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



 
         LEGISLATIVE BRANCH APPROPRIATIONS FOR FISCAL YEAR 2004

                              ----------                              


                        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
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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
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\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.

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                        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.]
