analysis of emerging conditions and trends, extensive
    consultations with congressional clients and outside experts, and
    assessments of our internal capacities and needs.
        At the beginning of fiscal year 2002, we updated our strategic plan
    for serving the Congress based on substantial congressional input--
    extending the plan's perspective out to fiscal year 2007 and factoring
    in developments that had occurred since we first issued it in fiscal
    year 2000. The updated plan carries forward the four strategic goals we
    had already established as the organizing principles for a body of work
    that is as wide-ranging as the interests and concerns of the Congress
    itself. Using the plan as a blueprint, we lay out the areas in which we
    expect to conduct research, audits, analyses, and evaluations to meet
    our clients' needs, and we allocate the resources we receive from the
    Congress accordingly. Following is our strategic plan framework.
    Appendix I of this statement delineates in a bit more detail our
    strategic objectives and our qualitative performance goals for fiscal
    years 2002 and 2003.

        We issued our 2001 Performance and Accountability Report that
    combines information on our past year's accomplishments and progress in
    meeting our strategic goals with our plans for achieving our fiscal
    year 2003 performance goals. The report earned a Certificate of
    Excellence in Accountability Reporting from the Association of
    Government Accountants. We issued our Fiscal Year 2002 Performance and
    Accountability Report in January 2003.
        Our financial statements, which are integral to our performance and
    accountability, received an unqualified opinion for the sixteenth
    consecutive year. Furthermore, our external auditors did not identify
    any material control weaknesses or compliance issues relating to GAO's
    operations.

    Information Technology
        During the past year, we acquired new hardware and software and
    developed user-friendly systems that enhanced our productivity and
    responsiveness to the Congress and helped meet our initial information
    technology goals. For example, we replaced aging desktop workstations
    with notebook computers that provide greater computing power, speed,
    and mobility. In addition, we upgraded key desktop applications, the
    Windows desktop operating system, and telecommunications systems to
    ensure that GAO staff have modern technology tools to assist them in
    carrying out their work. We also developed new, integrated, user-
    friendly Web-based systems that eliminate duplicate data entry while
    ensuring the reusability of existing data. As the Clinger-Cohen Act
    requires, GAO has an enterprise architecture program in place to guide
    its information technology planning and decision making. In designing
    and developing systems, as well as in acquiring technology tools and
    services, we have applied enterprise architecture principles and
    concepts to ensure sound information technology investments and the
    interoperability of systems.

    Human Capital
        Given GAO's role as a key provider of information and analyses to
    the Congress, maintaining the right mix of technical knowledge and
    expertise as well as general analytical skills is vital to achieving
    our mission. We spend about 80 percent of our resources on our people,
    but without excellent human capital management, we could still run the
    risk of being unable to deliver what the Congress and the nation expect
    from us. At the beginning of my term in early fiscal year 1999, we
    completed a self-assessment that profiled our human capital workforce
    and identified a number of serious challenges facing our workforce,
    including significant issues involving succession planning and
    imbalances in the structure, shape, and skills of our workforce. As
    presented below, through a number of strategically planned human
    capital initiatives over the past few years, we have made significant
    progress in addressing these issues. For example, as illustrated in
    figure 3, by the end of fiscal year 2002, we had almost a 60 percent
    increase in the percentage of staff at the entry-level (Band I) as
    compared with fiscal year 1998. Also, the proportion of our workforce
    at the mid-level (Band II) decreased by about 8 percent.

        Our fiscal year 2002 human capital initiatives included the
    following:
      --In fiscal year 2002, we hired nearly 430 permanent staff and 140
            interns. We also developed and implemented a strategy to place
            more emphasis on diversity in campus recruiting.
      --In fiscal years 2002 and 2003, to help meet our workforce planning
            objectives, we offered voluntary early retirement under
            authority established in our October 2000 human capital
            legislation. Early retirement was granted to 52 employees in
            fiscal year 2002 and 24 employees in fiscal year 2003.
      --To retain staff with critical skills and staff with less than 3
            years of GAO experience, we implemented legislation authorizing
            federal agencies to offer student loan repayments in exchange
            for certain federal service commitments.
      --In fiscal year 2002, GAO implemented a new, modern, effective, and
            credible performance appraisal system for analysts and
            specialists, adapted the system for attorneys, and began
            modifying the system for administrative professional and
            support staff.
      --We began developing a new core training curriculum for managers and
            staff to provide additional training on the key competencies
            required to perform GAO's work.
      --We also took steps to achieve a fully democratically-elected
            Employee Advisory Council to work with GAO's Executive
            Committee in addressing issues of mutual interest and concern.
        The above represent just a few of many accomplishments in the human
    capital area. GAO is the clear leader in the federal government in
    designating and implementing 21st century human capital policies and
    practices. We also are taking steps to work with the Congress, the
    Office of Management and Budget, and the Office of Personnel
    Management, and others to ``help others help themselves'' in the human
    capital area.

    Information Security
        Ensuring information systems security and disaster recovery systems
    that allow for continuity of operations is a critical requirement for
    GAO, particularly in light of the events of September 11 and the
    anthrax incidents. The risk is that our information could be
    compromised and that we would be unable to respond to the needs of the
    Congress in an emergency. In light of this risk and in keeping with our
    goal of being a model federal agency, we are implementing an
    information security program consistent with the requirements in the
    Government Information Security Reform provisions (commonly referred to
    as ``GISRA'') enacted in the Floyd D. Spence National Defense
    Authorization Act for Fiscal Year 2001. We have made progress through
    our efforts to, among other things, implement a risk-based, agencywide
    security program; provide security training and awareness; and develop
    and implement an enterprise disaster recovery solution.

    Physical Security
        In the aftermath of the September 11 terrorist attacks and
    subsequent anthrax incidents, our ability to provide a safe and secure
    workplace emerged as a challenge for our agency. Protecting our people
    and our assets is critical to our ability to meet our mission. We
    devoted additional resources to this area and implemented measures such
    as reinforcing vehicle and pedestrian entry points, installing an
    additional x-ray machine, adding more security guards, and reinforcing
    windows.

                     GAO'S FISCAL YEAR 2004 BUDGET REQUEST

        GAO is requesting budget authority of $473 million for fiscal year
    2004 to maintain current operations for serving the Congress as
    outlined in our strategic plan and to continue initiatives to enhance
    our human capital, support business processes, and ensure the safety
    and security of GAO staff, facilities, and information systems. This
    funding level will allow us to fund up to 3,269 full-time equivalent
    personnel. Our request includes $466.6 million in direct appropriations
    and authority to use estimated revenues of $6 million from reimbursable
    audit work and rental income. Our requested increase of $18.4 million
    in direct appropriations represents a modest 4.1 percent increase,
    primarily for mandatory pay and uncontrollable costs. Our budget
    request also includes savings from nonrecurring fiscal year 2003
    investments in fiscal year 2004 that we propose to use to fund further
    one-time investments in critical areas, such as security and human
    capital.
        We have submitted a request for $4.8 million in supplemental fiscal
    year 2003 funds to allow us to accelerate implementation of important
    security enhancements. Our fiscal year 2004 budget includes $4.8
    million for safety and security needs that are also included in the
    supplemental. If the requested fiscal year 2003 supplemental funds are
    provided, our fiscal year 2004 budget could be reduced by $4.8 million.
    Table 4 presents our fiscal year 2003 and requested fiscal year 2004
    resources by funding source.

        ----------------------------------------------------------------

                            TABLE 4.--FISCAL YEARS 2003 AND 2004 RESOURCES BY FUNDING SOURCE
                                                 [Dollars in thousands]
    ----------------------------------------------------------------------------------------------------------------
                                                                                               Change--fiscal year
                                                                   Fiscal Year  Fiscal Year        2003 to 2004
                            Funding source                             2003         2004    ------------------------
                                                                     Revised      Request       Amount      Percent
    ----------------------------------------------------------------------------------------------------------------
    Total budget authority.......................................  \1\ $451,20    $472,627      $21,425   ..........
                                                                            2
    Less: offsetting collections \2\.............................      (3,000)      (6,006)      (3,006)  ..........
    Direct appropriation.........................................    $448,202     $466,621      $18,419          4.1
    ----------------------------------------------------------------------------------------------------------------
    \1\ Excludes request for supplemental funds of $4.8 million.
    \2\ Offsetting collections include reimbursable audit work and rental income.

    Source: GAO.

        ----------------------------------------------------------------

        During fiscal year 2004, we plan to sustain our investments in
    maximizing the productivity of our workforce by continuing to address
    the key management challenges of human capital, and both information
    and physical security. We will continue to take steps to ``lead by
    example'' within the federal government in connection with these and
    other critical management areas.
        Over the next several years, we need to continue to address skill
    gaps, maximize staff productivity and effectiveness, and reengineer our
    human capital processes to make them more user-friendly. We plan to
    address skill gaps by further refining our recruitment and hiring
    strategies to target gaps identified through our workforce planning
    efforts, while taking into account the significant percentage of our
    workforce eligible for retirement. We will continue to take steps to
    reengineer our human capital systems and practices to increase their
    efficiency and to take full advantage of technology. We will also
    ensure that our staff have the needed skills and training to function
    in this reengineered environment. In addition, we are developing
    competency-based performance appraisal and broad-banding pay systems
    for our mission support employees.
        To ensure our ability to attract, retain, and reward high-quality
    staff, we plan to devote additional resources to our employee training
    and development program. We will target resources to continue
    initiatives to address skill gaps, maximize staff productivity, and
    increase staff effectiveness by updating our training curriculum to
    address organizational and technical needs and training new staff.
    Also, to enhance our recruitment and retention of staff, we will
    continue to offer a student loan repayment program and transit subsidy
    benefit established in fiscal year 2002. In addition, we will continue
    to focus our hiring efforts in fiscal year 2004 on recruiting talented
    entry-level staff.
        To build on the human capital flexibilities provided by the
    Congress in 2000, we plan to recommend legislation that would, among
    other things, facilitate GAO's continuing efforts to recruit and retain
    top talent, develop a more performance-based compensation system,
    realign our workforce, and facilitate our succession planning and
    knowledge transfer efforts. In addition, to help attract new recruits,
    address certain ``expectation gaps'' within and outside of the
    government, and better describe the modern audit and evaluation entity
    GAO has become, we will work with the Congress to explore the
    possibility of changing the agency's name while retaining our well-
    known acronym and global brand name of ``GAO.''
        On the information security front, we need to complete certain key
    actions to be better able to detect intruders in our systems, identify
    our users, and recover in the event of a disaster. Among our current
    efforts and plans for these areas are completing the installation of
    software that helps us detect intruders on all our internal servers,
    completing the implementation of a secure user authentication process,
    and refining the disaster recover plan we developed last year. We will
    need the Congress' help to address these remaining challenges.
        We also are continuing to make the investments necessary to enhance
    the safety and security of our people, facilities, and other assets for
    the mutual benefit of GAO and the Congress. With our fiscal year 2003
    supplemental funding, if provided, or if not, with fiscal year 2004
    funds, we plan to complete installation of our building access control
    and intrusion detection system and supporting infrastructure, and
    obtain an offsite facility for use by essential personnel in emergency
    situations. With the help of the Congress, we plan to implement these
    projects over the next several years.

                               CONCLUDING REMARKS

        As a result of the support and resources we have received from this
    Subcommittee and the Congress over the past several years, we have been
    able to make a difference in government, not only in terms of financial
    benefits and improvements in federal programs and operations that have
    resulted from our work, but also in strengthening and increasing the
    productivity of GAO, and making a real difference for our country and
    its citizens. Our budget request for fiscal year 2004 is modest, but
    necessary to sustain our current operations, continue key human capital
    and information technology initiatives, and ensure the safety and
    security of our most valuable asset--our people. We seek your continued
    support so that we will be able to effectively and efficiently conduct
    our work on behalf of the Congress and the American people.
        As the Comptroller General of the United States, I am very proud of
    how, in a time of uncertainty, GAO staff responded with a positive
    attitude and did whatever their country required and demonstrated an
    unwavering resolve to continue their work. Knowing this organization as
    I do, I was not surprised. We at GAO look forward to continuing to help
    the Congress and the nation meet the current and emerging challenges of
    the 21st century.

     Appendix I: GAO's Qualitative Performance Goals for Fiscal Years 2002
                                    and 2003

        This appendix lists GAO's strategic goals and the strategic
    objectives for each goal. They are part of our updated draft strategic
    plan (for fiscal years 2002 through 2007).
        Organized below each strategic objective are its qualitative
    performance goals. The performance goals lay out the work we plan to do
    in fiscal years 2002 and 2003 to help achieve our strategic goals and
    objectives. We will evaluate our performance at the end of fiscal year
    2003.

    Strategic Goal 1--Provide Timely, Quality Service to the Congress and
            the Federal Government to Address Current and Emerging
            Challenges to the Well-Being and Financial Security of the
            American People
        To achieve this goal, we will provide information and
    recommendations on the following:
      --the Health Care Needs of an Aging and Diverse Population
        --evaluate Medicare reform, financing, and operations;
        --assess trends and issues in private health insurance coverage;
        --assess actions and options for improving the Department of
                Veterans Affairs' and the Department of Defense's (DOD)
                health care services;
        --evaluate the effectiveness of federal programs to promote and
                protect the public health;
        --evaluate the effectiveness of federal programs to improve the
                nation's preparedness for the public health and medical
                consequences of bioterrorism;
        --evaluate federal and state program strategies for financing and
                overseeing chronic and long-term health care; and
        --assess states' experiences in providing health insurance coverage
                for low-income populations.
      --the Education and Protection of the Nation's Children
        --analyze the effectiveness and efficiency of early childhood
                education and care programs in serving their target
                populations;
        --assess options for federal programs to effectively address the
                educational and nutritional needs of elementary and
                secondary students and their schools;
        --determine the effectiveness and efficiency of child support
                enforcement and child welfare programs in serving their
                target populations; and
        --identify opportunities to better manage postsecondary,
                vocational, and adult education programs and deliver more
                effective services.
        --the Promotion of Work Opportunities and the Protection of Workers
        --assess the effectiveness of federal efforts to help adults enter
                the workforce and to assist low-income workers;
        --analyze the impact of programs designed to maintain a skilled
                workforce and ensure employers have the workers they need;
        --assess the success of various enforcement strategies to protect
                workers while minimizing employers' burden in the changing
                environment of work; and
        --identify ways to improve federal support for people with
                disabilities.
      --a Secure Retirement for Older Americans
        --assess the implications of various Social Security reform
                proposals;
        --identify opportunities to foster greater pension coverage,
                increase personal saving, and ensure adequate and secure
                retirement income; and
        --identify opportunities to improve the ability of federal agencies
                to administer and protect workers' retirement benefits.
      --an Effective System of Justice
        --identify ways to improve federal agencies' ability to prevent and
                respond to major crimes, including terrorism;
        --assess the effectiveness of federal programs to control illegal
                drug use;
        --identify ways to administer the nation's immigration laws to
                better secure the nation's borders and promote appropriate
                treatment of legal residents; and
        --assess the administrative efficiency and effectiveness of the
                federal court and prison systems.
      --the Promotion of Viable Communities
        --assess federal economic development assistance and its impact on
                communities;
        --assess how the federal government can balance the promotion of
                home ownership with financial risk;
        --assess the effectiveness of federal initiatives to assist small
                and minority-owned businesses;
        --assess federal efforts to enhance national preparedness and
                capacity to respond to and recover from natural and man-
                made disasters; and
        --assess how well federally supported housing programs meet their
                objectives and affect the well-being of recipient
                households and communities.
      --Responsible Stewardship of Natural Resources and the Environment
        --assess the nation's ability to ensure reliable and
                environmentally sound energy for current and future
                generations;
        --assess federal strategies for managing land and water resources
                in a sustainable fashion for multiple uses;
        --assess federal programs' ability to ensure a plentiful and safe
                food supply, provide economic security for farmers, and
                minimize agricultural environmental damage;
        --assess federal pollution prevention and control strategies; and
        --assess efforts to reduce the threats posed by hazardous and
                nuclear wastes.
      --a Secure and Effective National Physical Infrastructure
        --assess strategies for identifying, evaluating, prioritizing,
                financing, and implementing integrated solutions to the
                nation's infrastructure needs;
        --assess the impact of transportation and telecommunications
                policies and practices on competition and consumers;
        --assess efforts to improve safety and security in all
                transportation modes;
        --assess the U.S. Postal Service's transformation efforts to ensure
                its viability and accomplish its mission; and
        --assess federal efforts to plan for, acquire, manage, maintain,
                secure, and dispose of the government's real property
                assets.

    Strategic Goal 2--Provide Timely, Quality Service to the Congress and
            the Federal Government to Respond to Changing Security Threats
            and the Challenges of Global Interdependence
        To achieve this goal, we will provide information and
    recommendations on the following:
      --Respond to Diffuse Threats to National and Global Security
        --analyze the effectiveness of the federal government's approach to
                providing for homeland security;
        --assess U.S. efforts to protect computer and telecommunications
                systems supporting critical infrastructures in business and
                government; and
        --assess the effectiveness of U.S. and international efforts to
                prevent the proliferation of nuclear, biological, chemical,
                and conventional weapons and sensitive technologies.
      --Ensure Military Capabilities and Readiness
        --assess the ability of DOD to maintain adequate readiness levels
                while addressing the force structure changes needed in the
                21st century;
        --assess overall human capital management practices to ensure a
                high-quality total force;
        --identify ways to improve the economy, efficiency, and
                effectiveness of DOD's support infrastructure and business
                systems and processes;
        --assess the National Nuclear Security Administration's efforts to
                maintain a safe and reliable nuclear weapons stockpile;
        --analyze and support DOD's efforts to improve budget analyses and
                performance management;
        --assess whether DOD and the services have developed integrated
                procedures and systems to operate effectively together on
                the battlefield; and
        --assess the ability of weapon system acquisition programs and
                processes to achieve desired outcomes.
      --Advance and Protect U.S. International Interests
        --analyze the plans, strategies, costs, and results of the U.S.
                role in conflict interventions;
        --analyze the effectiveness and management of foreign aid programs
                and the tools used to carry them out;
        --analyze the costs and implications of changing U.S. strategic
                interests;
        --evaluate the efficiency and accountability of multilateral
                organizations and the extent to which they are serving U.S.
                interests; and
        --assess the strategies and management practices for U.S. foreign
                affairs functions and activities.
      --Respond to the Impact of Global Market Forces on U.S. Economic and
            Security Interests
        --analyze how trade agreements and programs serve U.S. interests;
        --improve understanding of the effects of defense industry
                globalization;
        --assess how the United States can influence improvements in the
                world financial system;
        --assess the ability of the financial services industry and its
                regulators to maintain a stable and efficient global
                financial system;
        --evaluate how prepared financial regulators are to respond to
                change and innovation; and
        --assess the effectiveness of regulatory programs and policies in
                ensuring access to financial services and deterring fraud
                and abuse in financial markets.

    Strategic Goal 3--Help Transform the Government's Role and How It Does
            Business to Meet 21st Century Challenges
        To achieve this goal, we will provide information and
    recommendations on the following:
      --Analyze the Implications of the Increased Role of Public and
            Private Parties in Achieving Federal Objectives
        --analyze the modern service-delivery system environment and the
                complexity and interaction of service-delivery mechanisms;
        --assess how involvement of state and local governments and
                nongovernmental organizations affect federal program
                implementation and achievement of national goals; and
        --assess the effectiveness of regulatory administration and reforms
                in achieving government objectives.
      --Assess the Government's Human Capital and Other Capacity for
            Serving the Public
        --identify and facilitate the implementation of human capital
                practices that will improve federal economy, efficiency,
                and effectiveness;
        --identify ways to improve the financial management infrastructure
                capacity to provide useful information to manage for
                results and costs day to day;
        --assess the government's capacity to manage information technology
                to improve performance;
        --assess efforts to manage the collection, use, and dissemination
                of government information in an era of rapidly changing
                technology;
        --assess the effectiveness of the Federal Statistical System in
                providing relevant, reliable, and timely information that
                meets federal program needs; and
        --identify more businesslike approaches that can be used by federal
                agencies in acquiring goods and services.
        Support Congressional Oversight of the Federal Government's
    Progress toward Being More Results-Oriented, Accountable, and Relevant
    to Society's Needs
        --analyze and support efforts to instill results-oriented
                management across the government;
        --highlight the federal programs and operations at highest risk and
                the major performance and management challenges confronting
                agencies;
        --identify ways to strengthen accountability for the federal
                government's assets and operations;
        --promote accountability in the federal acquisition process;
        --assess the management and results of the federal investment in
                science and technology and the effectiveness of efforts to
                protect intellectual property;
        --identify ways to improve the quality of evaluative information;
                and
        --develop new resources and approaches that can be used in
                measuring performance and progress on the nations 21st
                century challenges.
      --Analyze the Government's Fiscal Position and Approaches for
            Financing the Government
        --analyze the long-term fiscal position of the federal government;
        --analyze the structure and information for budgetary choices and
                explore alternatives for improvement;
        --contribute to congressional deliberations on tax policy;
        --support congressional oversight of the Internal Revenue Service's
                modernization and reform efforts; and
        --assess the reliability of financial information on the
                government's fiscal position and financing sources.

    Strategic Goal 4--Maximize the Value of GAO by Being a Model Federal
            Agency and a World-Class Professional Services Organization
        To achieve this goal, we will do the following:
      --Sharpen GAO's Focus on Clients' and Customers' Requirements
        --continuously update client requirements;
        --develop and implement stakeholder protocols and refine client
                protocols; and
        --identify and refine customer requirements and measures.
      --Enhance Leadership and Promote Management Excellence
        --foster an attitude of stewardship to ensure a commitment to GAO's
                mission and core values;
        --implement an integrated approach to strategic management;
        --continue to provide leadership in strategic human capital
                management planning and execution;
        --maintain integrity in financial management;
        --use enabling technology to improve GAO's crosscutting business
                processes; and
        --provide a safe and secure workplace.
      --Leverage GAO's Institutional Knowledge and Experience
        --improve GAO's use of Web-based knowledge tools;
        --develop a framework to manage the collection, use, distribution,
                and retention of organizational knowledge; and
        --strengthen relationships with other national and international
                accountability and professional organizations.
      --Continuously Improve GAO's Business and Management Processes
        --improve internal business and administrative processes;
        --improve GAO's product and service lines; and
        --improve GAO's job management processes.
      --Become the Professional Services Employer of Choice
        --maintain an environment that is fair, unbiased, family-friendly,
                and promotes and values opportunity and inclusiveness;
        --improve compensation and performance management systems;
        --develop and implement a training and professional development
                strategy targeted toward competencies; and
        --provide GAO's people with tools, technology, and a working
                environment that is world-class.

        Senator Campbell. You claim you have achieved over $37
    billion in financial benefits, generating a return on
    investment of $88 for every dollar appropriated to you by the
    Congress. Can you explain what you mean by financial benefits,
    how you determine these benefits, and provide examples of some
    of your largest items?
        Mr. Walker. GAO produces financial benefits when its work
    contributes to actions taken by the Congress or the Executive
    Branch to: Reduce annual operating costs of Federal programs or
    activities; lessen the costs of multiyear projects or
    entitlements; or increase revenues from debt collection, asset
    sales, changes in tax laws or user fees.
        The funds made available in response to GAO's work may be
    used to reduce Government expenditures or reallocated by the
    Congress to other priority areas. To ensure conservative
    estimates of net financial benefits, reductions in operating
    cost are typically limited to 2 years of accrued reductions.
    Multiyear reductions in long-term projects, changes in tax
    laws, program terminations, or sales of Government assets are
    limited to 5 years. In addition, all financial benefits are
    calculated in net present value terms.
        GAO has established policies and procedures to guide the
    reporting of financial benefits. Estimates must be based on
    independent third party sources and reduced by any identifiable
    offsetting costs. The third parties are typically the agency
    that acted on GAO's work, a congressional committee, or the
    Congressional Budget Office.
        All accomplishment reports for financial benefits are
    documented and reviewed by another GAO staff member not
    involved in the work, and a senior executive in charge of the
    work. Also, a separate independent unit (Quality and Continuous
    Improvement) reviews all financial benefits and must approve
    benefits of $100 million or more, which amounted to 93 percent
    of the total benefits recorded in fiscal year 2002. Finally,
    all benefits over $1 billion are reviewed by GAO's Inspector
    General, which amounted to about 58 percent of our total
    financial benefits for fiscal 2002.
        The following table lists GAO's major financial benefits
    included in our fiscal year 2002 Performance and Accountability
    Report, followed by summary explanations of the work
    contributing to financial benefits over $500 million.
        [The information follows:]

          GENERAL ACCOUNTING OFFICE FISCAL YEAR 2002 FINANCIAL BENEFITS
                                  [In millions]
    ------------------------------------------------------------------------
                              Description                             Amount
    ------------------------------------------------------------------------
    Financial Benefits Exceeding $1 Billion:
        Preventing Inappropriate Medicare Payments: Advocated         $8,100
         Medicare program safeguards help recover or avoid improper
         payments..................................................
        Improving Farm Loan Programs: Improved controls over USDA      4,800
         loan administration reduces risk of defaults..............
        Reducing the Cost of Federal Housing Programs: Review of       4,800
         unexpended balances at HUD recaptures funds...............
        Adjusting Department of Defense (DOD) Estimates: DOD           1,500
         officials reduced foreign currency exchange estimates.....
        Reducing Nuclear Waste Treatment Costs: New DOE contract       1,500
         for Hanford Tank Waste Project expected to achieve
         significant cost reductions...............................
        Retaining the Substantial Gainful Activity Level:              1,124
         Preserving an inability-to-work test as a qualification
         for SSA disability insurance payouts......................
                                                                    --------
            Subtotal--Financial benefits exceeding $1 Billion......   21,824
                                                                    ========
    Financial Benefits Between $500 Million and $1 Billion:
        Consolidation Initiatives at Department of Defense Computer      859
         Centers: DOD consolidation initiatives at its computer
         centers result in estimated savings and cost avoidances...
        Computerized Interfaces Identify Undisclosed Earnings: SSA       797
         use of computerized interfaces with Office of Child
         Support Enforcement database helps prevent or reduce SSI
         overpayments..............................................
        Delaying Full-Rate Reduction of the V-22: DOD restructuring      764
         of the Marine Corps program reduces program costs.........
        More Efficient Use of In-orbit Satellite Capabilities: DOD       702
         reduces excess capacity...................................
        Ensuring Contingency Funds are Spent Properly: DOD's fiscal      650
         year 2002 contingency funding reduced by Congress.........
        Reducing DOD Funding: DOD's fiscal 2002 working capital          639
         fund request reduced due to overestimate of bulk fuels....
        Targeting Tax Credits: Legislative changes in tax laws           564
         related to earned income tax credit eligibility rules and
         Section 936 tax credit achieve savings....................
        Contributing to the Military Base Closure and Realignment        545
         Process: DOD base closures and realignment result in cost
         reductions................................................
        Increasing Use of Excess Property: DOD improves inventory        526
         controls..................................................
                                                                    --------
          Subtotal--Financial benefits between $500 Million and $1     6,046
           Billion.................................................
                                                                    ========
          Total of 100 Financial Benefits Below $500 Million.......    9,900
                                                                    ========
          Grand Total..............................................   37,770
    ------------------------------------------------------------------------
    Return on Investment: $87.8 per dollar invested in GAO.

    Financial Benefits Exceeding $1 Billion
        Preventing Inappropriate Medicare Payments.--Responding, in part,
    to a body of GAO work and recommendations, the Congress passed
    legislation in 1996 that increased funding from fiscal 1998 through
    fiscal 2003 for activities to help safeguard the Medicare program from
    improper payments. With this increased funding, the Department of
    Health and Human Services created a fraud and abuse control program and
    a Medicare integrity program for a variety of abuse-constraining
    activities. The increased funding for these two programs helped the
    Medicare program control improper payments by an additional $8.1
    billion for fiscal 2001 and 2002.
        Improving Farm Loan Programs.--In 1990, GAO designated the
    Department of Agriculture's Farm Loan Programs as a high-risk area
    because of billions of dollars of losses attributable to significant
    problems primarily with the department's direct loan portfolio. Since
    then, the department has implemented many of our recommendations to
    improve the program, and the 1996 Farm Bill incorporated our key
    legislative recommendations. These changes eliminated the revolving-
    door credit for which the department had become known and gave farmers
    strong incentives to repay their loans rather than to seek loan
    forgiveness or loan refinancing that included write-offs of delinquent
    debt. During the 5 years following enactment of the 1996 Farm Bill,
    improvements in the program were estimated to reduce losses on direct
    loans by about $4.8 billion, compared with the losses for the 5
    preceding years.
        Reducing the Cost of Federal Housing Programs.--In response to GAO
    reports and recommendations over the past several years, the Congress,
    the Department of Housing and Urban Development (HUD), and the U.S.
    Department of Agriculture's Rural Housing Service took actions that
    produced financial benefits totaling $6.1 billion. Over $4.8 billion
    resulted from GAO's recommendation that HUD review unexpended balances
    in all of its programs to ensure timely expenditure of appropriated
    program funds. The remaining benefits resulted from a series of actions
    in response to our work. For example, the Congress (1) funded fewer new
    programs or set-asides than HUD had requested, (2) terminated Operation
    Safe Home, and (3) enacted legislation that replaced HUD's home
    mortgage assignment program with less costly alternatives.
    Additionally, the Rural Housing Service centralized its servicing for
    rural single family housing loans.
        Adjusting Department of Defense (DOD) Estimates.--GAO reviewed the
    reasonableness of the DOD's requests for fiscal 2001 for contingency
    funding. During internal DOD budget deliberations, DOD officials
    reduced the agency's foreign currency exchange estimates based on
    congressional action--due to GAO's efforts--by $1.5 billion for fiscal
    2002 and 2003. These adjustments did not affect readiness, and the
    Congress used the adjusted funds for other needs.
        Reducing Nuclear Waste Treatment Costs.--In 1996, GAO reviewed the
    Department of Energy's (DOE) Hanford tank waste privatization project
    and found many unresolved technical and financial uncertainties. In
    1998, GAO compared DOE's Hanford approach with several alternative
    contracting and financing strategies and suggested that DOE reassess
    its approach in light of significant cost growth. In June 2000, GAO
    testified that DOE should reevaluate its Hanford approach and consider
    other contracting and financing options. DOE subsequently terminated
    the Hanford tank waste project, and, after evaluating alternative
    contracting and financing options, awarded a new contract that is
    expected to achieve significant cost reductions--about $4 billion--over
    the life of the construction phase. The financial benefit for fiscal
    2003, 2004, and 2005 is about $1.5 billion.
        Retaining the Substantial Gainful Activity Level.--To establish and
    maintain eligibility for disability insurance benefits, beneficiaries
    must not only meet medical eligibility criteria but also demonstrate
    that they are not earning above a certain amount--known as the
    Substantial Gainful Activity (SGA) level. In March 2000, congressional
    hearings focused on the role of earnings in determining initial and
    continuing eligibility for disability benefits for individuals who are
    blind or have other disabilities. Prior to these hearings, bills
    introduced in the House and Senate had proposed eliminating the SGA
    level for the blind. While an advocate organization for the blind
    testified that it wanted the Congress to eliminate the SGA level for
    the blind, GAO responded that doing so would increase the costs of
    disability insurance and fundamentally alter the purpose of the
    disability insurance program by removing the connection between
    eligibility for benefits and the inability to work. As a result of our
    testimony, the Congress retained the SGA for the blind, resulting in a
    financial benefit of $1.124 billion in fiscal 2001 and 2002.

    Financial Benefits Between $500 Million and $1 Billion
        Consolidation Initiatives at Department of Defense Computer.--GAO
    recommended that DOD deploy cost savings measures such as
    consolidation, modernization, and outsourcing of computer center
    activities and processes to make computer center operations more
    economical and efficient. As a result, the Defense Information Systems
    Agency--the agency responsible for managing Defense Enterprise
    Computing Centers--undertook a major DOD project that led to savings or
    cost avoidance over a 4-year period covering fiscal 1998 through 2001.
    More specifically, DOD estimated savings or cost avoidances of $700
    million from consolidation initiatives at computer centers, $39 million
    from consolidating software licenses, and $19 million from optimization
    of storage capabilities. The net present value of the estimated
    financial benefit is $859 million.
        Computerized Interfaces Identify Undisclosed Earnings.--In 1998,
    GAO reported that an Office of Child Support Enforcement database,
    known as the National Directory of New Hires, could be used to help
    prevent or reduce overpayments of supplemental security income that
    occur when recipients fail to fully disclose their earnings. We
    recommended that the Social Security Administration (SSA) develop
    computerized interfaces to access this database and detect undisclosed
    earnings during initial and subsequent determinations of eligibility.
    SSA developed these interfaces, gave all field offices direct access to
    the database, and instructed field staff to use the database for cases
    meeting specified criteria. These actions have resulted in financial
    benefits of about $797 million.
        Delaying Full-Rate Production of the V-22.--In January 2001, GAO
    briefed the Secretary of Defense's V-22 Blue Ribbon Panel about our
    findings on the aircraft. The Blue Ribbon Panel was formed to
    investigate the V-22 after a fatal crash in December 2000, just prior
    to the aircraft's planned full-rate production. The panel received
    information from GAO about reductions in development testing, test
    waivers, deficiencies identified during operational tests, and results
    of an earlier April 2000 crash investigation that also involved
    fatalities. Much of the information in our briefing about the V-22 had
    not been previously disclosed. The panel used the information to
    support its position that the V-22 was not ready for full-rate
    production and that only a minimum production rate should be continued
    during additional testing and evaluation of the aircraft. The Congress
    subsequently rescinded $446.5 million from the fiscal 2001 supplement
    request and reduced the fiscal 2002 request by $296.3 million. The net
    present value of the two actions is $763.8 million.
        More Efficient Use of In-orbit Satellite Capabilities.--In 1998,
    GAO reviewed DOD's development of the Space-Based Infrared System
    (SBIRS), under which the launch of the first SBIRS satellite was
    planned for fiscal 2002. We reported that implementing this plan would
    put eight excess satellites in orbit without providing sufficient
    ground processing capabilities for the data the satellites generated.
    We recommended that the Secretary of Defense review and assess launch
    alternatives. As a result, DOD delayed the launch of the first SBIRS
    satellite from fiscal 2002 to fiscal 2004 and subsequently delayed
    other such launches. These delays, which allow DOD to use existing
    satellites until the end of their expected lives and avoid 8 years of
    excess satellite capability, saved about $702 million in satellite
    costs.
        Ensuring Contingency Funds Are Spent Properly.--Since 1991, the
    Department of Defense has spent more than $25 billion in support of
    military operations in the Balkans and the Persian Gulf. In assessing
    DOD's use of contingency operations funds in fiscal 2000 and 2001, we
    identified millions of dollars in questionable expenditures resulting
    from limited guidance and oversight combined with a lack of cost
    consciousness. In responding to our findings, the Congress reduced DOD
    funding for those operations by $650 million in fiscal 2002. In
    commenting on our report, DOD also stated its intention to improve its
    guidance for and oversight over the use of contingency funds.
        Reducing DOD Funding.--GAO reviewed the reasonableness of DOD's
    fiscal year 2002 budget request for its Defense Working Capital Fund to
    assist subcommittees in their appropriation and authorization
    deliberations. GAO estimated the value of DOD's overstatement due to
    bulk fuels. On the basis of GAO's findings, the Congress adjusted DOD's
    budget request by $639 million.
        Targeting Tax Credits.--Several GAO studies in the early and mid-
    1990s evaluated aspects of the design of the possessions tax credit and
    the earned income tax credit. As a result of these studies, the
    Congress modified the tax code, replacing the possessions tax credit
    with a less generous credit that will be eliminated in 2006 and
    tightening the eligibility requirements for the earned income tax
    credit. More current information on the 5-year impact of these changes
    points to $564 million in revenue savings that GAO has not claimed
    previously.
        Contributing to the Military Base Closure and Realignment
    Process.--Since 1979, GAO has issued a number of reports documenting
    excess infrastructure within the Department of Defense and supporting
    the need for a base closure and realignment process. The Congress
    authorized such a process and enacted legislation requiring us to
    provide it with a series of reports and testimonies validating DOD's
    implementation. We monitored and assessed all phases of the decision-
    making process, including executive-level sessions, for compliance with
    congressional requirements. In addition, GAO staff assisted commissions
    that recommended base closures and realignments in 1991, 1993, and
    1995. The staff helped shape the commissions' decisions through
    analyses of issues associated with closing or realigning specific
    installations. Last year, we reported cost reductions of about $6
    billion associated with our work. Updated DOD data indicate further
    cost reductions of $545 million.
        Increasing Use of Excess Property.--GAO reported that $2.7 billion
    worth of military property recorded as shipped to disposal offices was
    never recorded as received, resulting in losses and write-offs of the
    property from the military services' books and inventory records. GAO
    recommended changes that avoided the write-offs and kept the items as
    part of the services' inventory records until the property was actually
    disposed of. As a result, the inventory was available for use by DOD
    customers during the period prior to disposal. For the first 2 years
    that the changes were in effect, they resulted in savings of $526
    million.

                          HUMAN CAPITAL FLEXIBILITIES

        Senator Campbell. You spoke about what you called human
    capital flexibility. What is an example of human capital
    flexibility?
        Mr. Walker. Two comments. First, in calendar 2000, this
    subcommittee was instrumental in helping us to achieve our
    first set of flexibilities. You gave us the authority to offer
    targeted early outs and targeted buyouts to realign our
    workforce rather than downsize our workforce. The Congress, as
    you know, passed a similar provision for the entire executive
    branch as part of the Department of Homeland Security Act. We
    served as a beta or test case for the entire Government.
        As far as looking forward, one of the things that I am
    looking to do, Mr. Chairman, is right now we have to
    automatically follow the executive branch for the across-the-
    board pay increases that are mandated each year. I would like
    some additional flexibility so we do not have to follow them in
    lock-step. I want to make sure that our compensation is geared
    more toward the skills, knowledge, position and performance of
    our employees, rather than the passage of time and the rate of
    inflation.
        Senator Campbell. You are going to have to help me with
    some of this. As I understand it, about one-third of the GAO's
    resources go to support costs, which means activities that are
    not directly in support of the work for Congress. What are some
    of those support costs, and how does that compare with other
    Government organizations?
        Mr. Walker. I would respectfully suggest that everybody
    that works at GAO is contributing to mission, and if they are
    not contributing to mission, then we should not have them. It
    is as simple as that. There are differences, though, between
    the individuals who are actually doing the audits, the
    investigations, the evaluations, rendering the legal opinions,
    and adjudicating the bid protests versus those who are
    providing support services. Our numbers of staff providing
    support services are reasonable, and in line with other
    agencies; in fact, they are coming down.
        One of the things we have done over the last 4 years is
    reduce the number of so-called support services staff by about
    13 percent, while our overall number of staff has only gone up
    about 1 percent. So, we have taken that 13 percent and
    redeployed it to auditors, investigators and evaluators; those
    who are directly providing services to the Congress. We will
    continue to do that to the extent that we can.

                                 FIELD OFFICES

        Senator Campbell. You have 11 locations, including one in
    my State, in Denver.
        Where is GAO's Denver office located?
        Mr. Walker. GAO's Denver field office is located in the
    Cesar E. Chavez Memorial Building at 1244 Speer Boulevard,
    Suite 800, Denver, Colorado.
        We would love to have you any time you want to come.
        Senator Campbell. Maybe I will try to visit that just so I
    can learn a little more about your Denver operation. We have
    terrible deficits and a lot of changes in our budget proposals,
    as you know. Do you intend to keep those 11 open? What are your
    plans, at least for the foreseeable future for your field
    offices?
        Mr. Walker. I do, Mr. Chairman. I think it is important to
    note that back in the early 1980's, GAO had 42 offices,
    including 3 overseas offices. When I came in, we had 16 offices
    and none overseas. I conducted a very extensive review and
    analysis, and we went from 16 to 11. I believe that these 11
    offices are appropriate for the foreseeable future.

                             FIELD OFFICE CLOSURES

        Senator Campbell. Did they just consolidate some of the
    other ones?
        Mr. Walker. We closed five offices, Mr. Chairman.
        Senator Campbell. Has that been a substantial savings to do
    that?
        Mr. Walker. These office closures enabled us to free up
    some resources to redeploy for other purposes and, therefore,
    to minimize additional budget requests to the Congress. By the
    way, some of the authorities Congress gave us helped us
    tremendously to achieve that objective as well.

                                WALKER V. CHENEY

        Senator Campbell. Now, I am not an attorney, so I do not
    follow an awful lot of the court cases like some of my
    colleagues, but tell me about the District Court's decision not
    to hear the Walker versus Cheney case. How does that affect
    you?
        Mr. Walker. We do not believe it will have a significant
    adverse effect on GAO and our ability to do our job. That was a
    case in which a Federal District Court Judge in Washington,
    D.C. dismissed the case for lack of standing.
        We believe it was wrongly decided, based in part on
    material factual errors. However, I decided not to appeal the
    case, primarily because it dealt with an area that only
    represents a narrow percentage of our work, namely the work
    dealing directly with the Office of the Vice President. Second,
    this case was viewed by many as being more of a political
    battle, and I do not want to get in the middle of a political
    battle. Third, it would have taken years to pursue, even if we
    had appealed the case. So, my view is the better part of valor
    was to move on and look for a better case in the future. The
    decision has not had an adverse affect on our access authority
    since then.
        Importantly, the judge did not directly address our
    statutory rights to information. He did not decide who was
    right or wrong. He just basically said that the judicial branch
    should not have to decide this dispute between the executive
    and the legislative branches. But we are monitoring the
    situation closely, and to the extent that we believe that we
    have any problems, we will come to the Congress for appropriate
    action.

                         EMERGENCY WARTIME SUPPLEMENTAL

        Senator Campbell. This week the White House submitted a $75
    billion request for this war and homeland security, which
    included $125 million for the legislative branch. Is any of
    that money in there intended to go to the GAO and what would
    you use it for?
        Mr. Walker. Well, Mr. Chairman, I am glad you asked that.
        We did ask for $4.849 million which will be used for
    safety- and security-related improvements, not just for GAO and
    our employees, but as you know, we are also a contingency site
    for the House of Representatives. In fact, we housed the House
    of Representatives during a 2-week period due to the anthrax
    event that occurred in the fall of calendar 2001.
        For the first time in history, OMB did not pass through the
    entire legislative branch request to the Congress. That is
    unprecedented. I believe it is inappropriate; it is a
    separation of powers issue. I would respectfully hope that the
    Congress would include that $4.849 million as part of the
    supplemental, because we believe it is not just necessary for
    GAO, it is also necessary because of our designation as a
    possible contingency site for the U.S. House of
    Representatives.

                                CLOSING REMARKS

        Senator Campbell. Thank you. Was the anthrax issue 2 years
    ago?
        Mr. Walker. Time flies, Mr. Chairman.
        Senator Campbell. Okay. I appreciate that. I have no
    further questions.
        Mr. Walker. Thank you, Mr. Chairman, and I would be happy
    to answer any additional questions for the record.
        Senator Campbell. Thank you. I think we may submit some,
    particularly Senator Durbin, since he is not yet here.

                           GOVERNMENT PRINTING OFFICE

    STATEMENT OF BRUCE R. JAMES, PUBLIC PRINTER
    ACCOMPANIED BY:
            GEORGE A. TAYLOR, DEPUTY PUBLIC PRINTER
            FRANK A. PARTLOW, JR., CHIEF OF STAFF
            JUDITH C. RUSSELL, SUPERINTENDENT OF DOCUMENTS

        Senator Campbell. Our next panel is Mr. Bruce James, the
    Public Printer, and he will be accompanied by Mr. George
    Taylor, Mr. Frank Partlow, and Judith Russell, and I assume Mr.
    James will be the only one making a statement, is that right?
        Mr. James. Well, I am the only one making an opening
    statement, Mr. Chairman, but I may call on my colleagues if
    your questions are too tough.
        Senator Campbell. Go ahead, Mr. James.
        Mr. James. Well, I want to welcome you to the subcommittee,
    too, and I am looking forward to a long and good working
    relationship with you. As you know, I am the new Public
    Printer. I have been here since the beginning of December, just
    a little over 3 months, and have come to the conclusion that
    this is going to be the best job I have ever had. The reason
    is, it is the toughest.
        This is an interesting situation. The first 2 days I was on
    the job I spoke with our employees, gave five speeches over 2
    days. We never close, as you know, so I was in at 4 o'clock in
    the morning, I was in at 10 o'clock at night giving speeches,
    and what I talked to our employees about was the fact that the
    19th century was not going to return, and by that I mean that
    printing as our middle name--the Government Printing Office--
    may well get in the way of how we view ourselves and how we
    viewed ourselves over the years.
        The United States Government Printing Office has a mission
    of making certain that we collect all Government documents, we
    process those documents, we catalog those documents, we
    distribute the documents to depository libraries throughout the
    United States, and we preserve those documents in perpetuity.
    The fact that some of our documents end up with ink on paper is
    not the main purpose of our mission, and what we are seeing for
    the first time is that the amount of material that is printed
    is going to fall below 50 percent. We believe as much as 60
    percent of the Government documents this year will be in
    digital form. They will not see ink on paper.
        It does not mean they will not be printed. They may well be
    printed from a personal computer, but they will not be printed
    at the United States Government Printing Office or by one of
    our printers. Therefore, what that means is that it is
    necessary that we face the future squarely, and that we design
    a business model for the Government Printing Office that is a
    21st century business model, and that is what we are starting
    to do.
        You probably noticed the article in this morning's
    Washington Post which talked about the GPO reorganization. I
    thought it was a good article. I thought they captured the
    spirit of what we are trying to do. We are reorganizing the GPO
    to be more flexible to provide much better customer service, to
    be able to drive decisionmaking in our organization down to
    lower levels, to increase the efficiency.
        We have also embarked on a strategic planning process that
    I think at the end of the day will result in a new GPO that is
    absolutely attuned to the future. It is a three-stage process.
    The first part of the process is what I call fact-finding, and
    what we are doing is, we are talking to our customers, we are
    talking to our employees, we are talking to the printers in the
    United States, we are talking with librarians, and we are
    trying to understand exactly where they are going in the
    future.
        We want to understand what our resources are truly, not
    anecdotally, but what our true resources are, and after we
    gather all these facts together it is my job to get everybody
    on the same page and get everybody to agree that these are the
    facts, and once we have agreement on the facts, then we will
    move forward to make a plan, and we expect that that plan will
    outline, as I say, a new business model for the GPO that will
    be based around a digital infrastructure that will offer to
    Congress solutions for some of the problems that we face
    together.
        As an example, if you today order a paper document from the
    Superintendent of Documents, that document will be delivered to
    you by the United States mail, it will come in a Government-
    franked envelope, the penalty envelope. You tear that envelope
    open, and you have in your hands what you have every right to
    believe is an authentic United States Government document.
        On the other hand, if you download that same document from
    the Internet, you have no way of knowing today that that is an
    authentic document, so one of the problems that we have to
    address and solve is, how can we guarantee that information
    downloaded from a Government Web site is an authentic U.S.
    Government document?
        At the other end of the scale, if we print a document on
    paper, we have every reason to believe that document will be
    here 500, 600, 700, 800 years from now. Unless paper documents
    are exposed to direct sunlight, they will last forever.
        On the other hand, if we record it only on magnetic media,
    it may be gone in 10 years. So as long as Congress charges us
    with the responsibility for making certain this material will
    last in perpetuity, we have got to find a solution to this,
    too, and I believe this will be both a technical solution as
    well as a business solution.
        So we have to end up structuring our organization to take
    advantage of the new technological opportunities to make
    certain that we are not just repeating the past, that we are
    not living in the 19th century. A lot of that has to do with
    reforming our business practices. I think that I can report to
    you that at this point our labor organizations, our unions are
    solidly behind the direction we are going. We are working
    together in partnership to move this forward.
        I can address and I will address our request from you this
    year. As Mr. Walker said, we recognize, too, that Congress is
    going to be limited in what you can appropriate to legislative
    branch agencies this year, and we are mindful of that. We have
    two major areas that we are requesting funds for. One is the
    Congressional Printing and Binding Appropriation. That is to do
    your work. We anticipate that your work this year will result
    in a 1.7 percent increase over last year. That is what we are
    asking for.
        The second area is the Salaries and Expenses Appropriation
    for the Superintendent of Documents, and that is for the
    distribution of Government information throughout the country.
    We are asking for a 3 percent increase there for continuing
    operations, and that is basically to cover mandatory pay and
    benefit increases, as well as slight price level increases.
        We are also asking you to make two investments in the
    Government Printing Office this year. One of those investments
    is a $4.1 million allocation to allow us to replace 10-year-old
    technology, computer technology used to distribute digital
    information over the Internet. We simply have waited almost too
    long to make this kind of investment. We are ready to make it.
    We have the people in place to wisely spend the money.
        The second area we are asking for is a special $10 million
    appropriation to help us readjust our labor force. As you
    undoubtedly know, we have been operating the last few years in
    the red, and as I have examined the reasons why we have been in
    the red, it is very clear that our labor costs are above what
    is required to process the volume of work we have today, the
    volume and mix of work we have today, and we believe that we
    are in a position to reduce the labor force by about 10
    percent, or 300 people.
        We would like to be able to offer an incentive to our labor
    force to induce some of the people that are eligible for
    retirement to retire perhaps earlier than when they expected
    to. We anticipate that a $10 million investment on your part
    will result in an $18 million cost savings next fiscal year to
    us, so those are the two areas that we are asking you to
    participate with us in. I think that particularly these capital
    investments, are modest. They are less than 2 percent of our
    overall budget, probably should be higher than that, but I am
    not going to come to you with any proposition that I cannot see
    a clear payback to, and at this point I can recommend these to
    you. You will get a payback.

                               PREPARED STATEMENT

        I will be happy to answer any questions you might have, Mr.
    Chairman.
        [The statement follows:]

                      Prepared Statement of Bruce R. James

        Mr. Chairman and Members of the Subcommittee, it is a great honor
    to be here today to present the appropriations request of the U.S.
    Government Printing Office (GPO) for fiscal year 2004. It is also a
    great privilege. There are few posts in the Government and few Federal
    agencies that have stood the test of time as well as that of the Public
    Printer and the GPO. I intend to do my best to uphold the tradition of
    the office while providing the leadership required to guide the GPO
    into a new era, to ensure that it remains as relevant and necessary to
    the information needs of Congress, Federal agencies, and the public in
    the 21st century as it was for the first 140 years of its existence.
    With just over three months on the job, I have begun to carry out that
    promise.
        GPO's Mission.--GPO has a proud history, one built on innovation,
    craftsmanship, scale, flexibility, and a singular dedication to meeting
    the printing needs of the Federal Government and the information needs
    of the American people. It is one of the Nation's oldest and most
    venerable agencies, within which the official version of every great
    American state paper since President Lincoln's time has been produced.
        Today we are responsible for the production and distribution of
    information products and services for all three branches of the Federal
    Government. Many of the Nation's most important information products,
    such as the Congressional Record and all other legislative information
    supporting the U.S. Senate and House of Representatives, are produced
    at GPO's main plant, a 1.5 million square foot complex that is the
    largest information processing, printing, and distribution facility in
    the world. Working in partnership with the American printing industry,
    GPO also maintains a pool of private sector vendors nationwide to
    produce print and other information products for the Federal
    Government, ranging from Supreme Court decisions to IRS tax forms and
    crop reports for the Department of Agriculture.
        GPO's middle name--a name we are going to change--gets in the way
    of our true mission, which is keeping America informed by distributing
    the official information products of the Government, thereby sustaining
    one of the keystones of our 200-year old experiment in freedom: an
    enlightened public. This is a mission that traces its origins to our
    Founding Fathers. During the Constitutional Convention, James Wilson of
    Pennsylvania said, ``The people have a right to know what their agents
    are doing or have done, and it should not be in the option of the
    legislature to conceal their proceedings,'' creating the grounds for
    the constitutional requirement in Article I, section 5, that ``Each
    House shall keep a Journal of its Proceedings, and from time to time
    publish the same . . .'' Later, it was James Madison who eloquently
    said:

        A popular Government without popular information, or the means of
    acquiring it, is but a Prologue to a Farce or a Tragedy; or perhaps
    both. Knowledge will forever govern ignorance: And a people who mean to
    be their own Governors, must arm themselves with the power that
    knowledge gives.

        Congress moved early to establish the ``means of acquiring''
    information that Madison spoke of. GPO's mission today traces its roots
    to an act of the 13th Congress, which provided for the distribution of
    congressional and other Government documents on a regular basis to
    libraries and other institutions in each state for that Congress and
    ``every future Congress.'' This farsighted act established the
    antecedent for the Federal Depository Library Program, a program funded
    through GPO's appropriations, which today serves millions of Americans
    through a network of some 1,200 public, academic, law, and other
    libraries located in virtually every congressional district across the
    Nation. Along with that program, GPO today also provides public access
    to the wealth of official Federal information through public sales,
    through various statutory and reimbursable distribution programs, and--
    most prominently--by posting nearly a quarter of a million Federal
    titles online on GPO Access (www.gpo.gov/gpoaccess), GPO's award-
    winning Web site that is used by the public to retrieve more than 31
    million documents free of charge every month.
        New Strategic Direction.--Just as GPO's middle name gets in the way
    of understanding our true mission, the nature of what we do, printing--
    once the world's only mass communications medium--has been eclipsed by
    revolutionary changes in electronic information technologies,
    principally the Internet. Where once printing predominated as the means
    of communication between the Government and the public, new and ever-
    evolving strategies of communications are not only possible but have
    become mainstream practices, changing how America is kept informed.
        While printing will not disappear in our lifetime, its role in our
    lives--and in the lives of GPO's customers--has been forever changed.
    We are now in a period where we need to sort out what continues to
    belong in print and what best belongs in information retrieval systems
    that allow the public to define their own information needs, then
    search against databases of information that we construct to retrieve
    only what they need, only when they need it. Therein lies the challenge
    for GPO. Like every other manufacturing business in America, GPO must
    reinvent itself if it is to remain relevant and viable for the future.
    We must take a new look at the changing and emerging information needs
    of our customers and develop a deeper understanding of our true
    strengths so that we can plan for and build a new business model that
    will allow us to meet the information demands of our customers in the
    21st century. Then we must convince Congress and our customers to
    support our plan. As Public Printer, I lead this effort.
        To develop a plan that works, our first step is to determine the
    facts regarding GPO's strengths and weaknesses and the problems and
    opportunities facing us. We are already engaged in that process through
    participation in a wide-ranging General Accounting Office study of
    Federal printing and information policy, ordered by the Senate. In a
    related effort, the GAO is also conducting a general management review
    of our operations. When these studies are concluded later this year we
    will have a factual basis on which to build a strategic plan.
        The plan will present a new vision of GPO, establish specific and
    measurable short- and long-term goals and objectives, and contain
    budget and timetable details. Our next task will be to gain support for
    the plan from Congress, the Administration, and our customers, from the
    library and information communities, from the printing industry and the
    labor unions, and from all those who have a stake in the future of the
    goals of Federal information policy first articulated by the Founders.
    Then we must carry out the plan, to transform GPO into an information
    service equipped and staffed to meet the information demands of the
    21st century: an agency whose mission will be to capture digitally,
    organize, maintain, authenticate, distribute, and provide permanent
    public access to, the information products and services of the Federal
    Government.
        Transformation Process Begun.--Since I took office in early
    December, we have begun several initiatives to redirect the GPO's focus
    and begin transforming our operations:
      --Reorganization.--We have implemented an organizational model that
            is relatively new to the Federal Government but widely used in
            industry, wherein the chief executive officer (Public Printer)
            focuses on organizational policy and long-range planning and
            the second in command (Deputy Public Printer) serves as chief
            operating officer focusing on the day-to-day operations of the
            business. Working in collaboration with GPO's senior managers,
            we have rolled out a new top-level organizational structure
            that will be more responsive to the needs of our customers and
            employees and serve in a transition phase over the next two
            years.
      --Focus on Employees.--Through a series of round-the-clock meetings
            to cover all three shifts, I've met with most of our employees
            and their union representatives in our central office, and to
            date I've visited GPO operations in Laurel, Philadelphia,
            Denver, and Pueblo. I've asked for their help in retooling GPO
            from top to bottom into an organization that will make us all
            proud. The response has been highly positive: our employees are
            ready and eager for change, and I continue to be impressed by
            the superior quality of the personnel who staff the GPO. We've
            begun recruiting efforts at colleges and universities around
            the country to begin reversing the decades-long drain on GPO's
            talent. We've implemented the first new employee incentive
            program at GPO in over a decade to reward creativity,
            dedication, and initiative. We've expanded our workforce
            development budget to $3 million--just 1.5 percent of our
            overall budget, but 5 times the amount previously allocated--to
            ensure that no one is left behind as we transform our
            operations, and we've altered our workforce development policy
            to emphasize training that is mission-related, not simply job-
            related. We're expanding the use of digital communications
            internally, and we've created a new Employee Communications
            Office to provide employees with the information they need to
            do their jobs effectively.
      --New Image.--We've redesigned GPO's logo to create a new image that
            moves us away from printing and into the 21st century area of
            digital information processing and multi-media dissemination.
      --Emphasis on Customer Service.--A principal goal is to redirect
            GPO's operations toward customer service--helping our customers
            meet their goals, rather than bending their needs to fit what
            we provide. I've been meeting with Members of Congress, key
            congressional staff, Federal agency heads, the heads of Federal
            operations with congruent missions--such as the Postmaster
            General, Director of the Bureau of Engraving and Printing, and
            Director of the Mint, the library and information communities,
            the printing industry, and others--to win support for the GPO
            and increase our future business opportunities. I am especially
            interested in exploring ways of helping Congress reinvent its
            information products to help expedite its work.
      --Resolution of Printing Controversy.--One of my earliest meetings
            was with Office of Management and Budget (OMB) Director Mitch
            Daniels, where we reached an agreement to set aside the
            contention between our agencies regarding Federal printing
            policy. Since then, OMB sent the U.S. Budget to GPO for
            production and the proposed policy change in printing has not
            been issued. I have asked Mr. Daniels to walk forward with me
            as we establish the facts about printing and information policy
            and devise a policy that fits the 21st century, and I look
            forward to working with OMB on this important task.
      --Technology Innovation and Partnerships.--I've also been meeting
            with the top management of our suppliers--from printing
            companies to equipment manufacturers--to explore the
            opportunities for the GPO to assume a leadership position in
            technological innovation in the digital information era. As
            part of our reorganization I've created a new Office of
            Innovation and Partnerships to get us moving on technology
            opportunities. It will also guide us in the creation of
            partnerships with other public and private sector entities to
            carry out our mission. Partnerships--the use of which is
            widespread in industry--will be critical to the transformation
            of the GPO.
      --Depository Libraries of the Future.--In meetings with members of
            the library community at the American Library Association
            Midwinter Conference in Philadelphia, and at the upcoming
            Regional Conference of the Depository Library Advisory Council,
            I have challenged all to help us in developing a new depository
            library program model that recognizes that more than 50 percent
            of the information coming into the program is now only in
            electronic form, never reaching ink-on-paper. This is one of
            the biggest challenges that confronts us today, and its
            resolution will directly impact the appropriations that are
            provided annually for this purpose.
      --Contingency Planning.--Part of our reorganization was the creation
            of a Contingency Planning effort, reporting to the Chief of
            Staff, to plan for emergency preparedness, protection of our
            employees, and continuity-of-government operations in concert
            with similar planning efforts in Congress, Federal agencies,
            the District of Columbia, and elsewhere. We are working
            directly with the House and Senate to ensure continuity of
            operations in the event of an emergency, and we are finalizing
            operational improvements funded through the fiscal year 2001
            emergency supplemental.
        GPO's Appropriations.--The transformation of GPO will be a
    collaborative process, one that involves all of GPO's stakeholders,
    especially Congress. With the transformation we will provide Congress,
    Federal agencies, and the public an agency equipped and staffed to
    bring about change in Federal information products and services. In
    order to make the transition happen, however, GPO needs funding not
    only to continue product and service provision, but to begin making the
    investments we know are needed now to position us for the future. Our
    appropriations request for fiscal year 2004 is targeted at these two
    objectives: maintenance of product and service quality, and investment
    in necessary technology improvements and critical workforce
    restructuring initiatives. With the proper funding, we will be able to
    carry out the task of remaking the GPO.
        GPO has three separate appropriation accounts: the Congressional
    Printing and Binding Appropriation, and the Salaries and Expenses
    Appropriation of the Superintendent of Documents, and the Revolving
    Fund.
        The Congressional Printing and Binding Appropriation covers the
    estimated costs of producing the Congressional Record, bills, reports,
    hearings, documents, and related products required for the legislative
    process. This appropriation is critical to the maintenance and
    operation of GPO's in-plant capacity, which is structured to serve
    Congress's information product needs. It also covers database
    preparation work on congressional publications disseminated online via
    GPO Access.
        The Salaries and Expenses Appropriation of the Superintendent of
    Documents is used to pay for costs associated with documents
    distribution and information dissemination functions required by law.
    The majority of the appropriation is for the Federal Depository Library
    Program (FDLP), under which Government publications and information
    products are disseminated to 1,200 Federal depository libraries where
    they are available for the free use of the public. Related statutory
    functions covered by this appropriation are cataloging and indexing,
    by-law distribution, and the international exchange distribution of
    U.S. Government publications. Finally, this appropriation provides the
    majority of funding for the operation of GPO Access.
        The Revolving Fund is structured to provide working capital for
    GPO's operations, and to fund routine improvements to equipment and
    facilities. Non-recurring or extraordinary costs are met by
    appropriations to the Revolving Fund for specific purposes.
        Continuation of Services.--For the Congressional Printing and
    Binding Appropriation, we are requesting $91.1 million for fiscal year
    2004, an increase of 1.7 percent over the funding recently approved for
    fiscal year 2003. This amount will cover all estimated congressional
    printing requirements for fiscal year 2004, as detailed in our budget
    submission.
        GPO is fully prepared to assist the Secretary of the Senate, the
    Clerk of the House, the leaderships of both Chambers, and Members,
    committees, and staffs in efforts to improve the utility of
    congressional information products and services to the legislative
    process and reduce costs through the elimination of waste and
    duplication of effort. Rather than solely responding to requests from
    Congress, I view GPO's role as one of providing expert advice and
    assistance to Congress in the area of legislative information products
    and services, and we will be proactive in exercising this role. We are
    also prepared to participate in the Legislative Branch Chief
    Administrative Officers Council mandated by the conferees on the
    Legislative Branch Appropriations Act for Fiscal Year 2003 (H. Rpt.
    108-10).
        For the Salaries and Expenses Appropriation of the Superintendent
    of Documents, we are requesting an increase of 3 percent, or $871,000,
    over the amount approved for fiscal year 2003 to cover mandatory pay
    and benefits increases as well as price level changes.
        The transition to a more electronic Federal Depository Library
    Program (FDLP) is continuing in fulfillment of direction from Congress
    that ``emphasis should be on streamlining the distribution of
    traditional copies of publications which may include providing online
    access and less expensive electronic formats.'' Nearly 60 percent of
    the 34,800 new FDLP titles made available during fiscal year 2002 were
    disseminated electronically. For fiscal year 2003 to date, nearly 60
    percent of the new titles made available to the public through the FDLP
    have been online. Through its electronic information dissemination
    component, the FDLP now delivers more content to users than ever
    before. However, in order to preserve public access, the distribution
    of tangible formats--defined as print, CD-ROM, and microfiche formats--
    continues for those titles for which there is no acceptable online
    alternative. For fiscal year 2002, we distributed approximately 5
    million copies of 14,000 titles in tangible formats; overall, tangible
    formats comprised about one-third of all titles made available through
    the FDLP.
        Investment in GPO's Future.--To begin essential investment in GPO's
    future, we are requesting additional funds above the levels required
    for continuation of services. These funds, amounting to slightly less
    than 2 percent of GPO's total annual budget, represent a new point of
    departure for GPO.
        An additional $4.1 million is requested for the Salaries and
    Expenses Appropriation to replace obsolete technology used by the GPO
    Access system by upgrading its search and retrieval system, now nearly
    a decade old. These funds will also cover depreciation costs for GPO's
    new Integrated Library System and for our GPO Access mirror site
    operations, which are essential both to load-balancing for this
    heavily-used system as well as continuity of government operations.
    These are information technology investments that will yield proven
    results as two-thirds of all new titles today are electronic and
    significant growth in this area will continue.
        Also essential to GPO's future is $10 million we are requesting to
    be appropriated to the Revolving Fund to cover the costs associated
    with necessary workforce restructuring under retirement incentive
    authority established by law. This is an investment in human capital
    that will enable GPO to manage the size, composition, and skills of our
    workforce as required by our rapidly changing technology. The
    efficiency of operations will depend largely on our ability to increase
    the productivity of the workforce by developing needed skills,
    replacing aging systems, reengineering work processes, and achieving
    the right staffing levels. GPO last conducted a retirement incentive
    program in fiscal year 1994, reducing employment levels by
    approximately 350 at a cost of about $9.5 million.
        Legislative Changes.--Along with our appropriations request, we are
    seeking two technical legislative changes to Title 44, U.S.C., to
    improve our ability to attract and retain leadership talent and give us
    the authority to accept contributions of equipment and services as well
    as transfer or donate surplus equipment to appropriate entities. Both
    changes would significantly assist my vision of transforming the GPO.
      --We have submitted language requesting a revision to 44 U.S.C. 303
            to increase the statutory pay levels of the Public Printer and
            Deputy Public Printer. The current levels have been in place
            for more than a decade and are causing pay compression for
            GPO's senior level service. The maximum salary available to
            GPO's senior level service is capped at Executive Level IV,
            $134,000. By contrast, 60 percent of the Senior Executive
            Service in the executive branch is paid at the current cap,
            $142,500 (the same as Executive Level III), according to a
            recent new report from the National Academy of Public
            Administration. Without the ability to compete on a level
            playing field with executive pay for the rest of the Federal
            Government, much less with executive pay in the private sector,
            we will be unable to recruit and retain the talent we need to
            bring change to the GPO.
          While we have submitted language adjusting the pay Executive
            Levels II and III, a more appropriate model exists in the pay
            system for the Director and Deputy Director of the
            Congressional Budget Office (CBO), adopted by Congress in the
            Legislative Branch Appropriations Act for Fiscal Year 1999: the
            Director is paid at ``the lower of the highest rate of
            compensation of any officer in the Senate or any officer in the
            House of Representatives.'' The Deputy is paid $1,000 less than
            the Director. This model would satisfy our objective of
            alleviating pay compression without raising the Public
            Printer's pay to the level of the pay Members of Congress
            receive.
      --We are also requesting authority to accept contributions of
            property and services on behalf of the GPO. Currently, GPO is
            not authorized by law to accept uncompensated contributions of
            property and services. This authority will allow us to accept
            the placement of prototype equipment for beta-testing and
            systems trials without requiring a significant Government
            investment, providing us with the flexibility we need to
            evaluate new and emerging technologies onsite in this period of
            rapid technological change. It will also permit us to operate
            intern programs associated with academic printing, technology,
            and management programs, and to work with the private and non-
            profit sector on the development of programs designed to
            increase the public visibility of GPO's operations, such as the
            creation of a printing museum similar to the U.S. Postal
            Service Museum located nearby.
          The authority we are requesting is similar to donation acceptance
            authorities possessed by many Federal agencies, such as the
            Library of Congress, the U.S. Court of Veterans Appeals, the
            Department of Housing and Urban Development, the Consumer
            Product Safety Commission, the Department of Commerce, the
            Administrative Office of United States Courts, and the
            Department of Labor. However, the language we have submitted is
            primarily for placeholder purposes with the recognition that it
            may be subject to further revision. Of course, acceptance of
            contributions of property and services would be subject to the
            usual limitations covering donations to the Government.
      --Finally, we are requesting the authority to transfer or donate
            surplus property. GPO's equipment profile will undergo
            significant change in the coming period, and the appropriate
            disposition of surplus property would be facilitated with the
            authority to transfer or donate surplus property similar to
            that possessed by the Administrator of the General Services
            Administration. Currently, when any GPO property is declared
            surplus it must be sold to the highest competitive bidder. In
            addition to imposing an administrative burden in the conduct of
            the sale, this process often results in a price that is
            extremely low when compared to the actual value of the item
            when in use. We are proposing language that would provide us
            with discretionary authority to transfer or donate surplus GPO
            property to specific governmental and non-profit entities such
            as other Federal entities, educational or non-profit
            institutions as defined by the Internal Revenue Code, or state
            or local governments. In addition, it would allow us to donate
            surplus publications rather than destroying them and selling
            them as scrap paper.
        Representation Allowance.--We are requesting an increase for GPO's
    representation fund. The fund will be important in our effort to
    promote the concept of changing the GPO. We need to re-connect with our
    many vendors and customers as we attempt to regain our momentum and re-
    establish ourselves as the premier agent for the collection,
    dissemination, and preservation of the Government's information. Its
    use also will afford the GPO many first hand opportunities to hear the
    concerns and needs of the people and institutions we serve, especially
    those that will be essential to our future success. The fund will be
    subject to established limitations on its use. We will continue to make
    it available for official councils and groups advising the Public
    Printer, such as the Depository Library Advisory Council.
        Mr. Chairman and Members of the Subcommittee, I truly believe GPO's
    appropriations request for fiscal year 2004 represents a new departure
    for this agency in preparing for the future. I thank you for your
    support and encouragement of change at the GPO, and I look forward to
    working with you and the Appropriations Committees in your review and
    consideration of our request. This concludes my prepared statement, and
    I would be pleased to answer any questions you may have.

        Senator Campbell. I have a couple, but before I do, I would
    like to invite Senator Durbin if he has any comments before we
    go on.
        Senator Durbin. I will just put my opening statement in the
    record.
        Senator Campbell. Your statement will be in the record
    then.
        [The statement follows:]

                Prepared Statement of Senator Richard J. Durbin

        Mr. Chairman, thank you for scheduling today's hearing, the
    first of five budget oversight hearings to be held by the
    Legislative Branch Subcommittee this Spring.
        Mr. Chairman, I am happy to be working with you on this
    important bill this year. I had a great working relationship
    with your predecessor, Senator Bennett, and I am sure you and I
    will work very well together, too.
        This is an important Subcommittee. There are 12 other
    Appropriations Subcommittees that fund all of the Executive
    Branch Agencies and Departments. The Legislative Branch has
    this one Subcommittee in which we need to fund all of the tools
    and resources required of a co-equal branch of government.
        As you know, I was Chairman of this Subcommittee for most
    of the 107th Congress and believe that Senator Bennett, the
    other Subcommittee Members, and I accomplished many great
    things during the last few years.
        In fact, one of my accomplishments as a Senator that I take
    the most pride in is the student loan reimbursement program for
    Congressional staff that was initiated by this Subcommittee.
        We ask for tremendous sacrifices on the part of our staffs
    up here. The hours are long and highly unpredictable. The work
    is very demanding. And, frankly, the pay is not that great.
        Despite all of that, Hill staff are the most loyal,
    dedicated, and talented group of people I have ever met.
    Anything we can do, however small, to encourage young people to
    make public service a career is worth pursuing.
        More and more Member Offices and Committees are taking
    advantage of the student loan reimbursement program each year
    and that pleases me to no end.
        Today we are going to hear from three important Legislative
    Branch agencies, the General Accounting Office, the Government
    Printing Office, and the Congressional Budget Office. I join
    Chairman Campbell in welcoming David Walker, the Comptroller
    General of the United States, Bruce James, the U.S. Public
    Printer, and Douglas Holtz-Eakin, the Director of the
    Congressional Budget Office to today's hearing.
        Gentlemen, all of you seem to be requesting, with one or
    two exceptions, relatively modest cost-of-living increases for
    your organizations this year. Obviously, this is prudent, up to
    a point, during a time of both recession and war.
        However, it is important to the Members of this
    Subcommittee that you have the resources you need to do your
    jobs effectively and efficiently.
        To the extent that any of your budgets request have holes
    in them that are going to negatively impact your performance
    during fiscal year 2004, I hope you will share those concerns
    with us.
        Two points before I wrap up:
        First, Mr. Walker, I hope you will spend several minutes
    today discussing whatever plans or thoughts you have concerning
    access to executive branch information in light of the recent
    events surrounding the Cheney suit. We need to know what you
    need from Congress in order for you to be able to continue to
    be effective in your role as the investigative arm of Congress.
        Let me also say that I appreciate the way you have chosen
    to work with Congress on such a sensitive issue. This was a
    very delicate matter and I thought you navigated it pretty well
    under difficult circumstances.
        Second, Mr. James, I want to express my appreciation to you
    for your dogged determination to work with the OMB to try to
    get a truce declared in their on-going war against public
    printing. It seems that you are being given some time to make
    your case to the Budget Director, so, for the moment, I am
    willing to stand down on this issue. You showed up ready to
    work on Day 1 as the Public Printer and I respect that.
        I am looking forward to hearing your testimony about your
    plans to modernize the Government Printing Office.
        Mr. Chairman, I will conclude here and request that my
    entire statement, as well as a series of questions, be made a
    part of the record.
        Once again, congratulations on becoming Chair of this
    important Subcommittee.
        Thank you.

                                 REVOLVING FUND

        Senator Campbell. Since we have one more witness before we
    run to vote, let me just do a couple of short ones. You talked
    about the losses you had and, as I understand it, those losses
    have totaled, since 1988 through 2002--$44.6 million. How do
    you operate with that many shortfalls over that number of
    years, and I know you just came on board. You might not know
    the total answer to that, but give me an idea.
        Mr. James. I can certainly explain to you where the money
    is coming from.
        Senator Campbell. I can, too, from here.
        Mr. James. I absolutely shake my head when I look back and
    see the losses and the fact that they have continued year after
    year after year. The enterprise has not been run as a business,
    as you might expect, when you see these losses.
        Senator Campbell. Is that what you would consider a major
    weakness, that it has not been run like a business?
        Mr. James. Absolutely. Absolutely. The losses have been
    funded by our revolving fund. The revolving fund consists of
    retained earnings. Those are earnings that have been built up
    over 50 years. The purpose of those retained earnings is to
    replace obsolete equipment, and what we have been doing instead
    is funding these losses year after year and, in essence, eating
    into our future.

                                 GPO WORKFORCE

        Senator Campbell. I understand about half of your workforce
    is eligible for retirement. You talked a little bit about that,
    but if you have that many that are eligible for retirement,
    that means if you downsize on the number of people, you will
    just not hire replacements. It will be kind of a painless way
    of downsizing for the people that are working there, I assume.
    Is that right?
        Mr. James. Exactly. We are looking for a painless way to
    downsize. Now, clearly we will be adding people back into the
    organization, and I want to emphasize that, because for a
    period of 20 years the GPO dropped from 9,000 to 3,000 folks,
    and during that period they added almost no one into the
    organization, so today I have almost no one from 30 to 50 who
    is a manager in the organization, and that is seriously hurting
    succession, so while we are reducing the force in total, we
    will be selectively adding back in the skills that are required
    for the future.

                                   TECHNOLOGY

        Senator Campbell. You also mentioned something about the
    19th century practices. I am not a real high-tech guy, but I
    will tell you that it seems to me every 2 years or 3 years the
    things you were using 2 or 3 years ago are already obsolete, so
    I can understand in your Department you are going to have to
    have a major effort to stay ahead of the curve on new
    technology.
        I will submit the rest of my questions to you in writing if
    it is all right with you, Mr. James.
        I would like to invite my colleague and friend, if there
    are any questions he has.
        Senator Durbin. Thank you, Mr. Chairman. It is good to be
    with you in your new capacity, and I look forward to working
    with you, and you have a great assistant there who has helped
    all of us over the years. Let me ask you, Mr. James, it sounds
    like when you get to the GPO, coming out of the private sector,
    it is not a business that you would have wanted to buy.
        Mr. James. I would have not bought it except for the
    opportunity. There is a tremendous opportunity here. It is what
    got me to leave the hills of northern Nevada and a wonderful
    living condition, the opportunity to come in here and look at
    this enterprise and figure out how to take it into the 21st
    century. What the Government Printing Office has accomplished
    on behalf of the country in the last 150 years is truly
    amazing.
        If you think about this, we have the record of the
    Government spread throughout the United States. There is no one
    action that could ever wipe out the record of the Government.
    We have people in every State in this Nation in the principal
    population areas able to walk into a library and access any
    document the Government has produced. It is a tremendous
    legacy, and my fear is that if we are not very careful, that we
    will leave this behind as we move into the digital world, and
    we may well lose the record of the Government. It is worth
    coming in and trying to figure this out.

                                 PRIVATIZATION

        Senator Durbin. So the people who say, privatize it, get
    rid of it, it was inefficient and we can do this by contracting
    out, would you disagree with that conclusion?
        Mr. James. Well, I think they may be not well-informed, and
    I say this to you, Senator, actually during the Second World
    War the Government Printing Office became overwhelmed with the
    amount of work they had, and for the first time began to
    contract printing out to the private sector. They were amazed
    at how well that went, and it has continued ever since. Today,
    we contract out about 80 percent of the Government's printing
    requirements to the private sector. Last year, we had more than
    2,500 printing companies throughout the country in every State
    as contractors to the Government Printing Office.
        Senator Durbin. When you decided to bid on the 2004 Federal
    budget and turned in a bid, according to the news reports, 24
    percent lower than last year, was that to make a point, take a
    bath, or did you find that much efficiency?
        Mr. James. Let me say this, this transpired before I took
    office. The bidding process was completed when I came in, and I
    did have an opportunity to talk to Mr. Daniels about this
    before he made a final decision.
        In reviewing the bid that the Government Printing Office
    made, I thought it was a very intelligent bid. You know, there
    are two prices for a piece of printing. The first price is that
    when you give a printer a set of specifications you say, I want
    to print a 100-page book, it will be black and white, it will
    have this number of copies, this is what the manuscript will
    look like, and this is the date I need it.
        The final price is based on how many pages there actually
    were, how many changes you made to that manuscript, what kind
    of overtime you required for it. So what the Government
    Printing Office did was give the OMB a price for the
    specifications that they gave us. It happened to be about
    $100,000 below the year before. When the final bill is
    rendered, my guess is it will be similar to what it was last
    year.
        Senator Durbin. Thanks a lot. Thanks, Mr. Chairman.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Campbell. Thank you, and as I mentioned before, Mr.
    James, we will probably submit some questions in writing too,
    if you could answer them, we would appreciate it.
        Mr. James. Thank you, Mr. Chairman.
        Senator Campbell. Give my regards to all our friends in
    Reno, too.
        Mr. James. I will definitely do that.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

             Questions Submitted by Senator Ben Nighthorse Campbell

                               CHALLENGES AT GPO

        Question. GPO faces many challenges--half of its workforce is
    eligible for retirement, more agencies are using electronic means of
    producing information rather than printed materials, the Administration
    last year challenged the legal requirement that all government printing
    be done through GPO.
        How do you plan to address these issues and what is your vision for
    GPO's future?
        Answer. We have begun to transform the Government Printing Office
    into an information service facility for the 21st century. With your
    support, we will restore GPO's leadership in the graphic arts industry
    and make GPO a reliable and responsive provider of Government
    information. Through an inclusive process, we are redefining GPO's
    mission and strategy to meet the challenges of today and the future. We
    are working with our customers and stakeholders to identify their needs
    and concerns. The demands of Congress, the agencies, and the public
    will guide us in identifying the optimal technologies to employ to meet
    those requirements. The GAO is presently conducting a congressionally-
    mandated study of Federal Government information dissemination. The GAO
    is also conducting a management audit of GPO, which I requested. These
    studies will help us to focus on needed changes. The transformation of
    GPO will require investment in people and systems. The results will be
    improved effectiveness and efficiency and increased value to the
    customers we serve.
        Regarding OMB's challenge to the legal requirement to use GPO, I
    have asked OMB to cooperate with us in leading the GPO into the 21st
    century by addressing the issues most important to the future. For OMB
    to allow agencies to by-pass GPO would be a policy change geared to
    addressing the 19th century, not the 21st century. It is to the
    public's benefit to keep the GPO intact to lead in the transformation
    of the government's printing and information policy.
        While printing technology and practices are changing, librarians,
    historians, researchers, Members of Congress, and citizens will
    continue to need an easy to use, organized, predictable gateway to
    authenticated Government information and the knowledge that the
    information will be available to the public in perpetuity. OMB and GPO
    should cooperate in redesigning GPO to ensure the best interests of
    taxpayers are met.
        Question. How would you assess GPO's strengths and weaknesses? What
    gaps does GPO face in the number, skills, and competencies of its
    employees?
        Answer. GPO has great strength in the quality of employees and
    their dedication to GPO's mission. However, we need to ensure that GPO
    employees are trained in the right skills and motivated by an
    organization that promotes change, encourages initiative, and
    recognizes accomplishments. I have increased employee training
    significantly and we are now rewarding performance and initiative. Our
    workforce needs to develop more of the skills required to use the best
    available technologies to meet customer needs. This requires that the
    workforce become more highly trained with emphasis on digital formats,
    databases, and electronic communications. We have also begun to examine
    the constraints and excess costs associated with the building in which
    we operate. It is not suitable to efficient manufacturing operations.
        Question. How do you see the mission of GPO evolving in response to
    changing technology?
        Answer. GPO ensures the public's access to Government information.
    Since 1813 the Government has been gathering its information and
    documents, organizing and cataloging them, and making them available to
    the general public. GPO has carried out this mission with printing,
    then microfiche, later CD-ROMs, and now with online distribution of
    digital titles. Our mission is unique; no other agency of the Federal
    Government is charged with this responsibility or would begin to
    understand how to collect documents from all three branches, how to
    organize and catalog the documents so they are usable, how to
    distribute them to the 1,200 depository libraries, how to sell them to
    the public, and how to preserve permanent public access to Federal
    information and documents. We see a continued decline in the volume of
    paper documents and an increase in the use of electronic databases to
    access Government information. Increasingly, our role will be to
    capture digitally, store, authenticate, convert, and channel Government
    information to the public in all relevant media.
        Question. How will your interim reorganization help GPO move in the
    right direction? What are the objectives of the reorganization and how
    it will impact the services provided to Congress?
        Answer. The reorganization is designed to provide a greater
    customer focus, delegate decision-making, provide an enterprise view of
    technology, and make GPO more adaptable to change. Our principal goal
    is to redirect GPO's operations toward customer service--helping our
    customers meet their goals, rather than bending their needs to fit what
    we provide. We are especially interested in pursuing our vision of
    helping Congress to reinvent its information products to help expedite
    its work.
        Question. What actions will you take to make GPO operate in a more
    business-like manner?
        Answer. At this Committee's request, GAO is presently conducting a
    study of Federal Government printing and information policy. The GAO is
    also conducting a management audit of GPO, which we requested. These
    studies will help us to focus on needed changes. Over the next several
    years, the transformation of GPO will require investments in people and
    systems. The results will be improved effectiveness and efficiency and
    increased value to the customers we serve. We are implementing a buy-
    out program to increase efficiency.
        Question. What actions does Congress need to take to help GPO
    operate in a more business-like manner?
        Answer. We urge that Congress support our request for $10 million
    for a separation incentive program that will result in a reduction of
    300 positions. More than half our workforce is eligible to retire. This
    investment is necessary to reduce costs and will result in a savings of
    about $18 million per year. An additional $4.1 million is requested for
    the Salaries and Expenses Appropriation to replace obsolete technology
    used by the GPO Access system by upgrading its search and retrieval
    system, now nearly a decade old. A new search engine must be acquired
    and the databases brought forward to take advantage of the new
    technologies and ensure that data will not be lost through
    technological obsolescence.

                            GPO OPERATING AT A LOSS

        Question. GPO is losing money in each of its business lines--a
    total of $44.6 million since 1988 through 2002, and $3.8 million for
    the first quarter of fiscal year 2003.
        How do you operate with these shortfalls?
        Answer. The shortfalls were funded from retained earnings, which
    otherwise would have been available to replace and modernize equipment
    and systems.
        Question. What are the principal reasons for your losses?
        Answer. The principle reason for the losses in the past was GPO's
    inability to adapt its operations and cost structure fast enough to
    respond to the rapid pace of changes in technology and how customers
    produce and access Government information. Moreover, GPO's building is
    not suited to the purposes employed, causing excess cost to be
    incurred.
        Question. When will you run out of money in the revolving fund?
        Answer. If we did nothing, GPO would run out of available cash in
    about 12-15 months. GPO is adopting new business models, proposing a
    separation incentive program, and taking other actions to bring revenue
    and expense into balance.
        Question. What assurance can you provide that appropriated funds
    are not supplementing the cost of providing printing services to
    executive agencies?
        Answer. An independent CPA firm audits GPO financial statements
    annually. GPO receives unqualified opinions--the highest assurance an
    auditor can give. GPO has an accounting system, that properly controls
    cost reporting in the revolving fund and maintains separate accounting
    over each of its appropriations.

                               CONTRACTING COSTS

        Question. GPO contracts out more than 80 percent of its work to
    private contractors.
        What is the basis for GPO's 7 percent surcharge for the
    administrative expenses it occurs for contracting on behalf of
    agencies?
        Answer. The surcharge covers all GPO expenses to administer our
    Printing Procurement Program. No funds are appropriated by Congress
    directly to GPO to support this program. GPO printing contracts are
    developed and carried out by knowledgeable printing experts via a
    package of procurement support services. This program saves agencies
    much more than the surcharge.
        The surcharge covers the cost of a wide variety of services: GPO
    reviews requisitions and offers suggestions for economizing; develops
    specifications; competes, awards, and administers contracts; performs
    press inspections and other on-site reviews to assure quality; performs
    quality control reviews utilizing a unique program that quantifies
    quality ranking factors that has become widely recognized throughout
    the industry; provides voucher examination and payment services;
    provides legal advice on contracting; and makes available a dispute
    resolution service through GPO's Board of Contract Appeals. These same
    services would have to be provided by each executive agency if they
    procured printing themselves, leading to huge additional costs for
    duplication of effort.
        Question. I understand this surcharge does not cover your costs in
    the procurement program. Why?
        Answer. In fiscal year 2002, our Printing Procurement Program lost
    $3.8 million on revenue of $470 million, a loss of about eight-tenths
    of one percent. This loss is because GPO has not reduced operating
    costs commensurate with the decline in printing procurement volume of
    over 30 percent in the past three years. Our plans are to reduce costs
    to turn these results around. We are developing a new business model
    that involves replacing legacy systems and implementing electronic
    commerce. Our planned separation incentive program will also help to
    reduce costs.
        Question. Is GPO exploring increased use of streamlined procurement
    vehicles to reduce GPO's transaction costs for smaller print
    procurements?
        Answer. We purchase excess press capacity throughout the Nation by
    allowing any of 13,000 GPO certified printers to compete for any job
    they are equipped to handle. The result is very inexpensive printing,
    perhaps less than half the cost that would be paid by a private sector
    purchaser or Government agency acting in its own behalf. The difficulty
    in purchasing extremely low cost printing as the GPO has traditionally
    done is that the originating Government customer can't pick the vendor
    nor the location where it's printed and therefore frequently feels
    isolated from and unable to control the process to ensure their desired
    results.
        Partially as a consequence of this dissatisfaction, GPO four years
    ago launched a test program we call Simplified Purchase Agreement
    (SPA). This program allows agencies to directly bid and purchase
    printing up to $2,500 from their choice of local printers without the
    requirement to accept the low bid. GPO provides only a limited palette
    of services such as pre-approving printers, bill payment, and
    depository requirements. Last year, the 43 Federal agencies that have
    adopted this program purchased 12,000 printing jobs directly on their
    own using this system. Early indications are that both agency
    satisfaction and the cost of printing are measurably higher.

                               IN-PLANT CAPACITY

        Question. GPO has a very large in-plant print operation--at least
    half of which is used to serve congressional print needs.
        What percent of the plant's capacity is utilized? What plans do you
    have for downsizing GPO's in-plant print capacity to the level
    required? Are GPO's current facilities and equipment sufficient for the
    21st century?
        Answer. Measured on the basis of 24 hours per day, 7 days per week,
    potential availability, capacity utilization of equipment is about 10
    percent. GPO is not staffed to run the equipment on a 24/7 basis but
    this is the predominate metric in the private sector. Our plans are to
    gear capacity to meet peak workload demands of the Congress. This will
    require the elimination of some equipment and this process has already
    begun. New technologies are being explored. It will be necessary to
    substantially retool the agency for the 21st century.

                     OFFICE OF INNOVATION AND PARTNERSHIPS

        Question. Please explain your new Office of Innovation and
    Partnerships, including its goals and approach and how you plan to
    obtain and use external scientific and technological expertise.
        Answer. As part of our reorganization, a recently renamed new
    Office of Innovation and New Technology has been established to
    identify, evaluate, and plan for the adoption of technology
    opportunities. It will also guide us in the creation of associations
    with other public and private sector entities to carry out our mission.
    Such associations, the use of which is widespread in industry, will be
    critical to the transformation of the GPO. We have been meeting with
    the top management of our suppliers--from printing companies to
    equipment manufacturers--to explore the future possibilities for
    technological innovation in the digital information business.

                       FEDERAL DEPOSITORY LIBRARY PROGRAM

        Question. What are the implications for the Federal Depository
    Library Program of the trend towards electronic documents? Why are
    libraries pulling out of this program? What do you see as the future
    for this program?
        Answer. GPO is spending a great deal of time talking to the
    libraries that participate in the program about its future and seeking
    their advice on the essential services that we need to offer to support
    the depository libraries as the FDLP becomes an increasingly electronic
    program. GPO is the only Federal agency charged with cataloging and
    ensuring both timely and permanent public access to the full spectrum
    of Federal information from all three branches of the Government. This
    mission will be increasingly important in an environment where
    Government information is posted to many web sites in many formats,
    making it difficult for the public to locate it initially and over
    time.
        Authentication of electronic Government publications is a key issue
    for all of our depository libraries. GPO is working on Public Key
    Infrastructure (PKI) security services initiative to address this
    concern by enabling Congress, the Judiciary, and Federal agencies to
    identify and mark official documents. This would enable users inside of
    Government and elsewhere, including depository libraries, to confirm
    the validity of the publications GPO makes available on the Internet
    for permanent public access. PKI technology will also enable secure
    electronic transactions among agencies as well as with consumers of
    Government services and make it easier to safeguard official Federal
    Government information.
        Fugitive documents are an increasing problem as fewer documents are
    printed through GPO and we must reach out to locate digital copies on
    agency web sites and through other sources. In the past, most of the
    documents were identified and obtained through the printing process.
    That is no longer true and, as a result, we need new tools and
    additional staff with different skills to locate and acquire
    publications for the program.
        Maintaining GPO Access as a state-of-the-art service on which
    Congress and other parts of the Government, depository libraries, and
    the public can rely for current and permanent public access is
    essential. When GPO Access began in 1994, GPO identified the necessity
    to refresh periodically the software and hardware that support the
    service and to migrate the data forward to take advantage of future
    generations of technology. The initial platform selected for GPO Access
    has been enhanced and expanded through the years to support the
    service, but it is now at least two generations behind state-of-the-art
    systems. A new search engine must be acquired and the databases brought
    forward to take advantage of the new technologies and ensure that data
    will not be lost through technological obsolescence. GPO is
    establishing and will need to maintain backup and mirror sites to
    ensure public access and to avoid interruptions in service in the event
    of a catastrophe. GPO must also create appropriate metadata to
    facilitate identification and preservation of government information.
    We have requested $4.1 million for that purpose in fiscal year 2004.
        We have 53 regional depository libraries, which receive and
    permanently retain all publications distributed by the FDLP. At their
    own expense, they provide public access and preserve the record of the
    nation as well as ensure permanent public access to the paper and other
    tangible publications distributed by GPO. That critical group of
    libraries has remained stable for many years, but they are increasingly
    feeling economic pressures that cause them to re-evaluate the enormous
    expense of maintaining large paper and microfiche collections of
    Government documents. We have begun a dialog with the regional
    libraries about the value of shared regional collections to reduce the
    burden on individual libraries, a central collection at GPO to assist
    them and serve as a library of last resort, and retrospective
    cataloging and digitization projects that would increase the
    utilization of the pre-1976 collections and allow selective reduction
    in the paper and microfiche collections.
        We also have about 1,200 other depositories, which take only a
    portion of the tangible items based on the needs of the constituents
    they serve. That group, which we call ``selectives,'' always has some
    fluctuation as the resources of the libraries and needs of their
    communities shift. 48 libraries withdrew from the FDLP between
    September 2000 and February 2003. 30 (62.5 percent) of these libraries
    were small academic and public libraries in economically disadvantaged
    areas. In response to this data, we are developing a pilot project that
    will help comparable libraries that remain in the FDLP to focus their
    collection and services on Government publications that are
    specifically applicable to community economic development. We will
    combine that recommended collection with specialized training on the
    utilization of the resources and seek training and other assistance
    from agencies with responsibility for small and minority business
    development. We may also provide workstations to these libraries since
    they may not be able to afford the initial investment in appropriate
    equipment. We hope this program will provide a strong economic benefit
    and real incentive for such libraries to remain in the program and
    utilize information available from the Federal Government to assist
    their communities.
        We have just returned from Reno, Nevada, where we participated in a
    meeting of the Depository Library Council and over 250 other members of
    the depository library community. That meeting focused heavily on the
    future of the program and the range of products and services that GPO
    needs to offer in the 21st century. On the way to Reno we stopped in
    Tucson to visit the University of Arizona, which has a major initiative
    underway to become the first all electronic depository library. The
    rapid transition to electronic publications, which now make up over 60
    percent of all items available through the FDLP, has challenged the
    depository libraries. The response has varied from library to library.
    Given the range of types and sizes of libraries in the program, it is
    not surprising that some have adapted rapidly and well while others are
    still struggling to adjust to the increased demands for training and
    user support necessitated by searching databases and handling
    electronic files in a wide variety of formats. We are providing as much
    support and training as we can, and we are planning a pilot project to
    place GPO staff in the field to work more directly with libraries to
    meet their training needs and advise them about best practices for
    managing a depository library.

                         ADDITIONAL SUBMITTED STATEMENT

        [Clerk's Note.--The subcommittee has received a statement
    from the American Association of Law Libraries, American
    Library Association, and Association of Research Libraries
    which will be placed in the record at this point.]

       Prepared Statement of the American Association of Law Libraries,
      American Library Association, and Association of Research Libraries

        On behalf of the American Association of Law Libraries (AALL), the
    Association of Research Libraries (ARL) and the American Library
    Association (ALA), we write in support of the fiscal year 2004 budget
    request of the Government Printing Office (GPO). Collectively, these
    three associations represent thousands of individuals and institutions
    serving communities throughout the Nation, including the nearly 1,300
    federal depository libraries located in nearly every congressional
    district.
        AALL is a nonprofit educational organization with over 5,000
    members dedicated to promoting and enhancing the value of law
    libraries, fostering law librarianship and providing leadership and
    advocacy in the field of legal information and information policy. ARL
    is an Association of 123 research libraries in North America. ARL
    programs and services promote equitable access to and effective use of
    recorded knowledge in support of teaching, research. ALA is a nonprofit
    educational organization of 64,000 librarians, library trustees, and
    other friends of libraries dedicated to improving library services and
    promoting the public interest in a free and open information society.

    Fiscal Year 2004 Budget Request Essential
        We are pleased to submit a statement for the record on the fiscal
    year 2004 appropriations for the Government Printing Office and the
    Superintendent of Documents Salaries and Expenses. We urge your support
    for the Public Printer's fiscal year 2004 budget request of
    $135,567,000 for the GPO that includes $34,456,000 for the Salaries and
    Expenses (S&E) Appropriation of the Superintendent of Documents and
    $91,111,000 for the Congressional Printing and Binding (CP&B)
    Appropriation. The S&E request includes $28.5 million to fund the
    Federal Depository Library Program (FDLP), $4.9 million for the
    Cataloging and Indexing Program, $.8 million for the International
    Exchange Program and $.2 million for the By-Law Distribution Program.
    This amount includes necessary increases to support the continued
    operation of the FDLP, its continuing electronic transition plans and
    the increased demands upon GPO Access.
        We urge you to approve the full S&E appropriations request for
    fiscal year 2004. The majority of the S&E appropriation is for the
    Federal Depository Library Program (FDLP), by which congressional and
    other important Government publications and information products are
    disseminated to the nearly 1,300 participating academic, public,
    Federal, law and other libraries nationwide. We find the request of
    $4.1 million to replace obsolete technology and upgrade the retrieval
    system for GPO Access to be of crucial importance, since each day
    thousands of Americans rely on the GPO Access system to locate the
    important electronic government information they need.
        The FDLP and GPO Access are vital to the dissemination and access
    of Federal government information to our citizens. We believe that the
    fiscal year 2004 S&E budget request is essential to the continued
    transition to a more electronic program and the continued success of
    GPO Access. Since GPO is responsible for permanent public access to the
    content of its Electronic Collection, funding to strengthen digital
    archiving and migration capabilities is a critically important
    component.

    Growth of GPO Access and the Electronic Collection Impressive
        The FDLP is a unique program and one of the most effective,
    efficient and successful partnerships between Congress and the American
    public. The FDLP provides your constituents with equitable, ready,
    efficient and no-fee access to Federal government information in an
    increasingly electronic environment. Today Congress, government
    agencies and the courts increasingly are relying on state-of-the-art
    technologies to create and disseminate government information through
    the Internet.
        One of the critical keys to GPO's successful transition to a more
    electronic program has been the growth of the GPO Access system, a
    central access point within the GPO for electronic government
    information that today makes available to the public approximately
    225,000 titles. Created by Public Law 103-40, GPO Access has grown into
    a unique digital collection of official government databases from all
    three branches of government including the Congressional Record, the
    Federal Register and the Code of Federal Regulations. Currently an
    average of 31 million documents are downloaded by the public each
    month, a substantial increase from last year that attests to the
    importance and value of this award-winning system to the American
    public.
        GPO has continued to make excellent progress over the past year in
    enhancing its Electronic Collection. GPO constantly adds new data and
    products to the system, building a current collection of valuable new
    electronic resources. At the same time, GPO provides permanent access
    to core legislative and regulatory information and to agency
    information managed by GPO on GPO servers. Each year, this historic
    electronic collection grows, requiring GPO to meet its responsibility
    for ensuring permanent public access. This function presents probably
    the most difficult challenge of the networked electronic environment.
    Just as the government has an affirmative obligation to provide current
    access to its information, in the digital arena this obligation extends
    to ensuring the preservation of and permanent public access to
    electronic government publications.

    FDLP Libraries' Significant Services and Investments
        Each participating federal depository library makes significant
    investments to ensure that the public has effective access to
    government information. For example, FDLP libraries invest in
    technologies to assist in accessing electronic government information.
    These investments exemplify the substantial costs that participating
    depository libraries incur in order to provide your constituents with
    equitable, ready, efficient and no-fee access to government information
    in both print and electronic formats. These costs include providing
    highly trained staff, adequate space, necessary additional materials,
    expensive equipment and Internet connections. The success of GPO Access
    cannot be measured without acknowledging the substantial costs covered
    by libraries.
        Federal depository libraries serve as important channels of public
    access to government publications and contribute significantly to the
    success of this Program. The government's responsibility to make
    government publications in both tangible and electronic formats
    available to depository libraries is successful because of the
    necessary partnerships developed between the Federal government, the
    GPO, and the Federal depository libraries. In order for GPO to continue
    to increase the amount of government information available for current
    and future public access through the Internet and in order for the
    Federal Government to fulfill its responsibilities for this
    partnership, it is critically important that Congress provide adequate
    funds to support the transition to a more electronic program.

    Importance of Full Funding for the CP&B
        We also urge your support for the Public Printer's request of
    $91,111,000 for the Congressional Printing and Binding (CP&B)
    appropriation. Broad public access to legislative information,
    including the Congressional Record, the text of bills, as well as
    committee hearings, reports, documents and other legislative materials,
    is crucial to the ability of our citizenry to engage in the political
    process. Indeed, recent polls have demonstrated the public's increasing
    awareness of and thirst for information from their government,
    including Congress. Full support for the CP&B request will ensure the
    necessary electronic infrastructure to make congressional materials
    available in a timely manner for permanent accessibility through GPO
    Access and will maintain GPO's inplant printing operation for Congress.
        Chairman Campbell, we are very grateful to you and to members of
    the Subcommittee for your past support of GPO Access, the Federal
    Depository Library Program and GPO's Congressional Printing and Binding
    services. The investment in systems and services to provide the public
    with government publications in all formats will ensure that valuable
    electronic government information created today will be available and
    preserved for future generations. We respectfully urge your continued
    support by approving the Government Printing Office's fiscal year 2004
    appropriations request in its entirety. We ask that you please include
    this statement as part of the recent hearing record. Thank you very
    much.
                          CONGRESSIONAL BUDGET OFFICE

    STATEMENT OF DOUGLAS HOLTZ-EAKIN, DIRECTOR
    ACCOMPANIED BY BARRY B. ANDERSON, DEPUTY DIRECTOR

        Senator Campbell. And our third and last panel will be Mr.
    Douglas Holtz-Eakin, Director of the Congressional Budget
    Office, accompanied by Barry Anderson, his Deputy Director,
    too. As with the other panels, Mr. Holtz-Eakin, if you would
    like to just make a verbal statement, we will put your complete
    written statement in the record.

          OVERVIEW OF THE CONGRESSIONAL BUDGET OFFICE'S BUDGET REQUEST

        Mr. Holtz-Eakin. Thank you, Mr. Chairman. I will submit my
    written statement for the record and just summarize briefly.
    You have our request before you. You know it is for just under
    $34 million, which represents a 6.6 percent increase over the
    previous year. I should note, however, that of that request,
    1.1 percent is funding for our contribution to a partnership in
    the Federal Accounting Standards Advisory Board. Excluding
    that, we have a core increase of 5.5 percent devoted to current
    baseline increases of 3.8 percent and then additional resources
    of 1.7 percent.
        Stepping back a bit, if you look at the CBO budget as a
    whole, what you see is the budget basically covers people, and
    our budget submission is configured to ensure that those people
    can be put in a position to meet our congressional customers'
    needs in what I think is a timely, flexible, and high-quality
    fashion.
        We have attempted to make sure that we devote enough
    resources to our baseline receipts estimation so as to overcome
    the difficulties over the last few years in anticipating
    fluctuations in tax receipts that are not fully explained by
    the status of the economy, and I can explore that in greater
    detail with you.
        We have tried to devote resources to ensure that we can
    hire in a successful fashion in some areas of the labor market
    which are quite difficult, in particular, specialists in the
    areas of health economics and financial economics. We have
    attempted to make arrangements so that we have flexibility with
    respect to visiting scholars, post-doctoral fellows, and a
    variety of intern kinds of appointments.
        This allows us to redeploy resources quickly as
    congressional needs require, develop relationships with
    possible sources of permanent hires, and improve our ability to
    maintain the kind of workforce that is essential for the
    Congressional Budget Office. And then we continually attempt to
    improve the level of communication with Congress. This year, we
    have undertaken to designate a senior member of the
    Congressional Budget Office staff, Sandy Davis, to a job as
    special assistant to the director, where he has primary
    responsibility for ensuring that we are in continuous and top-
    flight communication with Congress on its needs and on
    timetables so that we can be responsive with the different work
    products that are important to Congress and be timely in our
    responses.
        We hope to build that enhanced communication into a
    strategic plan so that we are looking ahead to Congress' needs,
    building those anticipated needs into our work plans in a
    systematic fashion, and trying to upgrade the traditional
    practice of making sure that staff stay in communication--to
    regularize this process and to feed it into both the hiring
    process and decisions on things like visiting scholars.
        And finally, a portion of the budget is devoted to
    supporting our people at CBO in the areas of technology, where,
    in fact, the budget reveals cost savings from movements to more
    advanced forms of technology; disaster recovery, should we need
    to continue operations in unfortunate circumstances; and
    ongoing training and management training as well. So I think if
    you step back from the particulars of each of the budget items,
    what you will see is a budget that is really about the people
    at the Congressional Budget Office, and our strategy in
    constructing that budget is to make sure that those people
    respond quickly, accurately, and flexibly to the needs of
    Congress in fulfilling the job of the CBO.

                               PREPARED STATEMENT

        And with that quick overview, I would be happy to take your
    questions.
        [The statement follows:]

                   Prepared Statement of Douglas Holtz-Eakin

        Mr. Chairman and Members of the Subcommittee, I am pleased to
    present the fiscal year 2004 budget request for the Congressional
    Budget Office. The mission of CBO is to provide the Congress with the
    objective, timely, nonpartisan analysis it needs about the economy and
    the budget and to furnish the information and cost estimates required
    for the Congressional budget process.

             OVERVIEW OF CBO'S BUDGET REQUEST FOR FISCAL YEAR 2004

        The Congressional Budget Office's fiscal year 2004 budget continues
    to be driven by the need to be competitive in a specialized labor
    market, with the added challenge of completing and maintaining an
    effective disaster recovery process. We are requesting $33,628,000 for
    CBO's operations during fiscal year 2004, an increase of 5.5 percent
    over 2003. In addition, funding CBO's portion of the cost of operating
    the Federal Accounting Standards Advisory Board (FASAB) adds 1.1
    percent (or $365,000) to our request, but that expense should be offset
    by cost reductions for other sponsoring agencies--the Treasury, GAO,
    and OMB--whose annual contributions will decrease. Together, those
    requirements total $33,993,000, or a 6.6 percent increase over our
    appropriation for fiscal year 2003.
        Of the 5.5 percent increase needed for CBO operations, 3.8
    percentage points represent a current-services baseline, while the
    remaining rise of 1.7 percentage points would fund three new positions
    and allow us to focus more resources on improving our economic
    forecasts and baseline projections of tax receipts. Mandatory increases
    in personnel costs alone would have required a 5.2 percent baseline
    budget increase, but they were offset somewhat by a 1.4 percent
    decrease resulting from savings in technology spending and other
    operating costs.
        In fiscal year 2004, CBO will focus on its core functions of
    scorekeeping, budget analysis, and economic and revenue forecasting.
    Our request will allow us to fund 236 positions--the same level
    originally requested for 2003. The three additional positions, along
    with some reallocation of existing positions, will allow us to increase
    the level of effort applied to improving our receipts baseline and
    enhancing our responsiveness to the Congress. We will also continue our
    visiting scholars program for postdoctoral fellows and midcareer
    academics with expertise in areas such as health economics, financial
    analysis, and macroeconomics. And we will continue to pursue a number
    of internal management initiatives to improve our human resources
    management, technology, publication quality, facilities, and business
    processes.
        Specifically, the fiscal year 2004 budget would:
      --Support a workload estimated at 2,300 legislative cost estimates
            and mandate cost statements, 30 major analytical reports, and
            40 other publications, and allow us to meet our obligations for
            Congressional testimony.
      --Fund 236 full-time-equivalent positions (FTEs), adding three
            positions for staff and visiting scholars to improve our
            ability to make economic forecasts and project tax receipts.
      --Provide a pay adjustment of 3.7 percent for staff below the level
            of senior analyst, consistent with the increase requested by
            other legislative branch agencies and providing parity with the
            military pay raise.
      --Fund a combination of promotions and merit increases for staff and
            provide performance-based pay increases for managers and senior
            analysts who no longer receive automatic annual across-the-
            board increases.
      --Continue to support process redesign and automation initiatives in
            publishing, human resources, financial management, and other
            areas.
      --Use reductions in spending for technology and equipment to offset
            the cost of the three new positions and a portion of projected
            price increases for administrative expenses.
      --Enable us to complete tasks related to our disaster recovery
            strategy, including purchasing some equipment and moving
            mission-critical servers and other IT infrastructure to the
            Legislative Branch Alternative Computing Facility early in
            fiscal year 2004.
        This request also includes a change in our legislative authority
    that would allow our appropriation to be available to pay an
    appropriate share ($365,000) of the costs of operating the Federal
    Accounting Standards Advisory Board.

              SUMMARY OF CBO'S BUDGET REQUEST FOR FISCAL YEAR 2004
                             [Dollars in thousands]
    ------------------------------------------------------------------------
                                                        Staff       Amount
    ------------------------------------------------------------------------
    Calculation of Base Appropriation, Fiscal Year          233     $32,101
     2003..........................................
        Plus Supplementals.........................  ..........  ...........
        Minus Rescissions..........................  ..........        (209)
                                                    ------------------------
          Budget Base, Fiscal Year 2003............         233      31,892
                                                    ========================
    Proposed Changes for Fiscal Year 2004:
        Mandatory Pay and Related Costs............  ..........       1,668
        Price-Level Changes........................  ..........          89
        Program-Type Changes:
            Legislation............................  ..........  ...........
            Workload:
                Improve revenue estimates..........           3         519
                FASAB expenses.....................  ..........         365
                Net of other changes...............  ..........        (518)
        Equipment, Alterations, Maintenance,         ..........         (22)
         Repairs, etc..............................
                                                    ------------------------
          Total Proposed Changes...................           3       2,101
                                                    ========================
          Fiscal Year 2004 Budget Request..........         236      33,993
    ------------------------------------------------------------------------
    Note: Columns and rows may not add up to totals because of rounding.

        The total fiscal year 2004 budget request in this table is $543,000
    higher than the amount submitted to OMB for inclusion in the
    President's budget as a result of information available after the OMB
    deadline. CBO will submit an amendment to OMB to reflect the change in
    our request.

                      ACCOMPLISHMENTS IN FISCAL YEAR 2002

        In fiscal year 2002, as part of its contributions to the
    Congressional budget process, CBO issued its annual report on the
    budget and economic outlook in January, which was based on the first of
    three sets of baseline budget projections prepared during the year. The
    outlook was followed by an analysis of the President's budgetary
    proposals.
        CBO also prepared about 750 formal cost estimates during 2002 and
    an even larger number of informal estimates for proposals or options
    being considered by the Congress. Legislation with a significant
    budgetary impact included the Economic Security and Assistance for
    American Workers Act of 2001, the Farm Security and Rural Investment
    Act of 2002, the Bob Stump National Defense Authorization Act for
    Fiscal Year 2003, the Medicare Modernization and Prescription Drug Act
    of 2002, the Terrorism Risk Insurance Act of 2002, and the Energy
    Policy Act of 2002.
        At the request of the Senate Budget Committee, we prepared a
    special analysis of the estimated cost of activities related to U.S.
    military operations in Afghanistan. In addition, we developed estimates
    of the cost of possible military operations in Iraq. We assisted the
    Budget Committees in their development of proposals for a Congressional
    budget resolution for fiscal year 2003.
        Our staff also responded to numerous committee requests during 2002
    on the status of obligations and outlays for funding provided in 2001
    for homeland security and for assistance to New York in the aftermath
    of the September 11, 2001, terrorist attacks.
        We also provided regular economic forecasts and detailed analyses
    of the state of the economy and of the Administration's economic
    forecast to the House and Senate Budget Committees as well as to other
    committees. A major focus was on how changes in taxes affect the
    economy.
        CBO testified before the Congress 16 times in fiscal year 2002 on a
    variety of budgetary and economic issues. A few examples are the Budget
    and Economic Outlook for the House Budget Committee, Projections of
    Medicare and Prescription Drug Spending for the Senate Finance
    Committee, and Social Security: The Challenges of an Aging Population
    for the Senate Special Committee on Aging.
        Responding to requests from Congressional committees for analyses
    of budgetary, economic, and programmatic issues is an important
    function of the agency. CBO studied a broad range of policy initiatives
    and legislative proposals in 2002 and issued 23 program analysis
    reports and more than 40 other publications.
        Medicare and Other Health Issues.--This area continues to put great
    demands on CBO, particularly work related to Medicare reform and
    prescription drug benefits for seniors and low-income individuals. To
    respond, we have reallocated resources from elsewhere in CBO. In 2002,
    we increased the number of analysts working full time on health care
    from 19 to 21 and concentrated more effort on Medicare reform and
    prescription drug issues. We also increased contractual support and
    spending for data. We now have 24 analysts devoted to health care and
    are working to increase that number to 27 (a net gain of eight analysts
    over 2001). We will also continue to shift more of the health staff to
    Medicare and drug-related work and by year-end will have nearly doubled
    the resources devoted to those priority areas as compared with 2001.
        In fiscal year 2002, a major effort was the examination of several
    complex proposals to add a new prescription drug benefit to Medicare,
    ``modernize'' other features of Medicare's benefit package, and promote
    competition among providers of Medicare services. CBO provided
    information to committee staffs in both the House and Senate on the
    impacts of those options on federal costs and the consequences for
    other parties. CBO also presented testimony on prescription drug
    spending and prepared an important study, Issues in Designing a
    Prescription Drug Benefit for Medicare, which was released in October
    2002.
        In addition, we analyzed several other important health issues,
    including proposals to reform market-exclusivity rules in the
    prescription drug market to promote quicker entry by generic drugs; the
    federal costs and revenues and the effects on malpractice and health
    insurance premiums of options to reform the nation's medical
    malpractice tort system; and the federal budgetary and private-sector
    effects of proposals to regulate the operation of private health plans
    and health insurance providers (for example, ``patients' bill of
    rights'' legislation and parity in the coverage of mental health and
    medical/surgical benefits.)
        Social Security.--In fiscal year 2002, CBO continued to develop an
    analytical framework for examining proposals to restructure and
    partially privatize Social Security. In addition to using standard
    actuarial projection techniques (such as those employed by the Social
    Security Administration), we made significant progress in constructing
    a dynamic microsimulation model to produce long-term budget
    projections. The model helped CBO prepare several of its Fiscal Policy
    Briefs, prepare Congressional testimony on the long-term budget
    outlook, and analyze long-term options for CBO's 2003 Budget Options
    volume.
        National Security.--Defense-related accomplishments during fiscal
    year 2002 included supporting the Congress through direct assistance
    and published reports. Published reported included The Long-Term
    Implications of Current Defense Plans, an analysis for the Senate
    Defense Appropriations Subcommittee; Estimated Costs and Technical
    Characteristics of Selected National Missile Defense Systems;
    Increasing the Mission Capability of the Attack Submarine Force, a
    study of alternatives for that force produced at the request from the
    Senate Armed Services Committee; Accrual Budgeting for Military
    Retirees' Health Care, a paper for the House Budget Committee;
    Estimated Costs of a Potential Conflict with Iraq, an analysis for
    Senator Conrad and Congressman Spratt; and The Budgetary Treatment of
    Leases and Public/Private Ventures.
        Domestic Economic, Tax, and Financial Issues.--Significant
    publications in this area included a policy brief examining the sharp
    drop in revenue collections experienced in 2002; two reports that
    reviewed the effects of the September 11, 2001, terrorist attacks on
    the insurance industry and analyzed proposals for federal reinsurance
    risks from both terrorism and natural disasters; a review of recent
    productivity growth in the economy, its relationship to improvements in
    computer technology, and the prospects for such growth in the future;
    estimates of future investment needs for drinking water and wastewater
    infrastructure; the risks facing U.S. banks from their exposure to
    foreign financial losses; and the implications for banks and depositors
    of raising the limit on federal deposit insurance coverage.

                   PRIORITIES FOR FISCAL YEARS 2003 AND 2004

        CBO's primary objectives will, as always, be to provide technical
    assistance and analytical support to the Congress in its work on annual
    budgets. That effort will include the preparation of baseline spending
    and revenue projections, analyses of the condition of the economy, cost
    estimates for authorization and direct spending legislation, and outlay
    estimates for appropriation bills. CBO will undertake studies of
    budgetary, economic, and programmatic issues that meet the needs of
    individual committees. During the next two years, CBO will also
    undertake major efforts to improve its baseline projections of tax
    receipts, to become more responsive to our Congressional clients, and
    to continue internal management improvements, including strengthening
    our planning process.

    Improving Economic Forecasts and Baseline Projections of Tax Receipts
        The drastic swings in federal revenues that have occurred over the
    past decade have placed a premium on improving the state of the art in
    receipts forecasting. In the second half of the 1990s, when receipts
    rose faster than anticipated, and in the early 2000s, when the opposite
    occurred, CBO labored (along with other forecasters) to revise its
    revenue models and estimating methods. But we (and others) were
    hampered by the long lags between revenue collections and the
    availability of useful data on the nature of those collections, and by
    the fact that relationships between incomes and tax collections are
    more complex than previously appreciated. During 2003 and 2004, we plan
    further efforts toward improvement in that area and will add at least
    three staff-years in 2004 by hiring permanent staff, adding expert
    consultants, reallocating resources, and utilizing visiting scholars.
    Specifically, we will:
      --Review our current revenue models and estimating methods to
            determine whether better procedures are available and identify
            areas for further development.
      --Acquire additional expertise in the areas of revenue estimating and
            related macroeconomic issues through additional hiring,
            visiting scholars, and consultation with outside experts.
      --Attempt to get better and quicker access to IRS tax data and
            utilize private-sector financial information to improve our
            understanding of how changes in the economy and the markets
            influence federal receipts.
      --Consult broadly with federal, state, and private forecasters who
            are working on the same problem. For example, we will explore
            bringing in a visiting scholar who has experience with
            projecting tax receipts in a large state such as New York or
            California.
        We will emphasize transparency in all of our analyses, estimates,
    and projections, but particularly in the revenue area, so that external
    experts can understand and critique our methods.

    Responsiveness and Communications with Congressional Committees
        Another area we will begin to emphasize in 2003 will be our direct
    assistance to the Congress. We plan to do that in several ways:
      --Assigning a senior analyst with a broad knowledge of budget
            analysis and the budget process to provide liaison to the
            Congressional committees with whom CBO works.
      --Involving the Budget, Appropriations, House Ways and Means, and
            Senate Finance Committees, as well as other frequent users of
            CBO's services, in substantive discussions during our planning
            process.
      --More generally, taking careful note of the timing and information
            needs of all of our customers, working hard to meet delivery
            dates, and keeping all committees for whom we work advised of
            the status and progress of projects of interest to them.

    Strategic Planning
        During the past few years, we have experimented with a variety of
    planning approaches for our mission work, as well as for our internal
    management agenda. The results of those planning efforts, as well as
    the resulting accomplishments, have been reflected in internal plans
    and to some extent in our annual budgets, appropriation testimony, and
    the fiscal year 2002 operating plan. During the next six months, we
    will begin a more deliberate strategic-planning process that will
    involve a comprehensive and careful assessment of customer needs, a
    deliberate weighing of customer priorities in relation to CBO's mission
    and capabilities, the selection of broad work areas and individual
    projects, and the setting of supportive internal management goals. We
    expect to have our plan available for inclusion with the submission of
    our 2005 budget.

    Specific Work Priorities for Fiscal Years 2003 and 2004
        Medicare and Other Health Issues.--Reforming the Medicare program
    appears to be a continuing focus of Congressional interest. We expect
    to analyze a wide range of legislative proposals both to expand
    Medicare benefits and to modify existing program rules. Topics are
    likely to include adding a prescription drug benefit to Medicare,
    promoting greater competition among health plans in the program, and
    modifying Medicare's payments to providers in the traditional fee-for-
    service sector. With Medicare's long-term budgetary difficulties
    gaining greater prominence, we also plan to focus efforts on developing
    a long-term model for estimating Medicare's future costs.
        Options for expanding health insurance coverage are also likely to
    be a major focus of legislative interest. We will issue a report
    providing alternative estimates of the number of people without
    coverage, and we expect to be called on to analyze a range of specific
    proposals in the areas of providing tax inducements for insurance
    coverage, expanding Medicaid and the State Children's Health Insurance
    Program, reforming rules regulating private health insurance, and
    requiring employers to offer coverage.
        Social Security and Employment Policy.--CBO continues to develop
    its capacity to produce cost estimates and impact analyses of Social
    Security for both current-law and reform proposals. With recent
    extensions of temporary unemployment benefits and the scheduled
    reauthorization of the Workforce Investment Act, CBO expects to
    continue to provide the Congress with analyses of legislative options
    to extend unemployment insurance benefits.
        Homeland Security.--Providing for homeland security and the
    creation of the Department of Homeland Security remain challenges for
    the Congress and priorities at CBO. We will continue to track homeland
    security spending through the budget and appropriations processes and
    will assist the Congress in making such spending transparent. We will
    also examine a number of issues related to public spending for homeland
    security and the provision of incentives to the private sector to
    mitigate risks associated with terrorist attacks.
        National Security.--Current work is focused on several broad themes
    and individual projects:
      --Expeditionary Forces.--Analyzing alternative approaches to
            replacing current overseas forward basing of U.S. forces with
            so-called expeditionary forces.
      --Aftermath of a Conflict with Iraq.--Assessing the implications of a
            long-term occupation of Iraq for active-duty and reserve U.S.
            military force structure.
      --Army Transformation.--Examining the Army's plans to transform its
            forces to meet 21st-century threats, and alternatives to those
            plans that might mitigate technical and budgetary risks.
      --Long-Range Strike Capacity.--Analyzing the cost-effectiveness of
            alternatives to improve the ability to strike large numbers of
            targets at long range.
        We will also study the effects of reform initiatives on aircraft
    logistics management and analyze the budgetary implications of trends
    in the use of contractors to perform military support functions.
        Tax Issues.--Work on federal tax policies will examine and report
    on a wide variety of issues involving the efficiency, complexity, and
    equity of the income tax system, including the growing effect of the
    alternative minimum tax and the use of tuition tax credits versus other
    alternatives for supporting higher education.
        Other Domestic Economic and Financial Issues.--Examples of current
    and planned work are:
      --Climate Change.--A report on the economics of climate change will
            be issued soon, while ongoing work examines the macroeconomic
            effects of reducing emissions of greenhouse gases.
      --Resources for Baby Boomers in Retirement.--This report will
            describe sources of funds available to the baby boomers in
            retirement and put in context concerns about the cost of Social
            Security and Medicaid.
      --Transportation.--A report is being prepared on options for
            passenger rail. Work will support Congressional committees as
            they reauthorize federal highway, transit, and aviation
            programs.
      --Administrative Costs of Private Retirement Accounts.--Nearing
            completion, this paper analyzes how program design can raise or
            lower the administrative costs of private accounts intended to
            supplement or replace Social Security.
      --The Internet and Intellectual Property.--Two studies are ongoing.
            The first analyzes policy proposals to speed deployment of
            high-speed Internet connections. The second looks at possible
            changes to copyright law in light of the growth of digital
            technology.
      --Tort Reform.--Topics being studied include the economic costs and
            benefits of the tort system, the implications of tort reform
            for economic growth, and an assessment of the economic effects
            of state-level tort reforms undertaken from the mid-1980s to
            the present.

    INTERNAL MANAGEMENT STRATEGY: PROGRESS AND PRIORITIES FOR FISCAL YEARS
                                 2003 AND 2004

        In addition to focusing directly on its mission, CBO, like any
    successful organization, must devote resources to attracting talented
    people, developing their skills, and equipping them properly. It must
    also organize its key work processes to be as efficient as possible and
    capitalize on technology whenever possible.

    Enhancing Recruitment and Retention
        During fiscal years 2003 and 2004, we will continue to pursue the
    same goals and initiatives in order to identify, hire, and retain a
    highly talented and diverse workforce.

        1. Strengthen Recruitment Strategy.--Our goal has been to focus our
    efforts on quickly filling key vacancies, particularly in hard-to-
    attract disciplines, while building a more diverse workforce.
        Our emphasis here stems from the general difficulty of filling very
    specialized positions with highly qualified staff and from the
    experience of the late 1990s, when CBO experienced an unusual number of
    vacancies and was unable to replace employees quickly. As a result, we
    devised a recruitment and retention strategy that allowed us to fill
    vacancies faster and begin meeting our annual staffing goals. To
    achieve those ends, we raised offering salaries for new Ph.D. and
    master's degree candidates, simplified our application process and
    drastically shortened the time from application to job offer,
    advertised critical vacancies more aggressively, began using
    recruitment bonuses for hard-to-fill specialities, and implemented an
    awards program for outstanding performers.
        In fiscal years 2003 and 2004, our college and university
    recruitment program will remain focused on graduate students in
    economics, public policy, and related programs at a variety of schools
    and continue to add more schools with diverse student populations. We
    will also:
      --Continue to develop and expand our competitive ``scholars,''
            focusing on hard-to-staff areas such as macroeconomics,
            financial economics, tax, and health economics;
      --Provide training to managers and staff on effective recruitment
            techniques and interviewing skills; and
      --Add an on-line job-application module and additional job
            information to our Web site.

        2. Improve CBO's Training Program.--Our goal is to improve
    management and job skills by investing in our people through training,
    education, and professional development.
        CBO has always invested in the job skills of its employees, but the
    amount we spend on job training and professional development has been
    far less than that of other high-impact organizations, and much less
    than management and training experts recommend. In recent years, we
    have increased our training expenditures by 30 to 40 percent while
    eliminating less cost-effective training and providing skill training
    to a much higher percentage of our staff. In fiscal year 2002, roughly
    70 percent of CBO employees received training. And during the past
    three years, we have provided more than two-thirds of our managers with
    training in leadership and communications skills.
        During fiscal years 2003 and 2004, we will:
      --Continue to provide management training to our senior staff and
            provide management-development training to up to a dozen high-
            performing analysts with leadership potential;
      --Develop training plans for new employees and find ways to deliver
            critical skills training to newer employees more quickly.

        3. Modernize and Revitalize the Working Environment.--Our goal has
    been to reconfigure and renovate much of our space to use it more
    efficiently and provide a high-quality work environment for new
    employees and those who were in inadequate space.
        Most of CBO's space was configured shortly after the agency's
    creation over 25 years ago--in a building designed primarily for file
    storage. At that time, there were no desktop computers, many more
    support staff, less specialization, and a less competitive employment
    marketplace. Consequently, a significant percentage of our space was
    configured for clerical staff, and many analysts had work space that
    was in passageways or open bays. In cooperation with staff of the
    Architect of the Capitol and the Superintendent of House Office
    Buildings, we developed strategies to address our space problems with
    modest expenditures. Thus, by the end of December 2002, we finished
    reconfiguring roughly 57 percent of our usable floor space. The result
    is about 134 offices renovated, with a net gain of 47 private offices
    and three conference rooms with modern audio-visual equipment.
        During fiscal years 2003 and 2004, we plan to renovate another 50
    offices and, in the process, essentially eliminate remaining
    substandard offices, while realizing a net gain of 10 private offices.

    Streamlining Operations and Redesigning Key Processes
        As mentioned above, we have also devoted significant attention to
    automating and modernizing our internal processes.

        4. Process Redesign and Automation.--Our goal has been to modernize
    and automate key internal processes to provide better services and
    information electronically, while reducing the time needed to use and
    support administrative functions.
        In fiscal year 2002, we began a major thrust to modernize our work
    processes, with a wide range of process redesign and automated system
    development efforts. Several new systems were completed during the
    year, including a tracking system for projects, a Web-based ordering
    system for supplies, a reservation system for our conference rooms, and
    a tracking system for job applicants. We also implemented an innovative
    Intranet site, which is now our primary information source for internal
    policy guidance, new application programs, internal services,
    databases, and Internet-based journals and research tools.
        In fiscal years 2003 and 2004, we will:
      --Develop and implement a new publication distribution system;
      --Design and implement a Human Resources Information System (HRIS);
      --Install an asset management system;
      --Implement a service-request software system for computer
            assistance; and
      --Upgrade our financial management system in cooperation with the
            Library of Congress.

    Publishing and Communications Priorities
        The value of CBO's work to the Congress and the public derives from
    the quality, readability, and availability of its publications.
    Although the demand for printed publications remains strong, the use of
    electronic versions is growing every year.

        5. CBO's Publications and Production Processes.--Our goal is to
    produce high-quality publications that are easily identifiable as CBO
    products and to reengineer our production processes to become more
    timely and efficient.
        As usage of CBO's Web site has increased, we have been able to
    print fewer copies of reports and reduce inventory costs. Increasingly,
    we are targeting the distribution of our reports to put them in the
    hands of policymakers and other interested readers but avoid excess
    printing. Instead, we are relying more on electronic notification and
    distribution. To provide Congressional offices with advance access, we
    began e-mailing them some shorter publications and Internet links to
    some longer documents. We also finished modernizing the format and
    production process for our reports so that they all have a consistent
    and professional look readily identified with CBO. We also designed and
    began issuing a new product line--Policy Briefs--which capture the
    important aspects of major policy issues, such as the budgetary impact
    of society's aging population, in just a few pages, for use by busy
    staff and Members.
        In fiscal years 2003 and 2004, we will implement a PC-based report
    distribution system to replace the current mainframe system. The new
    distribution system will target distribution more precisely, to those
    who want specific kinds of publications; improve staff productivity;
    and support e-mail notification and distribution of reports. We also
    plan to further improve our graphics production process, take advantage
    of the improved print quality made possible by printing directly from
    electronic files, and eliminate some production rework. In addition, we
    will expand the use of Policy Briefs to cover more areas of CBO work
    and issue them more frequently. Finally, we plan to survey users of CBO
    documents to glean suggestions for additional improvements in our
    written products.

        6. CBO's Web Site (www.cbo.gov).--Our goals are to respond to the
    growing demand for electronic products and to enhance the site's
    functionality and accessibility.
        Use of CBO's Web site continues to increase dramatically each year,
    from about 2.3 million page requests in 2001 to about 4.9 million last
    year. Although the site was quite serviceable, we undertook a
    comprehensive redesign. On the basis of suggestions from users, we
    developed a better search function, recatalogued publications on the
    site, and improved navigation.
        In fiscal years 2003 and 2004, our Web site will continue to
    evolve. Anticipated improvements include adding new sections, such as
    one with extensive information on the federal budget, a notification
    system for job applicants, and a comprehensive searchable archive of
    all CBO publications dating back to 1975. That archive will make some
    1,100 reports and nearly 900 testimonies available on-line and on CD
    and will allow us to ``print on demand'' as Members, staff, and the
    public request hard copies. Our redesign of the on-line versions of our
    various publications will also be completed.
    Technology
        Highly effective organizations must build a staff of skilled
    employees and then provide them with the technology they need to do
    their work. That is especially critical at CBO because the broad scope
    of our work and the tight deadlines under which we often operate
    necessitate modern information and computing tools.

        7. Maintain CBO's Technological Edge.--Our goal is to use the best
    technology systems economically available to support the agency's
    mission while improving the performance of those systems and raising
    employees' productivity and satisfaction.
        In fiscal year 2002, we replaced our oldest desktop systems,
    upgraded network infrastructure, and improved network security. To
    reduce timesharing costs, we moved most statistical processing and data
    storage from the Library of Congress to an in-house platform. We also
    made substantial progress in replacing our mission-critical Budget
    Analysis Data System, which is more than 20 years old, with a PC-based
    application. That new application will provide improved capability and
    yield operating-cost savings.
        In fiscal years 2003 and 2004, we plan to:
      --Complete the redesign and implementation of the Budget Analysis
            Data System during 2003; and
      --Consolidate a variety of existing data backup processes into one
            enterprise-wide backup system.
        We will also continue to replace our oldest workstation hardware
    and software, upgrade important routers and switches, replace some
    high-speed printers, and continue to support process redesign and
    automation efforts with programming assistance.

        8. Prepare for Disaster Recovery.--Our goal is to refine existing
    plans and develop resources that would allow the prompt restoration of
    CBO's mission-critical support to the Congress.
        The events of September 11, 2001, and the closure of the Ford House
    Office Building a month later reemphasized the importance of disaster
    recovery. Those events caused us to rethink our response strategy. The
    nature of the closure of the Ford building left our network, systems,
    and data intact, permitting us to quickly restore essential services to
    the Congress, but with considerable difficulty. In 2002, we improved
    our data system backup, moved surplus IT equipment to off-site storage,
    and devised a robust emergency recovery strategy.
        In fiscal years 2003 and 2004, we will complete the implementation
    of that strategy as we:
      --Mirror our CBO Web site, our internal Intranet, and other mission-
            critical databases and programs at a secure off-site facility;
      --Provide staff with highly secure remote access to e-mail
            application programs, analytical data, and the CBO Intranet,
            which contains hundreds of journals, research tools, and useful
            Internet links;
      --Strengthen our emergency wireless communication capabilities; and
      --Upgrade our e-mail and network operating systems to be more fault-
            tolerant.
        We will also complete the planning for and make the move to the
    Legislative Branch Alternative Computing Facility, establish reciprocal
    agreements for emergency work centers with the Library of Congress and
    other federal entities, and increase the quantity of off-site
    emergency-use hardware we have available.

        9. Enhance Network Security.--Our goal is to strengthen network
    security for the core network as well as for the separate network
    established to store and process sensitive data from the IRS, Social
    Security Administration, and Department of Health and Human Services.
        Some of CBO's analyses and model-development efforts require access
    to sensitive government data. Generally, that sensitivity forces us to
    adhere to strict security procedures dictated by the providing agency.
    As our use of sensitive data has grown, so has our need to increase
    security measures.
        In fiscal year 2003, we plan to substantially complete this effort
    by implementing automated auditing of secure data access to ensure that
    we are complying with all data- use agreements, completing an internal
    audit of network security and addressing any issues identified, and
    verifying that remote work sites are adequately safeguarded. We will
    then periodically perform data-security audits.

                                   CONCLUSION

        Mr. Chairman, in recent years, CBO has worked very hard to meet the
    needs of the Congress and to rebuild its staff during a period of great
    competition in the labor market. To do so, we have raised starting
    salaries for new graduates and undertaken a variety of efforts to make
    CBO a more desirable employer for talented economists and policy
    analysts. The recent budget increases provided by this Committee, along
    with our extensive efforts to reduce our nonpayroll costs, have allowed
    us to return to full strength while modernizing our products,
    processes, technology, and facilities.
        Nonetheless, we continue to have the same concerns as all federal
    employers: our salaries are not always competitive, many new graduates
    shun government service, anticipated retirements are worrisome, and
    replacing staff in high-demand disciplines is neither easy nor quick.
    Our new recruitment and retention initiatives, for which we need your
    continued support--the visiting scholars' program, performance and
    recruitment bonuses, training and professional development authority,
    and student loan repayment--will provide us with additional tools we
    can use in our efforts to attract the best and the brightest to serve
    the Congress.
        Finally, the additional staff resources that we have requested are
    critical to my efforts to improve CBO's economic forecasts and revenue-
    estimating processes.

                        CHANGES SINCE TERRORIST ATTACKS

        Senator Campbell. It seems to me that almost every agency
    that we deal with has had some major changes since 9/11, kind
    of foisted on them, obviously, but CBO has a little bit more of
    a buffered existence. Have there been any major changes with
    your workload or internal agency changes since 9/11, as there
    has been with so many other agencies?
        Mr. Holtz-Eakin. Well, I can let Barry Anderson, who has
    actually been at the Congressional Budget Office during the
    entire period, respond to that most directly.
        Mr. Anderson. The workload, no. I would have to say our
    workload is about the same. We have answered more requests,
    about, for example, the potential cost of the war in Iraq, and
    we also were called by the budget committees--and, in fact,
    volunteered to them right after 9/11--to talk about the
    potential economic damage that 9/11 could have caused for the
    economy. But that was a relatively small amount of work with
    respect to the entire workload. The budget process, Mr.
    Chairman, just seems to go on and on, ever more complex, but
    not much impacted by that.
        With respect to the actual working conditions, though, it
    has, I would say, relatively dramatically affected the staff.
    First of all, it has affected them psychologically. The fact
    that we work on Capitol Hill--the fact that one of those planes
    could have been headed directly our way--has had a major
    impact. In the Ford House Office Building in which we are
    located, there is a day care center, and that really has had an
    impact, particularly right after the event.
        Senator Campbell. Is that day care center still there?
        Mr. Anderson. It is still there, and there have been a
    number of security provisions implemented in the building and
    in the area around it that were not in effect on 9/11; and
    people see that, and they recognize that, and they act
    differently.
        Second of all, right after 9/11, as you may recall, there
    was the anthrax, and we were out of our building for almost 3
    weeks because of that, too. That dramatically changed our
    disaster recovery procedures. When that happened back in
    October of 2001, I think we had only three or four laptops in
    the agency. Now we have 60 or 70.
        Senator Campbell. Where were you working when you had to
    vacate your offices during the anthrax scare?
        Mr. Anderson. We had six different locations. We went, hat
    in hand, to agencies, almost every one of which was very
    generous with us in giving us space.
        Senator Campbell. They were all downtown here somewhere?
        Mr. Anderson. Some of them--the Library of Congress
    provided some; the Department of the Interior, NASA,
    International Trade provided some. OMB staff had a space that
    they had vacated, that they had reserved in case they had to
    vacate the Old Executive Office Building, an entire floor of
    1800 G Street, and that provided the biggest amount of space. A
    third or more of our staff were there for several weeks.
    However, the space was one thing; the computers were another.
    And I would have to say, looking back, that is where we were
    least prepared. We were able, sort of by the skin of our teeth,
    to continue to provide services to the Congress during that
    time. Were that or anything like that to happen again, we would
    be so much better prepared now. It has drastically changed the
    way we think about things--backing up materials, backing up
    databases, being able to access materials off-site, those types
    of thing.
        Senator Campbell. Thank you. Senator Durbin.

                   RESOURCES TO IMPROVE BASELINE FORECASTING

        Senator Durbin. Thank you very much.
        Mr. Holtz-Eakin, may I ask you, in your statement, you said
    that you are going to devote more resources to improving
    economic forecasts and projections of tax receipts. I would
    like to ask how much of that is just an effort to be more
    accurate and how much of that reflects this new philosophy of
    dynamic scoring, where we have to look at the world through
    different eyes than we have during the course of the history of
    the Republic?
        Mr. Holtz-Eakin. This really reflects an effort to be
    better in our baseline forecasting, independent of any issues
    associated with dynamic scoring. The revenue swings over the
    late 1990s and the most recent couple of years involve a nexus
    of macroeconomic performance (a boom and a bust), financial
    performance (changing compensation patterns, movements toward
    more bonuses, options, profit-sharing plans), and integration
    of the receipts from the corporate and individual income taxes
    and from their respective alternative minimum taxes. This has
    presented a really difficult technical challenge in trying to
    anticipate receipts in each year. The request is meant to
    reflect our needs for specialists in those areas, including
    those visiting scholars who may bring to us some wisdom from
    the States that rely heavily on those kinds of receipts,
    California and New York.
        Senator Durbin. So virtually all the forecasters have been
    wrong pretty consistently. Has the CBO been more in error or
    less in error than most of the forecasters in the past few
    years?
        Mr. Holtz-Eakin. Although I have been here only 2 months, I
    can proudly say that the CBO's record is outstanding and that
    the agency has made smaller errors in absolute value than most
    forecasters.

                         STUDENT LOAN REPAYMENT PROGRAM

        Senator Durbin. So you do not think any restatement from
    CBO would call for--never mind. I will not go any further with
    that.
        You talked a lot about the brain drain in Federal
    Government. This is not unique to your agency. In fact, Senator
    Voinovich, our colleague, has really focused on this as a major
    part of his Senate activity in the Government Affairs
    Committee, and you also noticed here a student loan repayment
    program, and I might say to the chairman, this is one of the
    things that came out of a year or two of my chairmanship of
    this, or my chairmanship of this subcommittee to try to retain
    and recruit very good people to Government service, where there
    are many disincentives. Student loan repayment turned out to be
    one of the incentives. Now, are you using that now? I see in
    your statement you refer to it.
        Mr. Holtz-Eakin. I want to thank you for your efforts. To
    walk into a situation where you have this kind of recruiting
    tool is a big advantage.
        The repayment provisions have not yet been used. We have
    set up a program where individuals can get up to $6,000 each
    year, a total of $40,000. Should they accept this incentive,
    they would be required to stay at CBO 3 years; otherwise, they
    would have to pay it back.
        During fiscal year 2002, we did not use that. We did not
    have a budget until late in the year, and it was not necessary
    to deploy the incentive. We have built into our 2004 request a
    larger use of the incentive. We are looking for the right
    opportunities in the recruiting process to deploy it in a way
    that enables us to take a relatively modest program at its
    outset and hire strategically, especially in the tough areas I
    mentioned.
        Senator Durbin. I thank you for that, and I think many of
    us are coming to learn, as we look at the debt that our kids
    are carrying out of college, that this is a new reality when it
    comes to job search, and if you do not deal with it, you are
    likely to be a victim of it, and I think it is good that we are
    starting to open our eyes to that.
        Thank you very much, Mr. Chairman.

                               SUBCOMITTEE RECESS

        Senator Campbell. I want to thank our witnesses. You got
    done just in time. You heard the beepers. We are going to have
    to go vote. We will stand in recess until April 10 at 1:30,
    when we will take testimony from the Library of Congress.
        Thank you so much for being here. The subcommittee is
    recessed.
        [Whereupon, at 2 p.m., Thursday, March 27, the subcommittee
    was recessed, to reconvene at 1:30 p.m., Thursday, April 10.]