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



 
  DEPARTMENTS OF TRANSPORTATION, TREASURY AND GENERAL GOVERNMENT, AND 
          RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2005

                              ----------                              

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

    MATERIAL SUBMITTED BY AGENCIES NOT APPEARING FOR FORMAL HEARINGS

    [Clerk's Note.--The following agencies of the Subcommittee 
on Departments of Transportation, Treasury and General 
Government, and Related Agencies did not appear before the 
subcommittee this year. Chairman Shelby requested these 
agencies to submit testimony in support of their fiscal year 
2005 budget request. Those statements submitted by the chairman 
follow:]

             SAINT LAWRENCE SEAWAY DEVELOPMENT CORPORATION

         Prepared Statement of Albert S. Jacquez, Administrator

    The U.S. Saint Lawrence Seaway Development Corporation (SLSDC or 
Corporation), a wholly owned government corporation and an operating 
administration of the U.S. Department of Transportation (DOT), is 
responsible for the operations and maintenance of the U.S. portion of 
the St. Lawrence Seaway between Montreal and Lake Erie. This 
responsibility includes maintaining and operating the two U.S. Seaway 
locks located in Massena, NY, and vessel traffic control in areas of 
the St. Lawrence River and Lake Ontario. In addition, the SLSDC 
performs trade development functions designed to enhance Great Lakes 
St. Lawrence Seaway System utilization.
    Since its opening in 1959, the binational St. Lawrence Seaway has 
been a vital transportation corridor for the international movement of 
bulk commodities such as steel, iron ore, grain, and coal, serving a 
North American region that makes up one quarter of the U.S. population 
and nearly half of the Canadian population. The binational waterway 
serves as a deep draft waterborne link between major U.S. and Canadian 
agricultural, manufacturing, and industrial cities, including Chicago, 
Detroit, Toronto, Cleveland, Duluth, Toledo, Milwaukee, Montreal, and 
Green Bay, and European, South American, and North African markets.
    The SLSDC coordinates its activities with its Canadian counterpart, 
The St. Lawrence Seaway Management Corporation (SLSMC), particularly 
with respect to rules and regulations, overall day-to-day operations, 
traffic management, navigation aids, safety, environmental programs, 
security, operating dates, and trade development programs. The unique 
binational nature of the Seaway System requires 24-hour, year-round 
coordination between the two Seaway entities.
    The SLSDC's principal performance goal is to provide a safe, 
secure, reliable, and efficient U.S. portion of the St. Lawrence Seaway 
to its commercial users. Since its opening in 1959, more than 2.3 
billion metric tons of cargo has been transported through the combined 
sections of the St. Lawrence Seaway (Montreal-Lake Ontario and Welland 
Canal) with an estimated value of more than $400 billion.
    The navigation season typically runs from late March to late 
December. During the 2003 navigation season, the availability of the 
U.S. sectors of the Seaway, including the two U.S. locks maintained and 
operated by the SLSDC, was 98.9 percent; the annual goal is 99 percent. 
Weather and vessel incidents were the causes for all delays in 2003. Of 
the remaining factors that cause lockage shutdowns, the one that the 
SLSDC has the most control over is the proper functioning of lock 
equipment. During the 2003 navigation season, there were no system 
delays due to malfunctioning lock equipment.

                    FISCAL YEAR 2005 BUDGET ESTIMATE

    The SLSDC's fiscal year 2005 budget request provides the agency 
with the funding necessary to provide a safe, secure, reliable, and 
efficient waterway system for the movement of commercial goods to and 
from the Great Lakes region of North America.
    The SLSDC fiscal year 2005 proposed level of $16,800,000, includes 
an appropriation request from the Harbor Maintenance Trust Fund of 
$15,900,000 and an estimated non-appropriated $900,000 in non-Federal 
revenues. This proposed level will allow the agency to fund its 157 
Full-Time Equivalent (FTE) staff and continue the day-to-day 
operational and maintenance programs for the U.S. portion of the St. 
Lawrence Seaway between Montreal and Lake Erie. These programs include 
managing vessel traffic control in areas of the St. Lawrence River and 
Lake Ontario, maintaining and operating the two U.S. Seaway locks, and 
continuing increased security-related activities that were initiated as 
a result of the terrorist-related events of September 11, 2001. In 
addition, the SLSDC performs trade development activities designed to 
enhance Great Lakes St. Lawrence Seaway System awareness and 
utilization.
    The request also directly supports four of the five President's 
Management Agenda (PMA) initiatives (budget and performance 
integration, strategic management of human capital, financial 
performance improvement, and electronic government expansion; the SLSDC 
is exempt from competitive sourcing as a government corporation), the 
Department's strategic goals of Global Connectivity (efficient cargo 
movement) and Security (transportation system recovery), as well as the 
SLSDC's internal strategic goals. These agency goals include: safety, 
security, and the environment; reliability and availability; trade 
development; and management accountability. The request, separated by 
Departmental strategic goals and performance measures, includes 
$15,650,000 in appropriated funds directed at maritime navigation 
programs and personnel, and $250,000 towards the SLSDC's security and 
infrastructure protection activities.
    The SLSDC's budget request also includes funding for the Seaway 
Automatic Identification System (AIS) and the agency's financial 
management system, both of which support the PMA. The AIS system, which 
serves as one of the agency's ``Expanding E-Government'' PMA 
initiatives, utilizes Global Positioning System (GPS) to allow the 
SLSDC to more efficiently manage vessel traffic control and vessel 
transits at the U.S. Seaway locks. Implemented at the start of the 2003 
navigation season, the Seaway became the first inland waterway in the 
western hemisphere to implement an operational AIS vessel traffic 
services system.
    The SLSDC's financial management system supports the President's 
``Improving Financial Management'' initiative and includes nine 
subsystems that allow Corporation officials to track all financial-
related information and meet all independent auditor reporting 
requirements. The SLSDC has received 40 consecutive unqualified or 
``clean'' financial audits since its first audit in 1955, a major 
achievement under the PMA initiative of financial performance 
improvement. The AIS system and the financial management system 
represent $70,000 of the fiscal year 2005 budget estimate. This amount 
is consistent with the fiscal year 2004 request for operating and 
maintaining these two programs.

                      CONCRETE REPLACEMENT PROJECT

    The fiscal year 2005 appropriation request is $1.627 million above 
the fiscal year 2004 enacted level and is principally attributable to 
the planned start of a $6 million concrete replacement project at the 
two U.S. Seaway locks ($1.5 million each year in fiscal years 2005-
2008). The Eisenhower Lock has a history of concrete problems, caused 
by the use of natural cement in the mix composition during the 
construction of the lock. Due to the amount of concrete in need of 
replacement, the difficulties associated with accessing these areas of 
deteriorated concrete, and the need for in-house maintenance crews to 
focus on other essential non-concrete lock maintenance projects, it is 
more efficient and cost effective for outside contractors to complete 
this project. The SLSDC's Office of Engineering has researched other 
solutions to the concrete deterioration problem and found that there 
are no other substances as effective as concrete in protecting the 
structural integrity of the lock chambers.
    The concrete replacement work to take place in fiscal years 2005-
2008 includes areas identified by the U.S. Army Corps of Engineers 
(Corps) in its 1991 lock survey and evaluation of the two U.S. Seaway 
locks (Corps Technical Report ITL-91-4, November 1991). The report 
concluded, ``It is important for the SLSDC to maintain an aggressive 
maintenance program of replacing deteriorated concrete. In the near 
future, attention should be given to the repair of deteriorated 
concrete near the bottom of the lock walls at Eisenhower Lock.''
    Since 1991, the SLSDC has made in-house repairs to the most 
critical areas identified by the Corps, but further deterioration and 
harsh winter conditions have caused additional damage to the lock walls 
at Eisenhower Lock and newly-identified problems at the Snell Lock have 
also been targeted for replacement. In addition to concrete 
deteriorating along the lower portions of the lock walls, freeze-thaw 
damage is significant in the lock walls at high and low pool levels at 
both locks. As it deteriorates, pieces of concrete become dislodged and 
fall into the lock chambers. This poses a risk to people on the decks 
of commercial vessels and pleasure boats.
    Due to the amount of concrete in need of replacement, the 
difficulties associated with accessing these areas of deteriorated 
concrete, and the need for in-house maintenance crews to focus on other 
non-concrete lock maintenance projects, it is more efficient and cost 
effective for outside contractors to complete the project than in-house 
personnel.
    Between 1959 and 2003, the SLSDC expended more than $25 million on 
concrete replacement at the two locks during the off-season winter 
months, with the majority of work taking place at the Eisenhower Lock. 
Most of the work over that time was completed with in-house labor. The 
last major concrete replacement projects that utilized contractors were 
completed in fiscal years 1986 and 1987, at a total cost of $4.3 
million. The Seaway is a single-lock system, consisting of 15 
individual U.S. and Canadian locks; a delay/shutdown to any one of the 
locks would cause a delay/shutdown of the entire waterway. Although the 
SLSDC has never experienced a major lock failure, the Canadian Seaway 
agency suffered a lock failure at the Welland Canal in 1985, which 
trapped 53 vessels above the Canal for 24 days at a cost to the 
carriers of $24 million.

                   ENHANCED SEAWAY INSPECTION PROGRAM

    The SLSDC and the U.S. Coast Guard (USCG), in conjunction with 
Transport Canada and the SLSMC, signed a Memorandum of Understanding in 
March 1997 to develop a program of coordinated vessel inspection and 
enforcement activities to expedite the safe transit of shipping through 
the Great Lakes Seaway System. The principal goal of the Enhanced 
Seaway Inspection (ESI) program is to inspect all ocean vessels for 
safety and environmental protection in Montreal, Quebec, before they 
enter U.S. waters. Starting in 2002, security-related risk assessment 
inspections have been conducted concurrent with the ESI, further 
improving transit times for Seaway users. In 2003, the SLSDC continued 
this program and met its internal performance goal of inspecting 100 
percent of all ocean vessels in Montreal (208 total inspections).
    The ballast water exchange program continues to be an important 
function of the ship inspection program. These inspections are carried 
out concurrently with the ESIs, by Corporation personnel in Montreal. 
In 2003, 56 ballast water examinations were conducted in Montreal on 
ocean vessels transiting the Seaway. The SLSDC performed 31 ballast 
water examinations for subsequent trip vessels and eight follow-up 
examinations in Massena.
    Prior to the inception of the ESI program, foreign flag vessels 
experienced numerous delays at the U.S. locks to accommodate USCG-
required safety-related inspections, as well as ballast water 
management activities. Inspection in Montreal eliminates duplicative 
inspections, allows for a seamless and efficient transit of the Seaway, 
and provides a better location for repair resources, if required. This 
improved inspection regime has saved each vessel, on average, 4 hours 
per transit and ensured that any safety or environmental issues are 
addressed prior to entering U.S. waters. As a result, ocean carriers 
using the Seaway saved more than $500,000 in operating costs during the 
2003 season. Seaway customers have responded favorably to the ESI 
program through annual customer surveys.

        CRITICAL INFRASTRUCTURE AND NAVIGATION SECURITY MEASURES

    The SLSDC has been proactive in implementing increased security 
measures following the events of September 11, 2001. Within days of the 
terrorist attacks, risk assessment inspections of all foreign flagged 
vessels were conducted in Montreal, prior to their entry into U.S. 
waters. This protocol was developed with the full cooperation of the 
Canadian SLSMC, as well as U.S. and Canadian law enforcement and Coast 
Guard personnel. The protocol was further refined in March 2002 when 
the risk assessment inspection was combined with the existing Enhanced 
Seaway Inspection (ESI) program. By combining the two inspections into 
a single process, foreign-flag vessels are not unnecessarily delayed 
for security screenings, unless the initial risk assessment compels an 
additional examination. During the 2003 navigation season, SLSDC 
inspectors completed 216 risk assessment inspections in Montreal.
    Security procedures, both maritime and internal, were developed to 
ensure that security was enhanced while minimizing any impacts on the 
efficiency of Seaway operations. In late 2001, SLSDC inspection 
personnel logged substantially more staff hours in carrying out the 
risk assessment protocol than normally projected. However, when the 
protocol was refined in 2002 and merged with the existing ESI program, 
this impact was ameliorated.
    Another major security milestone for the SLSDC was the expansion of 
the U.S. and Canadian Seaway mandatory Notice of Arrival requirement 
for all foreign commercial vessels. With the start of the 2002 
navigation season, all foreign ships entering the St. Lawrence Seaway 
are required to give 96-hour advance notification of arrival in 
Montreal, Quebec. Ships failing to give complete notice are prohibited 
from entering the Seaway.
    The notification requirement on the St. Lawrence Seaway is unique 
because it mandates 96 hours notice prior to arrival in Montreal, as 
opposed to all other U.S. waterways which require the notice prior to 
reaching the first U.S. port of call. This modified requirement was 
needed due to the geography of the key U.S. ports on the Great Lakes 
Seaway System, which are several hundred miles into U.S. waters and, in 
many cases, require transit of all 15 Seaway locks before reaching the 
port. The Seaway's 96-hour notification requirement provides SLSDC 
officials, as well as law enforcement and intelligence agencies, even 
more advance notice (approximately 10 additional hours) to review 
vessel crew lists and manifests before the vessel enters U.S. waters. 
The SLSDC immediately sends the pre-entry information it receives to 
the USCG, which in turn submits the information to its National Vessel 
Movement Center for screening through various law enforcement 
databases.
    Other U.S. and Canadian agencies involved in the development of 
both the risk assessment inspection program and 96-hour notification 
requirement included Transport Canada, Citizenship and Immigration 
Canada, Canadian Navy, Royal Canadian Mounted Police, U.S. Customs, 
U.S. Immigration and Naturalization Service, and the U.S. Consul 
General's Office in Montreal.
    In February 2002, the SLSDC contracted for services to assess the 
physical security for SLSDC infrastructure and workplace assets in 
Massena. This assessment was intended to supplement and enhance an 
initial security assessment that was conducted immediately following 
September 11. The assessment focused on the two U.S. Seaway locks, the 
Eisenhower Lock Visitors' Center, and the SLSDC's marine base/
maintenance facility. In addition, another contractor conducted a 
detailed blast analysis of the highway tunnel under the Eisenhower 
Lock. Based on the contractor's recommendations, the SLSDC has made and 
continues to make several security enhancements and improvements to the 
lock infrastructure and other workplace assets. It is estimated that 
the SLSDC will expend more than $2.2 million in other-than-personnel 
security enhancements and improvements during fiscal years 2002 through 
2005.
    Significant security-related enhancements and improvements made to 
date include:
  --Installation of approximately 4,400 feet of additional 8-foot-high, 
        chain-link fencing and various slide and swing gates. Gate 
        controllers will not be installed until the fiber optic system 
        is installed.
  --Purchase of a Nasatka portable vehicle barrier to shut down or 
        control access, as needed, to our facilities, particularly the 
        Eisenhower Lock highway tunnel. This vehicle barrier has been 
        deployed during elevated threat level conditions.
  --Construction of approximately 61 concrete ``jersey barriers'' 
        topped with a 4-foot-high section of chain-link fence to keep 
        vehicles and pedestrians in the Visitors' Center parking lot 
        from approaching too close to the lock structure. These 
        barriers, built at a considerable cost savings with in-house 
        labor, will also be used in conjunction with the Nasatka 
        portable vehicle barrier to shut down or control vehicular 
        traffic.
  --Completion of several improvements at the Eisenhower Lock Visitors' 
        Center, including (a) fencing of both ends and the lock side of 
        the lower and upper observation decks, (b) closure of some 
        ground level observation area to visitors, (c) movement of 
        visitor parking areas further away from the lock chamber, and 
        (d) setup of a security checkpoint at the Center entrance with 
        a security guard on duty during operating hours.
    In fiscal year 2003, the SLSDC contracted with the firm of Edwards 
and Kelsey to conduct an engineering plan for the implementation of 
other security-related enhancements recommended in the previous 
assessments. At the end of fiscal year 2003, the SLSDC finalized plans 
to install a fiber optic network necessary for the electronic-based 
security enhancements. In fiscal year 2004, the fiber network will be 
installed and the purchase and installation of video cameras and smart 
card/EZ pass systems for access to gates and buildings will be 
finalized. The SLSDC will contract with an ``8-a, small business'' firm 
for the installation of the security enhancements. In fiscal year 2005, 
the SLSDC will continue to aggressively pursue the objectives of its 
security program, which includes greater protection of SLSDC 
facilities, new and improved measures for employee and visitor entry 
into facilities, and planned contingencies for facilities/
infrastructure in the event of a heightened security alert.
    The SLSDC fully participated in the U.S. Department of 
Transportation's role in the TOPOFF 2 weapons of mass destruction 
response exercise mandated by the U.S. Congress and conducted in May 
2003. The agency is currently participating in several preparatory 
exercises that will culminate in ``Exercise Forward Challenge '04''--
the government-wide continuity of operations exercise that is scheduled 
for May 12-13, 2004.
    In addition, the SLSDC will continue to work cooperatively with 
security and intelligence officials at both the Departments of 
Transportation and Homeland Security to ensure that the St. Lawrence 
Seaway, and its navigation assets, is protected to the maximum extent 
possible. This relationship was highlighted by the General Accounting 
Office's Top Fiscal Year 2004 Management Challenges for the Department 
of Transportation (Establishing and Managing an Ongoing DOT/Department 
of Homeland Security (DHS) Programmatic Relationship).
    The SLSDC has worked closely with DHS and the Transportation 
Security Administration (TSA) since their inception. In February 2002, 
the Corporation contacted officials in the TSA Explosives Unit to 
request its consultation on security concerns regarding the Eisenhower 
Lock highway tunnel. Additionally, SLSDC security and emergency staff 
have also conducted a series of informational meetings with TSA 
officials from its Office of Maritime and Land Security to educate them 
on those same issues. To date, SLSDC/TSA interactions have proven to be 
informative, constructive, and useful.

                     TRADE DEVELOPMENT INITIATIVES

    Since 1985, the SLSDC has performed trade development and 
promotional activities geared at generating trade to and from North 
America via the Great Lakes Seaway System. Program-wide activities 
include hosting overseas trade missions that promote the entire Seaway 
System at maritime and trade-related exhibitions, developing commodity-
specific marketing plans, and working directly with ports, carriers, 
terminal operators, labor, and importers/exporters in the development 
of promotional materials and initiatives. Overseas trade missions, 
which include U.S. and Canadian maritime, government, industry, and 
labor delegates, have led to the development of new international cargo 
movements into the System. Since 1985, the SLSDC has sponsored 26 trade 
missions to 56 cities in 37 countries. In October 2003, the SLSDC led a 
23-member delegation of U.S. and Canadian Great Lakes executives to 
Belgium and The Netherlands, two of the Seaway's largest trading 
partners.
    In addition to overseas trade missions, the SLSDC is working with 
various Great Lakes Seaway System port authorities, the Great Lakes 
Cruising Coalition, the Great Lakes Waterways Management Forum, State 
and local governments, and tourism associations, to attract cruise 
vessels into the Great Lakes. Also, the SLSDC is working on joint trade 
development initiatives with the Canadian SLSMC to maximize the use of 
waterborne transportation as North American highways become more 
congested, including the examination of the Seaway System for short sea 
shipping movements and niche container trade as well as exploring 
partnerships with other inter-modal connections in an effort to 
generate new business for the Seaway System.
    In an effort to provide its global customers with a single portal 
for news and information related to the Great Lakes Seaway System 
commercial navigation, the SLSMC and SLSDC developed and launched a 
binational Internet web site (www.greatlakes-seaway.com) in 2001 that 
has been extremely well received domestically and internationally from 
the maritime and trade communities. In 2003, average monthly site page 
hits grew from 70,000 in 2002 to more than 120,000 hits. The site 
recorded an all-time high in December 2003 with 153,000 page hits, and 
received more than 1.4 million hits for the year from viewers in more 
than 110 countries.
  u.s. army corps of engineers' great lakes st. lawrence seaway study
    The Water Resources Development Act of 1999 directed the Corps, in 
consultation with DOT (through the SLSDC), to undertake the Great Lakes 
St. Lawrence Seaway Study (Study) to examine improvements to the 
commercial navigation infrastructure of the Great Lakes St. Lawrence 
Seaway System. Since January 2001, the Corps has partnered closely with 
DOT/SLSDC to carry out the Study's reconnaissance phase.
    The Corps completed a 2-year reconnaissance study in February 2003 
and concluded that more analysis was needed to determine if a Federal 
interest exists to improve the commercial navigation infrastructure on 
the Great Lakes and Seaway. The current scope of the Study is to 
establish a 50-year baseline for the current infrastructure to analyze 
the engineering, economic, and environmental consequences of 
maintaining, and not maintaining that infrastructure at its current 
level of reliability. The Study is primarily a commercial navigation 
study, but as evidenced by the composition of the Steering Committee, 
it will include environmental considerations.
    On May 1, 2003, the U.S. Department of Transportation and Transport 
Canada signed a Memorandum of Cooperation that established the intent 
of each agency to work together to ensure the future viability of the 
Great Lakes Seaway System as a commercial navigation waterway. 
Memorializing this intent in the MOC document cleared the way for 
Canada to work together with the Corps and DOT on the Study.
    Currently, all projects related to the revised scope of the Study 
are underway (engineering, economics, and environmental), along with 
meetings of the Study Steering Committee. The Steering Committee is 
made up of the senior level officials from Corps, DOT, Transport 
Canada, SLSDC, Canadian SLSMC, as well as representatives from the U.S. 
Fish and Wildlife Service and Environment Canada.

                         SEAWAY AIS/GPS PROJECT

    Since 1992, the SLSDC has worked with the U.S. Department of 
Transportation's Volpe National Transportation System Center and 
Canadian partners to design and implement state-of-the-art AIS/GPS 
navigation technology.
    On March 31, 2003, with the start of the navigation season, the 
U.S. and Canadian Seaway agencies began enforcing mandatory AIS use on 
commercial vessels entering the waterway in North America to employ 
this technology as a requirement for transit. The AIS/GPS project 
represents a major step forward in marine navigation technology. In 
fact, the Seaway is currently the world leader in developing shore-side 
applications for AIS/GPS.
    AIS technology uses data from ship-to-ship, ship-to-shore, and 
shore-to-ship, thereby enabling a constant two-way communication 
between mariners and the three Seaway vessel traffic control centers. 
Originally developed primarily for safety reasons, AIS has become 
increasingly of interest to maritime security officials in the post-9/
11 environment as it offers the ability for them to track any vessel 
carrying a transponder with great precision.
    In the near future, permanent installation of AIS equipment will be 
required onboard commercial vessels in the entire Great Lakes St. 
Lawrence Seaway System from the Lakehead in Duluth, MN, to traffic 
entering the Gulf of St. Lawrence on the Atlantic. Adoption of the 
technology, which has been approved by the International Maritime 
Organization, was embraced early on by the Canadian Shipowners 
Association and the Shipping Federation of Canada, both of which 
provided technical and financial assistance. The Department's Volpe 
National Transportation Systems Center served as technical contractor 
for development of the AIS project, which began almost a decade ago. 
AIS will soon be required internationally on commercial vessels and 
will be mandatory throughout the Great Lakes Seaway System by December 
2004.

                    2003 NAVIGATION SEASON OVERVIEW

    The estimated tonnage for the combined sections of the St. Lawrence 
Seaway in 2003 was 40.9 million metric tons. This was 500,000 metric 
tons or 1 percent below the 2002 total (a decrease of 1 percent). The 
decrease can be attributed, in large part, to higher global freight 
rates, weaker U.S. dollar valuation, the continuation of grain export 
reductions (7 percent decrease) due to lower European grain imports, 
and significant reductions to general cargoes, including iron and steel 
products (38 percent reduction). The reduction of import steel also had 
a secondary effect on export grain. It is estimated that approximately 
20-30 percent of ocean-going vessels exporting grain from the Great 
Lakes Seaway System enter the waterway carrying steel. The final weeks 
of the navigation season did result in high levels of grain movements 
on Canadian lakers as the Canadian Wheat Board began moving more grain 
exports via the St. Lawrence Seaway. In addition to cargo movements, 
estimated total commercial transits through the St. Lawrence Seaway 
were on par with 2002 levels at 3,886 transits.
    Several commodities posted increases in 2003: iron ore (up 10.5 
percent to 10.7 metric tons); coal (up 33 percent to 4.1 million metric 
tons); petroleum products (up 2 percent to 1.8 million metric tons); 
salt (up 17 percent to 2.3 million metric tons); stone (up 8 percent to 
800,000 metric tons); potash (up 48 percent to 144,000 metric tons); 
ores and concentrates (up 68 percent to 357,000 metric tons); and 
gypsum (up 25 percent to 652,000 metric tons).

                               CONCLUSION

    The SLSDC's fiscal year 2005 budget request reflects the agency's 
ongoing commitment of providing a safe, secure, reliable, and efficient 
waterway and lock transportation system for the movement of commercial 
goods to and from the Great Lakes region of North America. Maritime 
commerce on the Great Lakes Seaway System is vitally important to the 
Great Lakes regional economy, annually supports more than 150,000 U.S. 
jobs, $4.3 billion in personal income, $3.4 billion in transportation-
related business revenue, and $1.3 billion in Federal, State, and local 
taxes.
    Since 1959, the SLSDC has played a significant role in not only the 
operations and maintenance of the U.S. Seaway assets, but also in the 
promotion and development of new business for the waterway in concert 
with its North American stakeholders. As the St. Lawrence Seaway nears 
its 50th year of operation, the SLSDC remains committed to working with 
its customers and stakeholders to ensure the waterway's reliability and 
competitiveness for its next 50 years.
                                 ______
                                 

                     MERIT SYSTEMS PROTECTION BOARD

   Prepared Statement of Neil Anthony Gordon McPhie, Acting Chairman

    Chairman Shelby, Ranking Member Murray and members of the 
subcommittee, thank you for the opportunity to submit this statement 
for the record on the fiscal year 2005 appropriations request for the 
U.S. Merit Systems Protection Board (MSPB or ``the Board''). This year 
is particularly significant for the Board, as 2004 marks the agency's 
Silver Anniversary. Over the course of the Board's 25-year history, its 
Chairmen, Board members and staff have held steadfast and true to the 
agency's mission: to serve as guardian of Federal merit systems. In 
those 25 years, the Board has issued decisions in over 239,000 cases. 
The Board has issued over 80 reports of studies of the Federal merit 
systems and the degree to which employees are managed free from 
prohibited personnel practices. In addition, the Board has conducted 
outreach activities on its findings on appeals and studies to promote 
the improved application of merit principles. I am pleased to take this 
opportunity to explain to the subcommittee the basis for the 
President's appropriations request on behalf of the Board and its 
importance in enabling the Board to continue to fulfill its statutory 
missions during fiscal year 2005.

                        OVERVIEW OF THE REQUEST

    The President is requesting $35,303,000 in appropriated funds to 
support the operations of the Merit Systems Protection Board. This 
request represents a $1,800,000 increase over the fiscal year 2004 
appropriations request. This increase covers the $1,501,000 in 
additional expenses resulting from the January 2004 and 2005 pay raises 
that were included in the President's budget. However, because Congress 
approved a higher pay raise for fiscal year 2004 than the President 
recommended, MSPB needs an additional $375,000 to cover the difference 
between the President's recommended raise and the amount that was 
ultimately approved by Congress. This request also covers the increase 
in commercial rent charges for fiscal year 2004 ($183,000), the $78,000 
necessary to provide for inflationary costs increases in other non-
personnel costs and the $38,000 necessary to cover the cost of Workers 
Compensation Programs in fiscal year 2005.
    At the request of the Office of Management and Budget (OMB), the 
Merit Systems Protection Board is not requesting that funds be 
transferred from the Civil Service Retirement and Disability Trust Fund 
for fiscal year 2005. Instead, at OMB's request, the funding previously 
supplied from the Trust Fund for adjudication of Civil Service 
Retirement appeals is being requested as part of the regular 
appropriation total of $37,303,000.
fiscal year 2003 and fiscal year 2004 accomplishments with fiscal year 

                   2005 OUTLOOK (BY BUDGET ACTIVITY)
                              ADJUDICATION

    The bulk of the Board's resources are dedicated to processing our 
appellate workload; 192 FTE--or 84 percent of the 228 FTE estimated for 
fiscal year 2004 and fiscal year 2005--will be used for adjudication. 
During the last several years, we have maintained an average processing 
time of approximately 3 months for appeals and other cases processed in 
our regional and field offices. However, the average case processing 
time at headquarters increased slightly because the Board functioned 
with only one member for approximately 6 weeks in fiscal year 2003.
    We estimate that in each of the next 2 years the administrative 
judges will process approximately 7,300 appeals and other cases in our 
regional and field offices, and the Board members will adjudicate 
approximately 1,300 cases at headquarters. In fiscal year 2003, the 
Board decided 8,416 cases: 7,227 in the regional and field offices and 
1,189 in the headquarters office. The average processing times were 94 
days in the regional and field offices and 295 days for headquarters. 
Of the Board's final decisions that were appealed to the U.S. Court of 
Appeals for the Federal Circuit, the Court left 94 percent of the 
Board's decisions unchanged.
    This case workload is determined by factors beyond our control, as 
it results from the number of appealable actions taken by Federal 
agencies, the number of employees who decide to challenge those 
actions, and from legislative changes that affect our jurisdiction. Two 
such changes are enactment of the Homeland Security Act of 2002 and the 
National Defense Reauthorization Act of 2004. Under these statutes, the 
Department of Homeland Security (DHS) and the Department of Defense 
(DOD), respectively, were granted authority to establish their own 
appeals process.
    The Department of Homeland Security has decided to retain MSPB 
appeal rights for its employees at the regional and headquarters 
levels. DHS issued proposed regulations establishing an expedited 
appeals processing system which requires the Board to process employee 
appeals using shorter timeframes at the headquarters level. As required 
by statute, DHS officials consulted with MSPB prior to issuing those 
regulations.
    These expedited procedures might well require an increase in our 
adjudication staff in the headquarters office. Further, while DOD 
employees' MSPB appeals rights are currently limited by statute to the 
petition for review (PFR) level, it is still possible that DOD will 
also decide to provide first-level MSPB appeals rights for its civilian 
employees by regulation. If DOD does not provide first-level MSPB 
appeal rights for its employees, we expect the number of PFR's to 
increase, as this avenue of appeal will present DOD employees with 
their first opportunity for an independent review of the agency's 
employment action. This increase in PFR's will likely require 
additional Board staff to review the PFR's at MSPB headquarters.
    Notwithstanding the new DHS appeals procedures or the changes to 
DOD's appeals procedures, the Board will still hear DOD and DHS appeals 
under the Whistleblower Protection Act, the Uniformed Services 
Employment and Reemployment Rights Act, and the Veterans Employment 
Opportunities Act. Thus, the Board is seeking the level of funding 
reflected in its fiscal year 2005 budget request because we do not 
anticipate a decrease in the Board's caseload or staffing needs.
    It is important to note that even a small increase in workload per 
administrative judge could cause a significant increase in processing 
times. MSPB needs the requested funds in order to maintain the 
adjudication staff and to continue technological improvements that will 
facilitate case processing and avoid escalation of costs to the 
government as a whole.
    Achievement of the Board's performance goals related to the 
adjudication of cases at headquarters depends on having a quorum of 
Board members. When the Board has a full complement of three members, 
cases at headquarters are closed by a unanimous vote or a majority vote 
of the Board. When the Board has only two members, there is a quorum, 
but no majority is possible unless both members agree. If the two 
members cannot agree, the Board's regulations permit the issuance of a 
``split-vote'' order, which makes the initial decision under review 
final but not precedential. When the Board has only one member, as it 
did for almost 2 months during fiscal year 2003, no decisions can be 
issued.
    I am serving under the recess appointment I received from the 
President in April 2003. On December 10, 2003, the President designated 
me as Vice Chairman of the Board. Because the position of Board 
Chairman was vacant, I became the Board's Acting Chairman pursuant to 
the Board's operating statute, 5 U.S.C.  1203(b). Unless confirmed, my 
appointment to the Board will end when Congress adjourns sine die at 
the end of the 108th Congress. The term of the current Board member, 
Susanne T. Marshall, ended on March 1, 2004. However, Ms. Marshall has 
exercised her option to continue to serve in this position for up to 1 
additional year if no successor is named. While the President has 
recently submitted a nominee to the Senate for confirmation to fill the 
one remaining vacancy on the Board, this position has been vacant since 
December 2001. The Board has not had its full complement of three 
members since then.
    During fiscal 2003 MSPB implemented an electronic appeals process 
(e-Appeal) that allows appellants to file an initial appeal using the 
Internet.
    The Board's new alternative dispute resolution pilot program, 
called the Mediation Appeals Program (MAP), became fully functional in 
fiscal year 2003 with the completion of mediation training by 15 Board 
employees. As part of the training, these employees completed three to 
five co-mediations with dispute resolution experts. Fifty percent of 
the completed co-mediations resulted in settlements of pending appeals.

                  MERIT SYSTEMS STUDIES AND OVERSIGHT

    The MSPB has the statutory responsibility to conduct studies of the 
civil service and other merit systems in the Executive Branch. Our goal 
is to support strong and viable merit systems that ensure the public's 
interest in a high quality, professional workforce managed under the 
merit principles and free from prohibited personnel practices. In 
fiscal year 2005, the MSPB will increase its program of in-depth, 
timely analysis of major merit and human capital management issues. In 
fiscal year 2005 we expect to issue at least six reports and a 
quarterly newsletter, ``Issues of Merit.'' This function will use 
approximately 13 FTE, or about 4 percent of the approximately 228 FTE 
the Board is projected to use in fiscal year 2005.
    The Board makes reports of our studies available to a wide 
audience, including the President, members of Congress, Federal policy 
officials, managers, employee groups, academicians and others with an 
interest in the merit systems and Federal human resources management. 
Reports address policy issues as well as issues that affect the 
operation and practice of merit in the workplace. In fiscal year 2005, 
we will continue our efforts to work with organizations such as the 
Federal Executive Boards, the Senior Executive Association, and the 
Federal Managers' Association.
    The President's Management Agenda item on Human Capital Management 
and GAO's rating of human capital management as high risk influence our 
report topics. Alternative systems, such as those authorized by the 
Homeland Security Act of 2002 and the National Defense Reauthorization 
Act of 2004, are covering larger and larger portions of the workforce. 
Our charter to examine the policies and implementation of traditional 
and alternative personnel systems and their impact on merit principles 
and prohibited personnel practices is more important than ever.
    We are working closely with other research groups from the General 
Accounting Office, the Office of Personnel Management, the National 
Academy of Public Administration, and the Partnership for Public 
Service to include a sharing of research agendas and an expansion of 
peer reviews of our respective work products. These other groups have 
either a constituency group funding them or are direct agents of the 
administration. Accordingly, their clients' interests shape the views 
they express on an issue. MSPB is distinct in its statutory mission to 
provide an independent, unbiased perspective. Our clients are the 
American people and our responsibility to them is to protect the 
public's interest in a viable, merit-based system.
    In fiscal year 2003, the MSPB released three major studies and 
three editions of the newsletter. The major studies were, The Federal 
Selection Interview: Unrealized Potential, which makes recommendations 
to improve this important part of the selection process, Help Wanted: A 
Review of the Federal Vacancy Announcements, which makes 
recommendations to make vacancy announcements more useful in the 
recruitment process, and The Federal Workforce for the 21st Century: 
Results of the Merit Principles Survey 2000, which addresses employees' 
concerns before September 11, 2001. We are also planning our largest 
Merit Principle Survey ever using electronic web-based methodology. 
This electronic survey capability will be a centerpiece of our research 
agenda.

                           MANAGEMENT SUPPORT

    The management support function, which uses approximately 26 FTE, 
or 11 percent of the 228 estimate in fiscal year 2004 and fiscal year 
2005, provides the necessary management support for information 
resources management, human resources management, budget, finance, 
procurement, equal employment opportunity, travel, space and property 
management. The management support function, which uses approximately 
26 FTE, or 11 percent of the 228 estimate in fiscal year 2004 and 
fiscal year 2005, provides the necessary management support for 
information resources management, budget, finance, procurement, equal 
employment opportunity, travel, space, and property management.
    Fiscal year 2003 was the first year that we were required to have a 
financial audit pursuant to the Accountability of Tax Dollars Act of 
2002. We received a clean audit opinion. An additional important 
administrative accomplishment was the development and implementation of 
the Continuity of Operations Plan.
    The Board determined that a restructuring of its regional and field 
office configuration was necessary in order to consolidate resources 
and to allow for the most efficient management of case processing. 
After evaluating workload shifts, costs, economies of scale, changes in 
the Federal workforce, and the flexibility needed to adjust to civil 
service reform, Board management determined that it was necessary to 
close two of these offices to enable the Board to further its mission 
more efficiently and effectively.
    Effective March 31, 2004, the Board closed its field offices in 
Seattle, Washington and Boston, Massachusetts. This action affected a 
total of 12 employees in these two offices (four in the Boston office 
and eight in the Seattle office). The Board received authority to grant 
voluntary early retirement and voluntary separation incentive payments 
to affected employees. The Board will continue to operate five regional 
offices (Philadelphia, Washington, Atlanta, Chicago, and San Francisco) 
and three field offices (New York, Dallas and Denver).
    The restructuring was accomplished without a reduction in force. 
Every employee in the affected offices was offered a reassignment to an 
equivalent position within the Board. These reassignments were made 
without loss of pay or grade for the affected employees. Additionally, 
the Board will pay all required and most optional relocation expenses 
for employees who are reassigned. Eligible employees who declined the 
reassignment were offered the option of taking voluntary early 
retirement or the voluntary separation incentive payments. Under these 
arrangements, only five employees are separating from the Board; three 
are retiring and receiving voluntary separation incentive payments, one 
employee transferred to another Federal agency and one employee is 
serving in a temporary assignment, while seeking other employment.
    We believe that the restructuring will have a neutral budgetary 
impact. The annual rent on the Seattle field office is approximately 
$150,000 and the rent on the Boston field office is approximately 
$100,000 annually. As of April 1, 2004, the Board will cease to pay 
rent on the Seattle office. We are tied to a lease agreement that will 
obligate the Board to pay some amount for the Boston property through 
the end of the lease term, which is February 14, 2005. However, we are 
currently negotiating with the management company in an effort to pay a 
lesser amount from April 1, 2004, through the end of the lease period. 
We anticipate that any savings in rent expenses will be offset by an 
increase in expenses associated with the additional staff needed to 
meet the challenges presented by the new Department of Homeland 
Security and Department of Defense appeals systems.
    In fiscal year 2004, the Board implemented a new case management 
system. This system replaces a 13-year-old case management system, 
whose major components had long become obsolete. Two of the features of 
this new system that will improve the overall efficiency of the 
adjudicatory process include: (1) interfaces between the Board's Case 
Management System, Document Management System, and Document Assembly 
System to reduce duplicative data entry and to automate the use of data 
from CMS to produce standard case documents; and (2) use of off-the-
shelf software as the basis of the system, which will allow more 
frequent upgrading of other software.
    Additionally, in fiscal year 2004, the Board expects to replace all 
of the agency's personal computers (PC's) in accordance with our policy 
of replacing PC's every 4 years. As part of that upgrade, we will 
update word processing and other desktop software, and we will 
investigate the feasibility of installing a wireless network within our 
building.
    Finally, the Board's information resource management office will 
continue to enhance information technology security for the Board's IT 
systems. These enhancements will follow up on the recommendations of 
the independent auditor which were included in the agency's fiscal year 
2003 Federal Information Security Management Act report.
    In fiscal year 2005, we will implement a pilot program to evaluate 
the cost and feasibility of scanning case documents received from the 
parties. This is another phase of the e-Filing initiative which would 
permit documents that we do not produce or receive in electronic form 
through e-Appeal to be made part of the electronic case file 
nonetheless.

                               CONCLUSION

    I am honored to serve as Acting Chairman of the Merit Systems 
Protection Board. The Board and its staff continue to work diligently 
to maintain the reputation for efficiency, effectiveness and fairness 
it has earned over its 25-year history. I have enjoyed serving the 
Board as a member and now as Acting Chairman. I welcome the opportunity 
to lead the organization as it builds upon its legacy of excellence for 
service in the public interest.
                                 ______
                                 

                           U.S. ACCESS BOARD

      Prepared Statement of Lawrence W. Roffee, Executive Director

                              INTRODUCTION

    The Access Board is requesting a total budget authority of 
$5,686,000 for fiscal year 2005. The proposed budget is a 5.3 percent 
increase over the amount appropriated for fiscal year 2004. The Board 
is not planning new costly initiatives in fiscal year 2005 but will 
continue with the programs started in fiscal year 2004, and has 
followed the directives issued by the Office of Management and Budget 
for the preparation of the fiscal year 2005 budget.

     GOVERNMENT PERFORMANCE AND RESULTS ACT ANNUAL PERFORMANCE PLAN

    Following the Government Performance and Results Act (GPRA), the 
Board has established long-range goals and annual objectives that 
describe the strategies it will implement to achieve the long-range 
goals. The objectives are described in terms that permit future 
assessment regarding whether the objectives were achieved. To satisfy 
the requirements for an annual performance plan and review, this budget 
justification presents information under each of the Board's program 
areas regarding the long-range goals, reports on the results of the 
fiscal year 2003 activities, reviews the planned fiscal year 2004 
activities, and presents the fiscal year 2005 objectives.
    The Board was established by section 502 of the Rehabilitation Act 
and is the only Federal agency whose primary mission is accessibility 
for people with disabilities. The Board is responsible for developing 
guidelines under the Americans with Disabilities Act, the Architectural 
Barriers Act, and the Telecommunications Act for ensuring that 
buildings and facilities, transportation vehicles, and 
telecommunications equipment covered by these laws are readily 
accessible to and usable by people with disabilities. The Board is also 
responsible for developing standards under section 508 of the 
Rehabilitation Act for accessible electronic and information technology 
used by Federal agencies, and for providing training under the 
Assistive Technology Act to Federal and State employees on obligations 
related to section 508 of the Rehabilitation Act.
    In 2002, the Board was given new responsibilities under the Help 
America Vote Act to serve on the Board of Advisors and the Technical 
Guidelines Development Committee that will assist the new Election 
Assistance Commission in developing voluntary guidelines and guidance 
for voting systems, including accessibility for people with 
disabilities.
    The Board also enforces the Architectural Barriers Act and provides 
training and technical assistance on each of its guidelines and 
standards, and on a variety of other accessibility issues. 
Additionally, the Board maintains a small research program that 
develops technical assistance materials and provides information needed 
for rulemaking.
    The Board has adopted this mission statement to guide its programs: 
The Board is the catalyst for achieving an accessible America. The 
statement recognizes that achieving an accessible America requires 
bringing together public and private sectors. The Board has established 
three long-range goals for its programs:
  --Take a leadership role in the development of codes and standards 
        for accessibility;
  --Work in partnership with agencies and others to make the Federal 
        Government a model of compliance with accessibility standards; 
        and
  --Be known as the leading source of information about accessibility 
        and disseminate that information to customers in effective 
        ways.
    In developing objectives and strategies for achieving the long-
range goals, the Board seeks to work together with its stakeholders 
toward common objectives. The Board's plan is simple: work with its 
stakeholders to establish consensus-based guidelines and standards that 
are fair, reasonable, and acceptable to all interests; where the Board 
has enforcement responsibilities over Federal agencies, assist those 
agencies to achieve full compliance; and involve its stakeholders in 
developing and disseminating materials and manuals that will help them 
understand and comply with our guidelines and standards.
    The Board's programs will result in accessible buildings and 
facilities, transportation vehicles, telecommunications equipment, and 
electronic and information technology across our country and, 
ultimately, the full economic and social integration of people with 
disabilities into our society. Achieving these results will depend not 
only on the Board's activities, but also on the level of commitment and 
action taken by other Federal agencies, State and local governments, 
and businesses who are required to comply with or enforce the various 
laws that guarantee the civil rights of people with disabilities.

                 ACCESSIBILITY GUIDELINES AND STANDARDS

    The Board will continue to develop and update accessibility 
guidelines and standards and to work cooperatively with organizations 
which develop codes and standards affecting accessibility through 
fiscal year 2005 and beyond. The status of current guidelines and 
standards efforts is presented below.

ADA and ABA Accessibility Guidelines
    This rule will revise the accessibility guidelines for the 
Americans with Disabilities Act (ADA) and the Architectural Barriers 
Act (ABA), and include new guidelines for accessible housing covered by 
both of these laws. Through this rulemaking, the Board will ensure 
consistency and coordination in the development of guidelines 
applicable to the public and private sector, as well as the Federal 
Government. A notice of proposed rulemaking (NPRM) was published for 
public comment in November 1999. The NPRM consisted of separate scoping 
parts for each law. The ADA scoping part was based on the 
recommendations of the Board's ADAAG Review Advisory Committee and 
covers private facilities, such as places of public accommodation and 
commercial facilities, and State and local government facilities. The 
ABA scoping part applies to Federally financed facilities and is based 
on the ADA scoping part, with a few changes due to differences in the 
coverage of the two laws. For example, the ABA scoping part covers 
facilities leased by Federal agencies. The NPRM contained a single set 
of updated technical requirements based on the recommendations of the 
ADAAG Review Advisory Committee. Both the ADA and ABA scoping parts 
reference these common technical requirements. The comment period for 
the proposed rule closed in May 2000 and over 2,500 comments were 
received. The Board held two public hearings on the proposed rule. The 
Board also held informational meetings in Washington, DC in October 
2000 to hear from industry associations and disability groups on issues 
regarding automated teller machines, reach ranges, and captioning 
equipment for movie theaters. The Board required further information on 
these issues before deciding how to address them in the final rule.
    In April 2002, the Board placed in the docket for public review a 
draft of the final guidelines to promote harmonization of the Board's 
guidelines with the International Code Council (ICC)/American National 
Standards Institute (ANSI) A117.1 Standard on Accessible and Usable 
Buildings and Facilities and the International Building Code. The ICC/
ANSI A117 Committee and the ICC were in the process of revising the 
private sector codes and standards. This provided another opportunity 
to harmonize the Board's guidelines with those of the private sector. 
The Board's final rule will be published in fiscal year 2004.

Outdoor Developed Areas
    The Board's Outdoor Developed Areas Regulatory Negotiation 
Committee presented its report to the Board in September 1999. This 
committee developed new sections for parks, trails, and camping and 
picnic areas. In October 2001 the Board sponsored an information 
meeting on the final report of the Outdoor Developed Areas Regulatory 
Negotiation Committee. The meeting was attended by about 50 individuals 
and was held in Denver, CO during the annual meeting of the National 
Recreation and Park Association. The meeting was informal and provided 
an opportunity for a dialogue with Board members about the report.
    In September 2003, the Board decided to develop an NPRM on Outdoor 
Developed Areas using only its rulemaking authority under the 
Architectural Barriers Act. Taking this approach will help move this 
rulemaking forward and allow the Federal Government to take the 
initiative of addressing accessibility in this area before applying 
requirements to State and local governments or private entities. Future 
rulemaking under the ADA would be enhanced by the experience of 
implementing accessibility guidelines at Federal facilities. The 
Federal Government would gain experience in implementing the guidelines 
and this experience should prove important before applying them to 
other entities. A proposed rule will be published for public comment in 
fiscal year 2004.

Passenger Vessels
    In September 1998, the Board convened a 21-member Passenger Vessel 
Access Advisory Committee to develop accessibility guidelines for 
cruise ships, ferries, excursion boats, and other vessels covered by 
the Americans with Disabilities Act. The committee presented its report 
with recommendations to the Board in November 2000. The Board created 
an ad hoc committee of Board members to begin developing a proposed 
rule on access to passenger vessels.
    Standard means of boarding passenger vessels and the interaction 
between vessels and shoreside facilities present unique challenges to 
accessibility. It is a major issue the Board will address in guidelines 
it is developing for passenger vessels. The Board held public meetings 
in New Orleans (August 2003) and Seattle (September 2003) to gather 
information and input on viable access solutions that will allow 
persons with disabilities independent access onto and off of large 
vessels such as cruise ships, dinner boats, ferries, and gaming boats. 
Over 150 vessel designers and operators, pier operators, persons with 
disabilities, and others attended the meetings. A notice of 
availability (or draft rule) is expected to be published in fiscal year 
2004.

Public Rights-of-Way
    In October 1999, the Board created a 32-member Public Rights-of-Way 
Access Advisory Committee to assist it in developing new guidelines for 
access to sidewalks, street crossings, and related pedestrian 
facilities. The committee presented its report with recommendations to 
the Board in January 2001. The committee is continuing to meet to 
develop recommendations for a technical assistance manual for agencies 
and practitioners to support implementation of the future guidelines. 
In June 2002, the Board released draft guidelines on accessible public 
rights-of-way for public comment. The draft guidelines were made 
available for public review and comment prior to issuing a notice of 
proposed rulemaking. Written comments were accepted until October 28, 
2002; we received approximately 1,400 comments--all of which are 
available on our website.
    A public meeting on the draft guidelines was held in Portland, OR 
on October 8, 2002. The meeting provided an opportunity for industry 
groups, persons with disabilities, civil engineers, local governments, 
and other interested parties to comment on the published draft. Over 
100 people attended the meeting, and approximately 40 people provided 
testimony. Comments focused on the impact of various provisions in the 
guidelines. A proposed rule is expected to be published in fiscal year 
2004.

Fiscal Year 2003 Results--Rulemaking
    In fiscal year 2003, we did not issue any guidelines.
Fiscal Year 2003 Results--Codes and Standards
    Our long-range goal is to take a leadership role in the development 
of codes and standards for accessibility. The Board works with model 
code organizations and voluntary consensus standards groups that 
develop and periodically revise codes and standards affecting 
accessibility. We have voting membership in several codes and standards 
organizations, and monitor or are actively involved in the development 
or revision of dozens of other codes and standards affecting 
accessibility.
    We believe this goal enhances the Board's credibility as a 
knowledgeable source of information regarding technical aspects of 
accessibility. Additionally, by working cooperatively with codes and 
standards-setting bodies, Federal and private codes and standards will 
be more similar, or harmonized, and the Board will be more alert to 
non-Federal influences affecting its constituencies. Harmonization 
between Federal and private requirements will make it more likely that 
buildings and facilities will be accessible, thus reducing the 
necessity for complaints and litigation. Some highlights of 
accomplishments in fiscal year 2003 include:
  --The parent of a child with a hearing loss petitioned the Board to 
        include new provisions in ADAAG for acoustical accessibility 
        for individuals who are hard of hearing because the acoustical 
        environments found in many schools today are barriers to 
        communication and therefore to learning for children with 
        hearing impairments. Rather than initiating rulemaking, the 
        Board collaborated with an existing Acoustical Society of 
        America (ASA)/American National Standards Institute (ANSI) 
        Working Group on Classroom Acoustics to develop private sector 
        technical and scoping standards. The standard was recently 
        adopted by ANSI. The approved standard, Acoustical Performance 
        Criteria, Design Requirements, and Guidelines for Schools (ANSI 
        S12.60-2002), sets specific criteria for maximum background 
        noise and reverberation.
  --Currently, the Board is finalizing revisions to the ADA and ABA 
        accessibility guidelines. A key goal of this revision is to 
        make the guidelines more consistent with model building codes 
        and industry standards, particularly those issued by the ICC/
        ANSI A117 Committee. The ICC/ANSI A117.1 standard is referenced 
        by the International Building Code and various State codes, 
        among others. While the Board's guidelines derive from earlier 
        versions of the ICC/ANSI A117 standard, significant differences 
        between the documents have remained. From the outset of its 
        rulemaking to update the ADA and ABA guidelines, the Board has 
        sought to reconcile these differences. The ICC/ANSI A117 
        Committee is in the process of updating the A117.1 standard and 
        is working to harmonize the new edition with the Board's 
        upcoming guidelines. In April 2002, the Board released a draft 
        of the final ADA and ABA guidelines to facilitate this effort. 
        Later, the ICC/ANSI A117 Committee completed a series of 
        hearings on changes to the standard to make it more consistent 
        with the Board's draft final guidelines.

Fiscal Year 2004 Plans--Rulemaking
    In fiscal year 2004, we will issue one final guideline and three 
proposed guidelines:
  --Final rule on revisions to the ADA and ABA accessibility guidelines
  --NPRM on outdoor developed areas
  --Notice of availability (draft rule) on access to passenger vessels
  --NPRM on access to public rights-of-ways

Fiscal Year 2004 Plans--Codes and Standards
    The Board will be assisting the new Election Assistance Commission 
in the development of voluntary voting system guidelines under the Help 
America Vote Act. Among other things, the legislation requires the new 
Election Assistance Commission to develop voluntary voting system 
guidelines, including accessibility for people with disabilities. The 
voting system guidelines are to be developed with the assistance and 
input of a Technical Guidelines Development Committee and Board of 
Advisors. The legislation requires that the Access Board be represented 
on both groups.
    As a result of the September 11, 2001 attacks on the World Trade 
Center, code provisions for emergency egress from tall buildings are 
being re-examined. There is renewed interest in the use of elevators 
for both occupant egress and fire fighters access. Therefore, a 
workshop on the Use of Elevators in Fires and Other Emergencies will be 
held on March 2-4, 2004, in Atlanta, GA. This workshop is being co-
sponsored by the Access Board, the American Society of Mechanical 
Engineers, National Institute of Standards and Technology, 
International Code Council, National Fire Protection Association, and 
the International Association of Fire Fighters.

Fiscal Year 2005 Objectives--Rulemaking
    In fiscal year 2005, we will issue three final guidelines:
  --Final rule on outdoor developed areas
  --NPRM on access to passenger vessels
  --Final rule on access to public rights-of-ways

Fiscal Year 2005 Objectives--Codes and Standards
    In fiscal year 2005, the Board will continue efforts to harmonize 
its guidelines with model codes and standards, including the ICC/ANSI 
A117.1 Standard for Accessible and Usable Buildings and Facilities.

                          TECHNICAL ASSISTANCE

    The Board provides technical assistance to a wide variety of people 
regarding the accessibility guidelines and standards it issues. The 
Board's customers include architects, builders, designers, 
manufacturers, people with disabilities, State and local governments, 
and Federal agencies. The Board's technical assistance program has four 
components:
  --Responding to customer inquiries. The Board responds to about 
        13,000 customer inquiries each year. We have four toll-free 
        telephone lines for customers to call with questions. Customers 
        also e-mail and fax us questions. Many literally are sitting at 
        a drawing table with a design problem. They want accurate, 
        reliable, and timely advice. Our customers value being able to 
        discuss their questions directly with our accessibility 
        specialists who developed the guidelines and standards.
  --Developing and disseminating bulletins, manuals, and other 
        publications. The Board maintains about 30 publications on 
        accessibility issues. These range from short bulletins 
        responding to frequently asked questions about specific issues 
        such as accessible parking, to manuals on the Board's 
        guidelines and standards. We send out about 12,000 publications 
        each year in print and alternate formats.
  --Providing training. The Board conducts about 100 training sessions 
        each year. Training usually is provided at conferences and 
        seminars sponsored by other organizations. Training sponsors 
        generally reimburse us for travel expenses.
  --Maintaining the Board's website. The Board's website (http://
        www.access-board.gov) has become a very effective way to 
        distribute information to the public. Customers can download 
        many of our publications and view our accessibility guidelines 
        and standards from our website. We received over 12 million 
        ``hits'' on our website in fiscal year 2003.
    The Board also has established partnerships with other 
organizations such as the American Institute of Architects, the 
National Association of ADA Coordinators, the Disability and Business 
Technical Assistance Centers, and the Information Technology Technical 
Assistance and Training Center (ITTATC) to disseminate information 
about the Board's programs. The ITTATC, which is funded by the National 
Institute on Disability and Rehabilitation Research, collaborates with 
stakeholders to improve the awareness and availability of accessible 
electronic and information technology and telecommunication products 
and services and disseminates information, training, and technical 
assistance. Many of the Board's guidelines and publications are 
available through these organizations' on-line networks. The Board also 
provides training for these organizations. The Board's long-range goal 
is to be known as the leading source of information about accessibility 
and to disseminate information to our customers in effective ways. As 
we revise the guidelines for the Americans with Disabilities Act and 
the Architectural Barriers Act and develop guidelines for new areas 
such as outdoor developed areas, passenger vessels, and public rights-
of-ways, there will be increased demands for technical assistance from 
existing and new customer groups. There also will be opportunities to 
use existing partnerships and establish new partnerships with customer 
groups to disseminate information about the Board's guidelines and 
standards.

Fiscal Year 2003 Results--Leading Source of Information
    As a result of our expertise in accessibility issues, many 
government agencies and private organizations ask for our assistance in 
ensuring access at their facilities. During fiscal year 2003, we met 
with staff from the General Services Administration (GSA) on the design 
of a new courthouse annex in Washington, DC and plans for a new 
courthouse in Eugene, OR and we visited an existing courthouse in Upper 
Marlboro, MD with GSA staff. We also reviewed accessibility issues for 
the planned new Department of Transportation headquarters building.
    Many foreign government agencies also ask for our assistance in 
promoting access in their countries. In fiscal year 2003, we met with 
the Chairman of the Disability Rights Commission from the United 
Kingdom. The Disability Rights Commission helps implement the 
Disability Discrimination Act of 1995. We also met with a researcher 
from Sweden regarding accessible design and provided information on 
model building codes and met with Japanese researchers regarding 
Japanese initiatives on ``talking signs'' and detectable warnings. We 
also met with an Australian company representative to provide feedback 
on a new pocket Braille writer and with staff from the Royal National 
Institute for the Blind (England) to discuss United States and European 
cooperation on accessibility standards for information technology. We 
also hosted an architect from Portugal who is in the United States 
through the Fulbright Visiting Scholar Program. Recognizing the 
international interest in access to information technology, we recently 
posted translations of the section 508 standards in Spanish and 
Japanese on our website.
    Each year the Board meets outside of Washington, DC to encourage a 
more direct and open dialogue with members of the public about 
accessibility and the work of the Board. These visits outside the 
Washington beltway substitute for one of the Board's regular meetings, 
which are held every other month in the Washington, DC area. In 
September 2003, the Board held a meeting in Seattle, WA. During its 
stay in Seattle, the Board explored accessibility as it pertains to 
information technology and outdoor environments such as parks and 
trails. In a visit to Microsoft headquarters, the Board was briefed by 
representatives from Microsoft, Hewlett Packard, Cingular Wireless, and 
NCR Corporation on industry efforts to improve access to information 
technology. Presentations included information on how accessibility is 
mainstreamed into operating systems, other software, hardware and 
telecommunications products and services. The Board also toured several 
area parks to learn more about ways of providing access to campgrounds, 
picnic areas, trails, and other outdoor sites.
    The Board also held public meetings in Seattle and New Orleans to 
gather information and input on viable access solutions that will allow 
persons with disabilities independent access onto and off of large 
vessels such as cruise ships, dinner boats, ferries, and gaming boats. 
Over 150 vessel designers and operators, pier operators, persons with 
disabilities, and others attended the meeting. In advance of the 
meetings, the Board toured vessels and boarding facilities at area 
ports.
    Digital wireless phones present significant compatibility and 
interference problems for people who use hearing aids and cochlear 
implants. The Board assumed a lead role in organizing a conference on 
the subject held in September 2003 at Gallaudet University in 
Washington, DC. Sponsored by the Interagency Committee on Disability 
Research (ICDR), the ``Summit on Interference to Hearing Technologies 
by Digital Wireless Telephones'' explored compatibility issues and 
potential solutions. Digital wireless phones, unlike analog wireless 
phones, can emit interference caused by radio frequency from the 
antenna and magnetic interference from the battery leads and other 
electronic components. Noises resulting from such interference, which 
were simulated at the conference, make them virtually unusable by 
people who use hearing technologies. Participants included 
representatives from the digital wireless phone and hearing 
technologies industries, disability organizations, research centers, 
and Federal agencies such as the Federal Communications Commission 
(FCC) and the Food and Drug Administration (FDA).
    In fiscal year 2003, the Board responded to 12,193 customer 
inquiries; distributed 1,673 information packets; and conducted 90 
training sessions which were attended by 8,414 people. An information 
packet usually contains several publications. Since we do not collect 
data on publications disseminated through partner organizations, the 
actual number of publications disseminated to our customers is greater 
than our current data indicate. Technical assistance, research, and 
training projects funded in fiscal year 2003 include:
  --Recreation Technical Assistance with the Marina Operators 
        Association of America. This project will develop technical 
        assistance and training materials and conduct training sessions 
        for marina operators on the requirements of the new guidelines 
        for marinas and boating facilities.
  --Maintenance and Weatherability of Detectable Warnings with the 
        Transportation Research Board. The Board has contributed to a 
        larger project funded by several transportation industry 
        organizations to collect and report on detectable warnings 
        testing undertaken by several State departments of 
        transportation. The Board will be a member of the project 
        advisory committee.
  --Curb Ramp Directionality Workshop with the Institute of 
        Transportation Engineers. This project will bring together 
        highway engineers, orientation and mobility specialists, and 
        consumers in a 2-day workshop to consider possible changes to 
        roadway design that can facilitate wayfinding.
  --Passenger Vessels Coaming Research with the Volpe Transportation 
        Research Center. This project will investigate current and 
        possible approaches to shipboard coaming treatments for 
        accessibility.
    We use existing partnerships with organizations and will be 
establishing new partnerships to develop training and technical 
assistance materials. We have used our website to provide copies of the 
Board's guidelines and answers to frequently asked questions about the 
guidelines so that more customers can get the information they need. 
The number of user sessions on our website continues to grow. There 
were approximately 1,423,465 user sessions in fiscal year 2003, nearly 
200,000 more than the previous year. Due to the increasing use of the 
Board's website, we are focusing on web-based dissemination of 
information since this allows a variety of options for speedy 
distribution at a low cost to the Board. We also published and 
distributed six issues of Access Currents, a free newsletter the Board 
issues every other month by mail and e-mail. In addition, we responded 
to press inquiries from:
  --National and syndicated newspapers, magazines and radio and 
        television shows such as: Houston Chronicle; Los Angeles Times; 
        and the Washington Post.
  --Government related newspapers and journals including: Government 
        Computer News and Federal Computer Week.
  --Disability related newsletters including: Report on Disability 
        Programs and the Disability Compliance Bulletin.
  --Trade association periodicals such as: Transit Access Report; Land 
        Development Today magazine; Buildings Magazine; States News 
        Service; and the International Council of Cruise Lines 
        newsletter.
  --Local newspapers, television, and radio stations such as: Orange 
        County Register; Nashville City Paper; Daily Times (Merryville, 
        TN); Canyon Current (Canyon City, CO); El Nuevo Dia (The New 
        Day), a newspaper in Puerto Rico; and the Daily Camera 
        (Boulder, CO newspaper).
    We also wrote an article on section 508 for Telecommunications for 
the Deaf, Inc. (TDI) and developed an article on the Board's section 
508 standards for the Information Technology and Disabilities Journal, 
a new, quarterly electronic journal.
    We added to our growing inventory of technical assistance materials 
by creating new brochures on the Board and the Architectural Barriers 
Act. We also posted several new documents on the Board's website, 
including a research report on play surfaces, a new report on audible 
pedestrian signal products and their interface with traffic signal 
controllers, and a summary on ADAAG's detectable warning requirements. 
We also updated the on-line version of ADAAG including the requirements 
for children's elements, prisons and courtrooms, play areas, and 
recreation facilities into one integrated document.
    Last September, the Board issued new guidelines that address access 
to various types of recreation facilities covered by the ADA. These 
guidelines, which supplement the Board's ADA Accessibility Guidelines, 
specify access to amusement rides, boating facilities, fishing piers 
and platforms, golf courses, miniature golf courses, sports facilities, 
and swimming pools, wading pools, and spas. The guidelines are one of 
the first of their kind in detailing access to these environments. To 
help users become familiar with the Board's new recreation facility 
guidelines, including the meaning and intent of specific provisions, we 
developed seven supplementary guides on each of the facility types 
covered. The guides summarize and explain requirements for each 
facility type.

Fiscal Year 2004 Plans--Leading Source of Information
    The upcoming publication of the new ADA and ABA Accessibility 
Guidelines offers a timely opportunity to develop and implement an 
accessible web-based technical assistance and training strategy to 
augment current Board publications. Completion of the revised and 
reformatted ADA and ABA Accessibility Guidelines will necessitate a 
review of the Board's many technical assistance manuals and 
publications. Many documents will need revision; others may no longer 
be required, and some new publications may be indicated.
    The redesign of our agency graphic identity has provided us with a 
coordinated range of new templates for the layout of reports, 
bulletins, our internet presence, and other print and electronic 
materials. We developed this new and more appropriate graphic 
expression, including both logo and text, for our family of print 
materials. We did this to reflect the Board's professionalism and to 
communicate that we are the only Federal agency devoted to 
accessibility in the built environment and in communications and 
electronic technologies.
    Also, in a few years we will be largely finished with our planned 
rulemaking activities. It is an opportune time to share our 
accomplishments and insights with the rest of the world and encourage 
them to look at some of the access issues we have explored such as 
access to electronic and information technology, playgrounds, and 
recreation facilities. To do this will require that our documents 
become available in other languages. In fiscal year 2004, we will 
redesign most of our publications as well as our website using the 
Board's new graphic identity and will translate the ADA and ABA 
Accessibility Guidelines into other languages.

Fiscal Year 2005 Objectives--Leading Source of Information
    In fiscal year 2005 and beyond, we will develop training and 
information materials on our planned final rules on outdoor developed 
areas, access to passenger vessels, and access to public rights-of-
ways. As we publish final rules, we make every effort to ensure that 
training and technical assistance materials will be available to 
organizations and individuals that must apply the new requirements.
    Additionally, we plan to further our outreach activities to foreign 
government agencies who ask for our assistance in promoting access in 
their countries. In recent years we have hosted numerous delegations 
from other countries who are interested in learning more about our 
experiences with the Americans with Disabilities Act and other laws, as 
well as to discuss general accessibility issues. We plan to share our 
accomplishments and insights with the rest of the world by translating 
many more of our documents and guidelines into other languages and by 
looking for opportunities to work collaboratively with international 
entities on accessibility issues. With this new material we can more 
effectively encourage others to look at some of the unique access 
issues we have addressed.

         ARCHITECTURAL BARRIERS ACT COMPLIANCE AND ENFORCEMENT

    The Board enforces the Architectural Barriers Act (ABA), which 
requires that most buildings designed, constructed, altered, or leased 
by the Federal Government and certain other Federally financed 
facilities be accessible to people with disabilities. Complaints 
received by the Board concern post offices, national parks, military 
facilities, veterans hospitals, subway stations, and a variety of other 
facilities. When the Board has jurisdiction and finds that the 
applicable accessibility standards were not followed, we request a 
corrective action plan and monitor the case until the barrier is 
removed. Even when the Board does not have jurisdiction or no violation 
is found, we attempt to negotiate voluntary barrier removal.
    The Board's long-range goal is to work in partnership with Federal 
agencies and others to make the Federal Government a model of 
compliance with accessibility standards. The Board's experience with 
resolving complaints is that most violations are not intentional. When 
violations are found, it is usually because the people responsible for 
designing buildings, reviewing plans, and on-site construction did not 
have a good understanding of the accessibility standards and how to 
apply them. People responsible for building planning and design at 
headquarters, regional and field offices, and local sites must have a 
working knowledge of the accessibility standards if compliance is to be 
achieved. As Federal agencies are reorganized and personnel assignments 
and responsibilities change, it is important that agencies have 
effective systems for training new people responsible for applying the 
accessibility standards and for monitoring compliance with the 
Architectural Barriers Act. Training will be even more important when 
the accessibility guidelines and standards for the Architectural 
Barriers Act are revised.

Fiscal Year 2003 Results--ABA Compliance
    In fiscal year 2003, the Board received 140 written complaints. 
These included complaints investigated under the Architectural Barriers 
Act, and also those concerning facilities not covered by that law but 
potentially covered by other laws, such as the Americans with 
Disabilities Act and the Rehabilitation Act. Of the 140 complaints, we 
opened 83 as new Architectural Barriers Act cases. Although the Board 
did not have authority under the Architectural Barriers Act in the 
other 57 complaints, we responded to the complainants, usually by 
referring them to the appropriate enforcement agency. In addition, we 
referred another 37 complainants to other agencies for action when our 
investigations revealed there was no violation of the Architectural 
Barriers Act or we did not have jurisdiction. The Board receives many 
comments from its customers, indicating they are pleased that we make 
this extra effort to ensure that their complaints are addressed. The 
Board continued its high rate of successful complaint resolution in 
fiscal year 2003. Of those cases closed where the Board had 
jurisdiction and a violation of applicable standards was found, 100 
percent resulted in the successful removal of barriers. Additionally, 
in those instances where the Board did not have jurisdiction over the 
facility or no violation was found, we negotiated voluntary barrier 
removal in 21 percent of the cases.
    The Board responds quickly to all new complaints and contacts 
complainants frequently to update them on the status of their 
complaints. In fiscal year 2003, the Board sent initial letters to 
complainants acknowledging receipt of their complaint or began an 
investigation of the issues they raised within an average of 4 days. 
The Board's customers regularly say they are pleased to hear from a 
Federal agency so promptly. It is Board practice to keep complainants 
informed on a regular basis throughout the course of our 
investigations. In fiscal year 2003, we contacted 116 complainants to 
provide updates on the status of their complaints.

Fiscal Year 2003 Results--Working in Partnership with Agencies
    During fiscal year 2003 we continued ongoing actions under our 
long-term goal of working in partnership with agencies and others to 
make the Federal Government a model of compliance with accessibility 
standards. Under our partnership with the National Institutes of Health 
(NIH), we completed a series of training sessions on accessibility 
requirements under the Americans with Disabilities Act Accessibility 
Guidelines and the Uniform Federal Accessibility Standards.
    We completed our partnership with the General Services 
Administration (GSA) resulting in its development of a comprehensive 
desk guide of GSA policies and procedures regarding accessibility for 
use by GSA personnel to assist in implementing its National 
Accessibility Program. We also continued working in partnership with 
the Smithsonian Institution, Kennedy Center, and Library of Congress to 
develop a resource tool that organizations can use as guidance in 
evaluating and improving their emergency evacuation plans for persons 
with disabilities.

Fiscal Year 2004 Plans--ABA Compliance
    In fiscal year 2004, the Board will continue to investigate 
complaints under the Architectural Barriers Act. At the beginning of 
fiscal year 2004, the Board had 104 active cases. We expect to receive 
145 new complaints in fiscal year 2004. Of this total, we estimate that 
85 will be opened as new Architectural Barriers Act cases and 60 will 
be referred to other agencies for enforcement under other laws, such as 
the Americans with Disabilities Act and the Rehabilitation Act. The 
Board anticipates responding to complaints in an average of 3 or fewer 
business days and will continue to provide periodic updates to 
complainants on the status of their complaints. We also will evaluate 
and refine our electronic complaint-filing system and the compliance 
and enforcement information presented on our website.

Fiscal Year 2004 Plans--Working in Partnership with Agencies
    In fiscal year 2004, we will continue working with agencies to 
assist in development of ways to assess and improve plans for emergency 
evacuation of persons with disabilities. We will continue efforts to 
learn about plans or actions being developed by the standard-setting 
agencies with regard to implementation of the new ABA standards.

Fiscal Year 2005 Objectives--ABA Compliance
    In fiscal year 2005, the Board will continue to investigate 
complaints under the Architectural Barriers Act. We estimate that we 
will have 105 active cases at the beginning of fiscal year 2005 and 
will receive 145 new complaints. We expect to open 85 new Architectural 
Barriers Act cases and refer 60 complaints to other agencies for 
enforcement under other laws. We will continue to provide good customer 
service.

Fiscal Year 2005 Objectives--Working in Partnership with Agencies
    Once new ABA standards are issued by the standard-setting agencies, 
our objective will be to work with the agencies on the development of 
web-based training or other interactive methods to ensure their 
effective implementation. In addition, we will continue our efforts to 
work with agencies to identify and publicize best practices for 
ensuring ABA compliance.
                                 ______
                                 

                     OFFICE OF PERSONNEL MANAGEMENT

            Prepared Statement of Kay Coles James, Director

    Mr. Chairman and members of the subcommittee, I am pleased to have 
this opportunity to submit for the record a statement discussing the 
appropriations request for the Office of Personnel Management (OPM) for 
fiscal year 2005 and the relationship between that request and the 
implementation of the President's Management Agenda and other critical 
administration initiatives.
    Before reviewing the President's request for appropriations for 
OPM, I would like to provide some context by outlining briefly the 
significant strides we have made and the tremendous challenges we face.
    Consistent with our objective of shaping a Federal workforce that 
honors the President's commitment to the taxpayers for citizen-
centered, results-oriented, market-based government, we have made the 
President's Management Agenda the cornerstone of our corporate 
management. We are proud to note that the Office of Management and 
Budget cited us as one of the two most improved agencies, based on our 
rating on the Executive Branch management scorecard. Our employees have 
embraced the agenda and work as a team to identify and solve management 
problems. Since September of 2002, under the competitive sourcing 
initiative, OPM employees have aggressively competed and won all 11 
competitions undertaken.
    Given the government-wide nature of our responsibilities, we have 
focused on improving the strategic management of human capital in all 
agencies in many ways. We have analyzed the human capital efforts of 
agencies and shared our insights and guidance by providing agencies 
with workshops, tools, and information on specific human capital 
topics.
    Perhaps our most groundbreaking achievement was our joint effort 
with the new Department of Homeland Security (DHS) in creating a human 
resources management (HRM) system that provides the flexibility to 
manage more than 180,000 employees in a manner consistent with the 
unique mission requirements of that Department. The pioneering 
development of such a system through a joint regulatory process was 
unique. The collaborative and inclusive nature of the process involved 
employees, managers, the Department's largest labor unions, and a broad 
array of stakeholders and experts from the Federal sector and private 
industry. Currently, we are reviewing the many comments submitted in 
response to the publication of draft regulations on February 20, 2004.
    In addition, in conjunction with DHS and other agencies, OPM 
assisted Federal employees with safety planning, both at work and at 
home. Our efforts involved producing a series of publications to 
educate Federal workers and their families on dealing with emergency 
situations and providing training for employees in both security and 
emergency procedures. Further, we have conducted, for the past 2 years, 
surveys on emergency planning in the agencies and have worked to 
highlight areas of improvement to ensure better safety for employees.
    Beyond DHS, OPM is now working in a total partnership, as 
prescribed by law, for the standup of the new National Security 
Personnel System at the Department of Defense (DOD). OPM and DOD are 
pursuing a similar process to that used during the DHS process, with 
joint agency staff teams, meetings with unions and stakeholders, and, 
ultimately, joint signoff of implementing regulations by Secretary 
Rumsfeld and me.
    In fiscal year 2005, our appropriations request will build on those 
achievements in several ways. First, it will help us to continue to 
focus on the strategic use of human resources flexibilities tailored to 
each agency's unique requirements.
    Second, it will enable us to build the capacity to hold agencies 
accountable for using tools effectively, as well as sustaining the core 
values of Federal service. Third, OPM's budget request includes funding 
for security and emergency action programs to support increased 
outreach efforts designed to ensure the safety and security of the 
Federal workforce. OPM's efforts are being conducted in conjunction 
with the DHS and the General Services Administration.
    A significant highlight of our request is the support for OPM to 
continue our critical work as the managing partner for e-Government 
projects. For example, our request for $6.615 million will allow us to 
complete the Federal payroll enterprise architectural model and 
recommend a technology solution to replace legacy systems following the 
consolidation of payroll providers. We project that this investment 
will help yield over $1 billion in cost savings and avoidance through 
the project's life cycle. Also, with $3 million in base funding and 
$3.9 million from our revolving fund, we will continue our recruitment 
one-stop initiative to operate and enhance the USAJOBS Federal 
employment information system, increasing usage and satisfaction for 
Federal job seekers. Since launching new technology in August of 2003, 
the USAJOBS website has been used by job seekers to log more than 53 
million visits; and more than 483,000 new resumes have been created by 
Americans interested in public service careers. Through the USAJOBS 
website, this initiative is delivering to Federal agencies a greater 
number of highly-qualified candidates in a more efficient and cost-
effective manner.
    While the requests for other e-Government initiatives are somewhat 
smaller, they are no less crucial. The $2 million requested for the 
Enterprise Human Resources Integration effort will enhance the 
capability of agencies to submit timely and accurate data 
electronically to OPM's data warehouse. This data warehouse will help 
improve decision making and policy development through comprehensive, 
accurate, and efficient transfer of data, as well as by allowing 
improved analytics. Additionally, with our requested $2 million in 
salaries and expenses funding for e-Clearance, we will promote 
reciprocity of security clearances among agencies. Expanding 
reciprocity can save money and improve efficiency without adverse 
consequences to security.
    Our $800,000 request for the e-HRIS initiative will enable us to 
research, plan, and develop a project plan to establish standardized 
and integrated human resources information systems across the Federal 
Government, and the $685,000 sought for e-training will facilitate the 
transformation of the Go.Learn.gov site to a fully reimbursable 
activity that increases economies of scale and, through shared 
solutions, reduces duplicative investments.
    In addition to the innovative approaches taken in our e-Government 
initiatives, the establishment of the Human Capital Performance Fund is 
a major step toward transforming Federal employment by creating a pay-
for-performance culture. This Fund is an important tool for use by 
Federal agencies in rewarding high-performance employees. It points the 
way toward greater emphasis on employee performance contributions to 
mission accomplishment, rather than longevity. By requiring robust 
performance management as a criterion for funding, it would also 
provide an incentive for agencies to improve their performance 
management systems and human capital strategies and align them more 
closely with their missions and goals.
    As you are aware, the establishment of this Fund has not affected 
the operation of the General Schedule pay system itself. Individual 
employees remain at their existing grades and steps and continue to 
receive annual across-the-board pay adjustments, locality payments, and 
periodic within-grade increases. However, if the request for $300 
million for the Human Capital Performance Fund is granted, high-
performing employees will be rewarded with additional payments that 
will be treated as basic pay for the purposes of retirement and other 
benefits and will stay with the employees in the future.
    OPM will administer the Fund to ensure that agency plans for the 
distribution of payments from the fund are predicated strictly on 
appropriately assessed employee and/or organizational performance.
    Full funding of this request is essential to the progress of 
meaningful pay reform for the benefit of dedicated employees, 
critically challenged agencies, and taxpayers.
    Of course, beyond the e-Government initiatives and the Human 
Capital Performance Fund, OPM is requesting funding for the ongoing 
operation of our transformed agency. Our focus will be to build the 
government's capacity for human capital flexibility, accountability, 
and national security. With the funding we have requested for our new 
organizational framework--called Team OPM--we will concentrate on 
developing strategic human resources flexibilities through approaches 
tailored to each agency's unique requirements. We will also build the 
capacity to hold agencies accountable for using tools effectively, as 
well as sustaining the core values of Federal service. Also, as noted 
earlier, we will devote additional resources to the support of 
government-wide disaster and emergency action working groups.
    Turning to our request for resources to support these priorities, 
it is important to note that the total OPM fiscal year 2005 budget 
request of slightly more than $35 billion, an increase of nearly $1.4 
billion, includes appropriations that are 98 percent mandatory and only 
2 percent discretionary.
    OPM's general fund request for basic operating expenses totals 
$131.3 million and covers 831 full-time equivalent (FTE) employees. 
This includes $114.9 million in annual funds, $11.4 million in no-year 
funds for the e-Government projects discussed earlier (excluding 
recruitment one-stop), and $5 million in 2-year funds to coordinate and 
conduct program evaluation and measurement.
    The annual funds include an increase of slightly more than $3 
million and 24 FTE to increase the human capital support to agencies, 
to develop hiring solutions, to provide enhanced information technology 
support, to conduct competitive sourcing studies, and to support 
homeland security and emergency response needs.
    With regard to the transfers from benefits trust funds, OPM is 
requesting a total of nearly $128.5 million to support 1,151 FTE in the 
administration of the employee retirement and insurance programs. This 
includes more than $100.8 million in annual funds, representing an 
increase of almost $2.2 million from fiscal year 2004. These resources 
will be devoted to retirement benefits calculation, increased call 
center support during peak season, telephone system upgrades, and 
contract cost increases. The total also includes more than $27.6 
million in no-year funds for the retirement systems modernization 
effort.
    It is important to note here that a significant portion of the 
funding for the Office of the Inspector General in OPM is derived from 
trust fund transfers, too. That request will be discussed in greater 
detail by that office in a separate statement, but it should be 
mentioned that the overall request totals $18.1 million dollars and 140 
FTE. Of that total, $1.6 million would come from general funds, while 
$16.5 million would represent transfers from the trust funds. Of 
course, we strongly support the important work of Inspector General Pat 
McFarland and his fine staff. OPM maintains an independent relationship 
with the IG, but on issues of common concern, such as the maintenance 
of employee and retiree confidence in the trust funds and the Combined 
Federal Campaign, the teamwork and professionalism of the IG and his 
staff are outstanding.
    In addition to the 141 FTE financed by reimbursements from other 
agencies for the provision of HRM technical assistance and from OPM 
programs for the provision of agency-wide services, it is also worth 
noting that OPM provides a variety of services that are financed by 
payments from other agencies through our revolving fund.
    For ongoing revolving fund programs, the fiscal year 2005 budget 
includes slightly more than an estimated $1 billion in obligations and 
2,601 FTE to be financed by payments from other agencies for OPM's 
services.
    These services include professional development and continuous 
learning for Federal managers and executives; providing one-stop access 
to high-quality e-training products and services; testing potential 
military personnel for the Department of Defense in those locations 
where it is cost-effective for OPM to do so; providing employment 
information and assessment services; automating other agencies' 
staffing systems; providing examining services when requested by an 
agency; providing technical assistance and consulting services on all 
facets of HRM; coordinating the selection and development of 
Presidential Management Fellows; and, through contracts with private 
companies, conducting suitability and security investigations.
    As always, the OPM budget request includes mandatory appropriations 
to fund the government contributions to the health benefits and life 
insurance programs for Federal annuitants. This is because OPM serves 
as the ``employing agency'' for these individuals relative to these 
benefit programs.
    Given the mandatory nature of these payments, we are requesting a 
``such sums as may be necessary'' appropriation for each of these 
accounts. We estimate that, for the 500,000 annuitants under age 65 who 
elect post-retirement life insurance coverage and for whom we are 
responsible, $35.0 million will be needed, while an appropriation of 
about $8 billion will be required to pay the government's share of the 
cost of health benefits coverage for the 1.9 million annuitants who 
participate in that program. That represents an increase of $688 
million over fiscal year 2004.
    In addition, as mandated by the financing system established in 
1969 by Public Law 91-93, liabilities resulting from changes 
(principally pay raises) since that year which affect retirement 
benefits must be amortized over a 30-year period. We are requesting a 
``such sums as may be necessary'' payment to the Civil Service 
Retirement and Disability Fund for that purpose. We estimate the amount 
needed to be $26.4 billion, an increase of $402 million to cover this 
service cost that is not funded by and for active employees under the 
Civil Service Retirement System.
    Finally, the President's budget for fiscal year 2005 proposes a pay 
increase for white-collar workers of 1.5 percent, to be distributed 
between an across-the-board raise and locality pay as determined by the 
President later in the year. In addition, funding in the amount of 0.2 
percent has been included in agency budgets for use in addressing 
specific recruitment and retention needs. When combined with the basic 
pay adjustment and the $300 million request for the Human Capital 
Performance Fund, the overall amount available for a pay adjustment 
amounts to 2.0 percent.
    Once again, we have included in the government-wide general 
provisions in the budget the appropriate legislative language to ensure 
that blue-collar Federal employees receive pay adjustments up to the 
amount received by their white-collar colleagues if warranted by local 
private sector market rates.
    Thank you for the opportunity to discuss OPM's request for the 
record. I would be pleased to provide any additional information the 
subcommittee may require.
                                 ______
                                 
     Prepared Statement of Patrick E. McFarland, Inspector General

    Mr. Chairman and members of the subcommittee, thank you for 
providing me with this opportunity to discuss the President's fiscal 
year 2005 request for appropriations for the Office of the Inspector 
General (OIG). The total request for the Office of the Inspector 
General is $18,088,000, which is an increase of $2,257,000 above the 
amount appropriated in fiscal year 2004. Of this amount, $1,627,000 is 
from the salaries and expenses/general fund, and $16,461,000 is from 
the trust funds. The additional resources are requested to:
  --Increase criminal investigative oversight of the Office of 
        Personnel Management (OPM) administered trust fund programs;
  --Conduct audits of pharmacy benefit managers participating in the 
        Federal Employees Health Benefits Program (FEHBP);
  --Expand the scope of audit for the largest community-rated health 
        maintenance carriers;
  --Further develop computer assisted audit tools and techniques to 
        ensure effective audits of the FEHBP;
  --Increase the number of health carrier information systems audits; 
        and
  --Provide pre-award contract audit support.
    The Office of the Inspector General recognizes that oversight of 
the retirement and health and life insurance trust funds administered 
by OPM is, and will remain, its most significant challenge. These trust 
funds are among the largest held by the United States Government. Their 
assets totaled $650.0 billion in fiscal year 2003, their revenue was 
$78.2 billion, and their annual program and operating expenses were 
$164.1 billion. The amounts of their balances are material to the 
integrity of the government's financial position. I continue to 
allocate the vast majority of the Office of the Inspector General's 
efforts and resources to trust fund oversight, and we remain fully 
committed to trust fund activities.
    OPM makes outlays from the retirement trust funds in the form of 
payments to millions of annuity recipients. The health insurance trust 
fund provides payments to approximately 260 health insurance plans 
nationwide. In turn, the health insurance carriers pay millions of 
claims for services filed by their enrollees and health care providers. 
We have shown through our investigations and audits that such health 
insurance payments may be at risk through improper, inaccurate or 
fraudulent claims.
    We are obligated to Federal employees and annuitants to protect the 
integrity of their earned benefits. Our audit and criminal 
investigative work reduces losses due to fraud and otherwise improper 
payments and recovers misspent funds whenever possible. We have a 
special obligation to the Federal agencies and the American taxpayers 
who provide the majority of the funding.
    The Office of the Inspector General has achieved an impressive 
record of cost effectiveness. Audits and criminal investigations of the 
OPM administered trust fund programs have resulted in significant 
financial recoveries to the trust funds and commitments by program 
management to recover additional amounts. Since fiscal year 1992, these 
recoveries and commitments have exceeded $1 billion which is 
approximately $10 of positive financial impact for each direct program 
dollar spent. In addition, we believe that Office of the Inspector 
General audits and criminal investigations provide a significant 
deterrent against future instances of fraud, waste, and abuse.
    The Office of the Inspector General's fiscal year 2005 request 
includes additional resources totaling $2.25 million. Of this amount, 
$0.6 million will be used to increase criminal investigative oversight 
of the Federal Employees Health Benefits Program and the Civil Service 
Retirement/Federal Employees' Retirement programs.
    These additional criminal investigative resources will be dedicated 
to speed the handling of our current inventory of criminal 
investigative cases and also increase our ability to handle the growing 
number of referrals we have been receiving because of past success. As 
a result of this additional oversight, we expect to increase the number 
of arrests, indictments and convictions by approximately 60 percent, as 
well as increase financial recoveries by $5 million for the trust funds 
from criminal investigations. We are particularly concerned with the 
extent to which health care fraud puts the health and safety of current 
Federal employees, annuitants, their survivors, and eligible family 
members at risk.
    An additional $0.7 million will be used to conduct audits of 
pharmacy benefit managers (PBMs). It is estimated that $6 billion will 
be paid during 2004 in prescription drug premiums by the Office of 
Personnel Management and Federal employees. This represents 
approximately 26 percent of total premiums paid for health benefits 
coverage for Federal employees and annuitants. The premiums paid for 
prescription drug coverage have risen exponentially over the last 10 
years. However, Federal prescription drug benefits have never been 
audited because the FEHB Program historically has defined health care 
providers and suppliers as other than Federal subcontractors. Since 
health care providers and suppliers, including PBMs were not 
subcontractors, they were not subject to our audits. In light of 
increasing expenditures on prescriptions and allegations against PBMs, 
the FEHB Program has amended its carrier contracts to define PBMs as 
Federal subcontractors subject to our audits.
    By performing these audits, we will help the FEHBP recover 
inappropriate costs charged to it in previous years, negotiate more 
favorable contracts, and positively affect the future costs and 
benefits provided to program enrollees. Ultimately, these audits will 
reduce health care costs while improving the quality of health care for 
FEHBP enrollees.
    An additional $0.5 million will be used to expand the scope of 
audits for the largest community-rated health maintenance organization 
carriers participating in the FEHBP. During fiscal year 2002, $4.9 
billion of FEHBP premiums were paid to community-rated carriers. Of 
this amount, $3.4 billion was paid to 25 carriers most of whom use some 
sort of experience-based rating to set premiums. The additional 
resources will enable us to expand the audit testing to include reviews 
of this information to identify overpayments charged to the FEHB 
Program which will result in increased financial recoveries to the 
Program totaling approximately $5 million.
    An additional $0.3 million will be used to increase the efforts of 
our office's information systems audit program. The purpose of this 
program is twofold: (1) to perform information systems audits of Office 
of Personnel Management systems, including computer security, and (2) 
to develop computer-assisted audit tools and techniques (CAAT) such as 
computer claims analysis applications that our auditors use while 
conducting carrier audits. These new computer-related resources will be 
used primarily to increase the number of information systems audits we 
conduct on providers participating in the FEHBP.
    Also, we will further our development of a data warehouse of health 
benefit claims. A data warehouse offers the best opportunity for 
detecting erroneous health benefit payment transactions by medical 
providers, insurance carriers and subscribers by accumulating all 
benefit claims for all fee-for-service insurance carriers in a single 
data repository. This effort will enhance our current claims reviews by 
enabling the auditors to target certain types of potential claim 
payment errors on a program-wide rather than on a plan-by-plan basis. 
This will provide a significant improvement in our audit efficiency and 
effectiveness by offering us the opportunity to address significant 
issues one time only, instead of multiple times per year and to recover 
overcharges to the program when appropriate.
    The data warehouse will provide information enabling our criminal 
investigative staff to react quickly to criminal investigative leads. 
For example, the OIG investigators will be able to determine the 
potential program risks associated with an identified provider or 
subscriber fraud allegation, and take appropriate action in a matter of 
hours instead of the days or weeks currently required.
    The remaining $0.1 million increase will be used to obtain 
technical expertise in the field of pre-award contract auditing. We 
will perform audits of selected bid proposals before OPM enters into 
large contracts with vendors.
    I would also like to bring to your attention the significant 
progress we have made in implementing Public Law 105-266, the Federal 
Employees Health Care Protection Act of 1998. Final regulations 
necessary to implement the financial sanctions authorities provided in 
this legislation were published in the Federal Register in March 2004. 
These financial sanctions, in the form of civil monetary penalties and 
monetary assessments, provide OPM the ability to recover, through 
administrative action, FEHBP funds lost to provider misconduct. In 
addition, we believe they will serve as a deterrent against FEHBP 
program violations.
    Also, OPM is now using new suspension and debarment regulations 
that went into effect during fiscal year 2003, to process actions. To 
date over 3,400 debarments under the new authorities have been issued. 
These new authorities are more efficient to administer and are designed 
specifically to address health care provider integrity concerns within 
the FEHBP. They have largely supplanted the previous regulations which, 
although we have used them to issue over 24,000 debarments and 
suspensions since 1993, are relatively inefficient to operate and, 
since they were dependent on Medicare or other agency debarments, were 
not tailored directly to the health, safety, and integrity issues that 
are most significant in the FEHBP.
    Thank you for this opportunity to present my resource request for 
fiscal year 2005.
                                 ______
                                 

                    GENERAL SERVICES ADMINISTRATION

                        Public Buildings Service

         Prepared Statement of F. Joseph Moravec, Commissioner

    As Commissioner of the Public Buildings Service of the U.S. General 
Services Administration, I am pleased to present a statement for the 
record regarding our fiscal year 2005 budget request.
    There are three primary programs within the Federal Buildings Fund 
(FBF)--New Construction, Leasing, and Asset Management.

                            NEW CONSTRUCTION

    We construct new buildings when our agency customers have a need 
for specialized space. The majority of our newly constructed buildings 
are courthouses, border stations, laboratories and highly specialized 
facilities like the U.S. Mission to the United Nations and the National 
Oceanic and Atmospheric Administration, (NOAA) Weather Satellite 
control center. The courthouse construction program has a fewer number 
of projects this year due to the large investment required to construct 
the Los Angeles, CA Courthouse. This project is the No. 1 priority on 
the Judiciary's 5-Year Plan, which reflects priorities approved by the 
Judicial Conference.
    As part of our performance-based budget, we have committed to 
completing 85 percent of our new construction projects on schedule, and 
within 1 percent of the original appropriation by fiscal year 2005. PBS 
is undertaking many initiatives to keep projects on schedule and within 
budget. Project status is being closely monitored throughout design and 
construction to alert us to any emerging issues in a timely manner. For 
projects over $25 million, evaluations are scheduled at 15 percent, 60 
percent and 100 percent of the design process. In addition, a new 
performance measurement tool has been developed and implemented. This 
tool allows comparison of a project's construction schedule and outlays 
to standards and reports variances for both measures.

                                LEASING

    GSA has a total leased inventory of over 160 million square feet 
located in 6,200 buildings across the United States and its 
territories. Our leasing program is an important tool for managing our 
portfolio because when clients' space requirements cannot be met with 
available Federal space, we lease space from the private sector. This 
program area has been undergoing significant expansion due to the 
growth of Defense, law enforcement, and security-related agencies. The 
decision to lease space is part of a coherent overall local Portfolio 
Strategy. Our strategies to keep leasing costs at or below market 
levels include comparing lease offers to comparable industry 
benchmarks, using market surveys to comparison shop for best prices, 
using published market sources to gain a better understanding of area 
markets and partnering with the private sector for brokerage services. 
We are very proud that our vacant space within our leased inventory is 
1.4 percent. The top priority within the Leasing Program is 
implementing the National Broker Contract. Analysis has indicated that 
``no cost'' contracts and limited fee-based broker contracts will help 
meet future capacity needs, lower leasing costs and provide a higher 
level of customer service and satisfaction. GSA has taken the first 
steps toward implementing this important initiative.

                            ASSET MANAGEMENT

Repairs and Alterations
    Our inventory of owned buildings contains more than 100 million 
square feet of space where the design and physical condition of the 
space make it very difficult to meet modern day needs. This space 
typically has inefficient energy systems, lacks the flexibility to 
readily provide state-of-the-art information technology features to 
occupants and--for those buildings constructed during the 1960's and 
1970's--have exterior materials which have outlived their useful lives. 
To address many of these issues we have instituted a portfolio 
restructuring and reinvestment strategy that uses private sector 
techniques to tier our owned properties, remediate those that can still 
cost-effectively contribute to the overall financial strength of the 
FBF, and reshape other parts of the portfolio to include disposal of 
some properties. GSA measures the percentage of government-owned assets 
with a Return on Equity greater than 6 percent to gauge progress in 
this area. For each of the past several years, we have directed nearly 
$1 billion toward the reinvestment in the modernization of our 
inventory, with on-time, on-budget completion a program priority. 
Within government owned space, the vacancy rate is 8.3 percent with 35 
percent committed to tenants and 25 percent currently under 
construction or alteration. That makes the amount of vacant available 
space in the owned inventory 5.0 percent.

Operations
    The most critical initiative affecting the Asset Management program 
is the Human Capital Strategy. The Human Capital Strategy/Workforce 
Transformation project is primarily driven by the following factors:
  --An aging workforce and previous inability to replenish talent lost 
        through attrition;
  --Customer demands for more complete real estate services; and
  --Skills needed to focus PBS business priorities on customer 
        relationships.
PBS is currently engaged in implementing a comprehensive Human Capital 
Strategy that will guide the recruiting, training, management and 
deployment of our most important asset in the years ahead.
    For GSA to meet our customers' expectations and remain cost 
competitive with the private sector, we must maintain below-market 
operating costs and reduce energy consumption, while simultaneously 
maintaining a high level of customer satisfaction. Our strategy is to 
leverage buying power through better planning, using national tools 
like the Federal Supply Schedule, and holding contractors accountable 
for performance. We must leverage our workforce via user-friendly 
contracting vehicles, multi-regional operations/maintenance and energy 
contracts, electronic data systems, contractual data sharing, workload 
visibility, and national vendor alliance management and acquisition. 
Because many operational services are readily available from the 
private sector, and to obtain the best possible value for the taxpayer, 
we are subjecting many of the activities we currently perform with in-
house staff to the rigorous analysis required by the A-76 process.
    I am willing to answer any questions you or other members of the 
subcommittee may have on the President's fiscal year 2005 budget 
request for the General Services Administration.
                                 ______
                                 

                    GENERAL SERVICES ADMINISTRATION

         Prepared Statement of Stephen A. Perry, Administrator

    Mr. Chairman and members of the committee, the General Services 
Administration (GSA) budget request for fiscal year 2005 reflects our 
strong commitment to fulfilling our mission, which is: ``to help 
Federal agencies better serve the public by offering, at best value, 
superior workplaces, expert solutions, acquisition services and 
management policies. All areas of GSA, including the Public Buildings 
Service, the Federal Technology Service, the Federal Supply Service, 
our Office of Governmentwide Policy and our Office of Citizen Services 
are working together to efficiently and effectively meet the 
requirements of our Federal agency customers and the public.
    Americans demand that the Federal Government show results. 
Accordingly, President Bush has challenged GSA and all Federal agencies 
to improve performance through the use of good management practices as 
outlined in the President's Management Agenda. In striving to achieve 
improved performance results, Federal agencies often rely upon GSA to 
provide the property management and acquisition services they need for 
successful operation. Additionally, each Federal worker relies upon 
GSA's assistance in creating a productive work environment by providing 
the appropriate facilities, equipment, supplies and services they need. 
GSA is committed to achieving our critically important mission in an 
efficient and effective manner that yields best value for the American 
taxpayer.
    In the last few years, GSA has strengthened its Performance 
Management Process to document customer-focused goals, action plans and 
performance measures to enhance our achievement of high performance 
results and accountability. Our fiscal year 2005 budget request will 
provide the resources needed to achieve these high priority goals in 
support of Federal agencies, including our support of the U.S. 
Military, Homeland Security, the Judiciary and other law enforcement 
and security related agencies.
    As you know, GSA offers its core expertise in acquisition services 
to Federal agencies on a ``non-mandatory'' basis. Therefore, agencies 
can decide to devote their own resources directly to the acquisition 
process or they can use GSA to provide this service. Where GSA provides 
the most efficient and effective approach, agencies are increasingly 
deciding to use GSA and thereby reducing the overall cost to the 
government. Further, this enables the customer agency's personnel to 
avoid duplication of effort and focus on their core missions. GSA 
charges fees to cover its costs and most of GSA's resources come from 
these customer payments. In fact, only a relatively small amount of GSA 
resources, close to 1 percent of funding, is from direct 
appropriations.

                    FISCAL YEAR 2005 BUDGET REQUEST

    The total GSA budget for fiscal year 2005 budget is $24.3 billion. 
This is a 3.0 percent increase over fiscal year 2004, representing 
increased business in revolving funds (i.e., the General Supply Fund 
and the Information Technology Fund). Approximately 1 percent, or $218 
million, of this amount is for funding GSA's appropriated activities.
    The volume of services that GSA provides to other Federal agencies 
has increased each year because of our successful efforts to make GSA a 
more timely and cost-effective source for property management and 
acquisition services. At the same time, we have made process 
improvements and significantly streamlined our organization. Our 
employment level of 12,508 for fiscal year 2005 is 26 percent below the 
fiscal year 1995 levels. Lower employment levels mean that only 5.0 
percent, or $1.2 billon, of our budget is expended for salaries and 
benefits and that 95 percent of GSA's funding is spent directly with 
private sector firms for goods and services procured on behalf of 
Federal agencies.
    For fiscal year 2005, although our overall net request for budget 
authority is down $225 million from fiscal year 2004, given the 
increased income level there is a robust construction and repair and 
alteration program. In addition, our request also funds modest spending 
increases to support our E-Government component of the President's 
Management Agenda. The fiscal year 2005 budget does not include a 
request for an appropriation to the Federal Buildings Fund (FBF). The 
FBF New Obligational Authority request is funded entirely from rent 
revenue and other income to the Fund.

Public Buildings Service
    GSA's Public Buildings Service (PBS) has reinvigorated the process 
for carrying out its responsibility to maximize the value of GSA's 
portfolio of government-owned buildings. The government-owned 
facilities under GSA's stewardship represent a real estate portfolio 
with a replacement value of approximately $34.7 billion. For fiscal 
year 2005, we are requesting $7.2 billion in New Obligational Authority 
(NOA) to spend available resources in the Federal Buildings Fund. Of 
this amount, $980 million is for our Repairs and Alterations program.
    One of GSA's biggest financial challenges is funding the large 
backlog of deferred maintenance and repair work at its government-owned 
facilities. To address this challenge, we have taken steps to transform 
our owned portfolio into one comprised of well-maintained, modernized, 
functional assets with positive cash flows. We have determined that in 
order to better allocate our funds for capital investment, we must 
redeploy our non-performing assets so that those properties that remain 
in our portfolio will provide appropriate workplaces for Federal 
workers.
    PBS has begun to implement the policy of Executive Order 13327 on 
Federal Real Property Asset Management. GSA already ``promotes the 
efficient and economical use of America's real property assets.'' We 
use asset management principles to allocate the limited resources of 
the Federal Buildings Fund to address the backlog of Repairs and 
Alterations projects. These asset management principles were applied to 
develop our $980 million Repairs and Alterations program for fiscal 
year 2005. The program includes:
  --$394 million for basic (non-prospectus) Repairs and Alterations
  --$473 million for prospectus Repairs and Alterations
  --$50 million for design
  --$13 million for chlorofluorocarbons program
  --$30 million for energy conservation program
  --$20 million for glass fragmentation retention program
    There is $650 million for Construction and Acquisition of 
Facilities in GSA's fiscal year 2005 budget request. It includes the 
following projects:
  --$381 million for construction for U.S. Courthouses in Los Angeles, 
        CA and El Paso, TX; and design of a U.S. Courthouse in San 
        Diego, CA
  --$89 million for FDA Consolidation in Montgomery County, MD
  --$14 million for FBI Facility in Los Angeles, CA
  --$2 million for Southeast Federal Center Site Remediation, 
        Washington, DC
  --$53 million to purchase 10 West Jackson Blvd., Chicago, IL
  --$91 million for 12 Border Stations
  --$10 million for non-prospectus construction and acquisition
  --$10 million for repayment to the Judgment Fund
    Government-owned space represents approximately half of our 
inventory, however, today we are continuing to secure leased space to 
meet general-purpose office and special space needs. For fiscal year 
2005 we project adding 2.6 million rentable square feet of leased space 
to our inventory. Under the Federal Buildings Fund operating programs, 
the $3.7 billion budget for Rental of Space is based on projections of 
known requirements such as (1) leases already in the inventory and the 
scheduled cost increases associated with these leases and (2) 
identified expansion and cancellation projects.
    The $1.7 billion budget request for Building Operations funds 
essential building services provided by PBS for facilities occupied by 
our Federal Government customers, including cleaning, maintenance, 
minor repairs, utilities, space management and other building services.
    The following performance measures illustrate some of our 
successes.
  --Costs for leased space are 7.4 percent below the industry average.
  --Operating costs are 14.8 percent below industry benchmarks.
  --Energy consumption has been reduced by 19 percent from the fiscal 
        year 1985 baseline. PBS plans to reduce energy consumption by 
        an additional 11 percent by the end of fiscal year 2005.
  --PBS has improved the percentage of Repairs and Alterations projects 
        completed on time from 75 percent in fiscal year 2001 to 78 
        percent in fiscal year 2003.

Electronic Government
    Expanding the scope and level of the Federal electronic government 
(E-Gov) program is a major focus of the President's Management Agenda. 
Through E-Gov initiatives GSA is transforming the way information is 
disseminated to the American people. By leveraging Internet 
technologies, GSA is building a more citizen-centric and results-
oriented Federal Government. In support of E-Gov initiatives, our 
budget request includes $23.4 million in Operating Appropriations for 
select E-Gov initiatives led by GSA, $5 million for the E-Gov Fund, and 
$40 million in the General Supply Fund for government-wide initiatives.
    To provide much needed resources for E-Gov projects, GSA is 
proposing a new general provision that would amend existing law to 
permit the Administrator, after consulting with the Office of 
Management and Budget, to retain surplus funds generated by the 
operation of the General Supply Fund in an amount not to exceed $40 
million in any given fiscal year and use those funds for E-Gov 
initiatives. These funds would be used for government-wide E-Gov 
projects for purposes authorized under the E-Gov Act of 2002 (Section 
3604 of Title 44). The fiscal year 2005 budget anticipates $40 million 
in funding from the GSA General Supply Fund.
    GSA realizes that common solutions shared by agencies are 
absolutely critical to the effective and secure operations of the 
government. The $23.4 million requested in the fiscal year 2005 budget 
will be used to provide standardized Federal approaches to electronic 
government. GSA will provide a leadership role to customer agencies by 
integrating key E-Gov initiatives into the daily business of 
government. For example:
  --USA Services, one of the President's E-Gov initiatives, is part of 
        GSA's Office of Citizen Services and Communications. USA 
        Services seeks to make government more citizen-centric by 
        providing a front door where citizens can get answers to their 
        questions about the Federal Government by phone, on line, by e-
        mail, or by print publications. At the same time, USA Services 
        seeks to improve citizen customer service government-wide. We 
        are requesting $1.5 million to establish government-wide 
        standards in customer service, performance benchmarking, and 
        best practices for Federal contact centers responding to 
        citizen inquiries.
  --A component of USA Services is the internet site FirstGov.gov, the 
        official web portal of the U.S. Government. We are requesting 
        $17.3 million, an increase of $3.7 million, to maintain and 
        enhance FirstGov.gov by further leveraging Internet technology 
        and by providing a highly secure environment. And by sharing 
        the FirstGov technology and infrastructure, we are helping the 
        government reduce costs. In fiscal year 2003, there were 580 
        Federal web sites using FirstGov.gov search services as their 
        primary search engine mechanism, equating to a savings of $21 
        million from avoiding the need to purchase search engine 
        software for each individual web site.
  --GSA is playing a key role in setting standards for identity 
        management and electronic authentication. In order for the 
        Federal e-Government initiatives to be successful, the Office 
        of Governmentwide Policy is working towards establishing a 
        cross-agency governance structure and process for e-
        Authentication and identity management in order to unify 
        Government systems. GSA is requesting $4.6 million to support 
        this effort, an increase of $0.57 million.
    Another key E-Gov initiative led by GSA is e-Travel. In 2003, the 
Office of Governmentwide Policy (OGP) and our partner agencies 
established a standard booking engine as well as a consistent travel 
and voucher system for the Federal Government. As the e-Travel service 
becomes operational, management of the e-Travel contracts will transfer 
from the Office of Governmentwide Policy (OGP) to the Federal Supply 
Service (FSS) in fiscal year 2005. FSS will integrate e-Travel with 
GSA's other travel service offerings. GSA will provide an additional 
$9.9 million to this E-Gov project in fiscal year 2005 through the 
General Supply Fund.
    We believe these and other E-Gov initiatives are critical to 
becoming a citizen-centric government. These projects provide 
government-wide solutions to meet common needs across agencies, thus 
eliminating redundancies and duplicate spending.

                         APPROPRIATION REQUEST

    While only about 1 percent of the total proposed budget is funded 
through direct appropriations, our Operating activities are a vitally 
important part of GSA's total program. These funds support our Office 
of Governmentwide Policy function, the Office of Citizen Services and 
Communications, the E-Gov Fund, the Office of Inspector General, Former 
Presidents, the Presidential Transition, and various other operating 
programs. The $218 million requested is $15 million above fiscal year 
2004 levels. Approximately half of this increase, $7.7 million, is for 
Presidential transition.
    Our request is shown by account in the following table:

                                     THE FISCAL YEAR 2005 BUDGET IN SUMMARY
                                            [In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                    Fiscal Year     Fiscal Year     Fiscal Year
                                                                    2003 Actual    2004 Current    2005 Request
----------------------------------------------------------------------------------------------------------------
                        TOTAL OBLIGATIONS

Operating Accounts (Appropriations).............................        $853,133        $206,550        $218,682
Federal Buildings Fund Direct (Including Appropriations)........       6,546,606       7,100,494       7,313,195
Reimbursable Programs...........................................       1,245,899       1,014,798       1,155,694
Real Property Relocation........................................  ..............           6,050           6,000
General Supply Fund.............................................       4,066,351       4,896,773       5,130,708
Information Technology Fund.....................................      10,034,941       9,970,687      10,071,313
Working Capital Fund............................................         316,914         347,877         357,698
Federal Citizen Information Center Fund (Reimb.)................           2,650           3,901           4,353
Permanent Appropriations........................................          15,928          29,493          34,926
                                                                 -----------------------------------------------
      Subtotal..................................................      23,082,422      23,576,623      24,292,569
                                                                 ===============================================

                 REQUIRING APPROPRIATIONS ACTION

Operating Appropriations:
    Office of Governmentwide Policy.............................          55,569          59,669          62,100
    Operating Expenses, GSA.....................................          81,089          83,971          82,175
    Electronic Government Fund..................................           4,968           2,982           5,000
    Election Reform Payments....................................         650,000               0               0
    Election Reform Reimbursements..............................          14,903               0               0
    Office of Inspector General.................................          37,270          38,938          42,351
    Federal Citizen Information Center..........................          13,356          13,917          14,907
    Presidential Transition.....................................               0               0           7,700
    Former Presidents...........................................           3,156           3,373           3,449
                                                                 -----------------------------------------------
      Subtotal Budget Authority/Appropriation...................         860,311         202,850         217,682
                                                                 ===============================================

Federal Buildings Fund New Obligational Authority:
    Construction & Acquisition of Facilities....................         734,868         745,314         650,223
    Repairs and Alterations.....................................         985,009       1,002,997         980,222
    Installment Acquisition Payments............................         178,897         169,677         161,442
    Rental of Space.............................................       3,381,265       3,551,032       3,672,315
    Building Operations.........................................       1,546,514       1,608,064       1,709,522
                                                                 -----------------------------------------------
      Subtotal FBF New Obligational Authority...................       6,826,553       7,077,084       7,173,724

    FBF Net Budget Authority....................................         463,347         254,194          15,447
    FBF Appropriations..........................................         375,711         459,669               0
                                                                 -----------------------------------------------
      TOTAL, Transportation/Treasury Appropriation Action (BA/         7,673,508       7,266,017       7,376,499
       NOA).....................................................
                                                                 ===============================================

    Budget Authority............................................       1,310,302         443,127         218,222
    Appropriations..............................................       1,222,666         648,602         202,775
Total, VA/HUD Appropriations Action (BA): Federal Citizen                 13,356          13,917          14,907
 Information Center (Direct)....................................
----------------------------------------------------------------------------------------------------------------


    Mr. Chairman, this concludes my formal statement, and I look 
forward to continuing to discuss our fiscal year 2005 budget request 
with you, members of the committee and your staff.
                                 ______
                                 

                      DEPARTMENT OF TRANSPORTATION

              Federal Motor Carrier Safety Administration

        Prepared Statement of Annette M. Sandberg, Administrator

                OVERVIEW: SAFETY, SECURITY, PRODUCTIVITY

    People depend on motor carriers for the safe, reliable, and 
efficient movement of the goods they use everyday. The trucking 
industry comprises almost 650,000 motor carriers operating in 
interstate commerce and some 7.9 million large trucks. Trucks account 
for most of the freight movement in our Nation's transportation system. 
Approximately 80 percent (by value) of all domestic commodity movements 
are carried by truck. The trucking industry also employs approximately 
9.9 million people in jobs related to trucking activity, including 
several million drivers. People rely on motor coaches for safe and 
secure transportation. Commercial motor coaches traveled 2.4 billion 
miles in 2001, carrying more than 500 million passengers. Clearly, both 
the trucking and motor coach industries contribute to competitiveness 
and a robust economy.
    Mobility, as crucial as it is to our economic well-being, presents 
significant hazards in terms of safety on our highways. Trucks and 
buses share roadways with passenger vehicles and pedestrians. Over the 
last several years, approximately 5,000 people have died annually in 
crashes involving a truck. This is unacceptable. Truck transportation 
of hazardous materials presents even greater potential safety 
consequences. And, there is increasing recognition and appreciation 
that there can be no safety without security. In most cases, there is a 
close connection between safety and security, and strategies designed 
to mitigate one often impact both.
    FMCSA has defined five strategic goals linking to Department of 
Transportation and national objectives, illustrated in Figure 1 below. 
Among these, safety is FMCSA's primary mission. At the same time, the 
agency looks to employ a coordinated strategy that balances the inter-
relationships between these missions and leverages solutions that 
achieve the greatest overall public good.



    The agency's $455 million request for fiscal year 2005 will fund 
programs and activities supporting all five agency strategic goals. 
Figure 2, below, illustrates the allocation of funds by agency 
strategic goal in our fiscal year 2005 budget request.



                               CMV SAFETY

    Safety is the capstone of this agency's strategic hierarchy. The 
FMCSA safety vision is to develop and promote, in coordination with 
other Departmental modes, data-driven, analysis-based, and innovative 
programs to achieve continuous safety improvements in the Nation's 
highway system, intermodal connections, and motor carrier operations. 
Saving lives and reducing crashes involving trucks and motor coaches on 
our highways is the agency's primary mission, and our fiscal year 2005 
budget request allocates approximately 86 percent of the agency's 
resources to 10 performance segments in support of this strategic goal. 
Figures for 2002 show a reduction in truck-related fatalities of 4.2 
percent from 2001, despite a projected increase in truck vehicle miles 
traveled (TVMT). This decrease extends to five consecutive years (1998-
2002) the trend of improved commercial motor vehicle safety. We may be 
beginning to realize the results of agency regulation and safety 
interventions undertaken since the establishment of the agency in 1999, 
enabling us to pursue with greater confidence our coordinated safety 
strategy.
    With the encouragement of Secretary Mineta, FHWA Administrator 
Peters, NHTSA Administrator Runge, and I are coming together for 
safety. Improving highway safety is an administration and national 
goal. All highway fatalities are unacceptable. If we are to stem the 
tide of this terrible loss of life on our Nation's highways we all must 
play a role, combine our knowledge and expertise, and coordinate our 
program delivery. My colleagues and I share the belief that our 
programs are complementary rather than competing. So, FMCSA will work 
together with FHWA and NHTSA to pool and focus our effort, energy, and 
resources where they will have the greatest impact on safety. Our new 
CMV safety goal, harmonized with the DOT Highway Safety performance 
goal and FHWA and NHTSA measures, evinces our intermodal approach. 
Encouragingly, FMCSA achieved its fatality rate performance target for 
2002.
    Enforcement is FMCSA's primary safety mitigation strategy and the 
agency's core competency. Appropriately, it is the focus of the 
greatest share of program resources. FMCSA conducts enforcement 
operations and provides grants to support State enforcement efforts. To 
the extent possible, we look to increasingly align Federal and State 
enforcement operations in mutually-reinforcing ways. The effectiveness 
of enforcement interventions in reducing crashes, fatalities, and 
injuries is borne out by findings of the CR Impact Assessment Model and 
the Roadside Inspection and Traffic Enforcement Intervention Model. We 
propose to expand the toolbox of enforcement techniques, close 
loopholes permitting unsafe practices, and improve our penalty 
structure. We look to implement a balanced enforcement model--an 
approach that balances and capitalizes on prevention (compliance 
reviews, safety audits), deterrence (inspections, traffic enforcement), 
and remediation (sanctions and penalties) interventions. New entrant 
safety audits will broaden our enforcement regime.
    Information is a high near-term priority. As a data-driven 
organization, information is the essential backbone for all major FMCSA 
operational and support programs and activities. To ensure our maximum 
operational effectiveness and efficiency, we need to base our decisions 
on the highest quality data possible and sound statistical analysis of 
that data. A highlight for fiscal year 2005 will be issuing the results 
of the Large Truck Crash Causation Study. Information initiatives are 
addressed in the respective performance segments and the cross-cutting 
Information Management proposal for fiscal year 2005 is attached as an 
Appendix.
    States play essential partnership roles in highway safety, 
providing critical safety data and extending regulation and enforcement 
reach. The Motor Carrier Safety Assistance Program, which provides 
(MCSAP) grants to State highway safety authorities, is the primary 
means we have of moving our goal of safety advocacy from focus to 
action.

                               HM SAFETY

    FMCSA authority extends to enforcing compliance with the Federal 
Hazardous Materials Regulations (FHMRs) to provide adequate protection 
against the risks to life and property inherent in the highway 
transportation of hazardous materials in commerce. The agency's goal is 
to reduce serious reportable hazardous materials incidents involving 
trucks. This links to and supports the DOT hazardous materials 
performance goal. Approximately 5 percent of the agency's fiscal year 
2005 budget request is attributed to 3 performance segments 
contributing to achievement of this goal. A priority initiative is the 
institution of a grant program to extend safety inspection by States of 
HM carriers crossing the borders.

                              HM SECURITY

    Continued emphasis on commercial carrier, driver, vehicle, and 
cargo security, and particularly hazardous materials operations is 
required, supporting the DOT Security strategic goal and administration 
priorities. Following the successful transfer of the Transportation 
Security Administration (TSA) to the Department of Homeland Security, 
FMCSA will continue to work in concert with TSA and other agencies to 
establish the protocols ensuring the security of commercial motor 
vehicle transportation. To this end, FMCSA has designated approximately 
2 percent of the fiscal year 2005 budget request to two performance 
segments aimed at heightening the awareness of hazardous materials 
carriers to security threats.

                            CMV PRODUCTIVITY

    The efficient movement of goods is a critical component of a 
healthy economy. FMCSA's authority extends to ensuring compliance of 
household goods carriers with the Federal Motor Carrier Commercial 
Regulations (FMCCRs). Judging by complaints received on our hotline, 
and more recently on the new website we have established for this 
purpose, closer scrutiny of and attention to the responsibilities of 
carriers and the rights of consumers is needed. Reducing the cycle time 
for response to complaints is a priority. Our fiscal year 2005 budget 
request includes approximately 1 percent for two performance segments 
supporting CMV productivity and the integrity of goods movement. Our 
aim is to provide informative and timely responses to all household 
goods complaints and HHG Congressional inquiries. We will track our 
progress toward accomplishment of this goal by the following two new 
performance metrics: percent of HHG consumer complaints receiving an 
initial response within 72 hours of the complaint, and percent of HHG 
Congressional inquiries receiving an initial response within the DOT 
time limit.

                       ORGANIZATIONAL EXCELLENCE

    At the core of organizational excellence are our strategies for 
developing, acquiring, and sustaining the components of capability to 
perform our safety, security, and productivity missions: people, 
information, and financial resources. The President's Management Agenda 
(PMA) frames our agency efforts to ensure we put the right capability 
in the right place, at the right time, and at the right cost. Our five 
Organizational Excellence performance segments align with the PMA 
initiatives. We aim to sharpen our resource effectiveness and have 
allocated 6 percent of our fiscal year 2005 budget request in support 
of these performance-accelerating strategies.
    In addition to the PMA, we are increasingly integrating findings 
and recommendations of the Government Accounting Office (GAO), DOT 
Office of the Inspector General (OIG), and the National Transportation 
Safety Board (NTSB) as integral components of our agency strategy and 
operational guidance. Our activities supporting these recommendations 
are addressed in our performance budget narrative. As a result of these 
efforts, we are pleased to have closed numerous recommendations in 
fiscal year 2002.
    Strategic Management of Human Capital and Competitive Sourcing.--We 
will soon complete our agency-wide competency survey, and the priority 
objective will be the completion of the agency's Human Capital Plan. 
The Human Capital Plan will provide baseline information about the 
competencies of our workforce relative to our mission and performance 
targets; projections of potential competency gaps; and strategies for 
preventing those gaps. Competitive Sourcing is one approach in a 
coordinated strategy for managing human capital effectively and 
efficiently, along with hiring, learning and development, the use of 
personnel flexibilities, restructuring and reorganization of work, and 
contracting new work to result in best-value service to our customers.
    Budget and Performance Integration and Financial and Procurement 
Performance.--Our agency's initial performance budget effort 1 year ago 
provided the framework for a more performance-based approach to 
formulation of this year's request. Agency senior leadership met and 
reviewed cross-cutting performance implications in the allocation of 
program resources in this performance budget request for fiscal year 
2005. To advance our resource-to-results linkage, we have integrated 
our grant programs into our program logic, the better to track and 
discern the contribution of complementary Federal and State program 
efforts. We are also piloting FMCSA Division Administrator annual State 
plans to further increase the linkage between Federal and State plans, 
and to strengthen alignment with national goals. Our alignment and 
attribution of resources by performance segment also supports our 
advances in managerial cost accounting.
    E-Government.--FMCSA is a data-driven and citizen-centered 
organization. The agency looks to increasingly capitalize on 
information and IT to streamline internal processes, and to increase 
public accessibility to programs and information. Our e-Gov initiatives 
include advances in e-grants, business compliance one-stop, e-
rulemaking, and others.

                   FMCSA ADMINISTRATOR'S IMPERATIVES

    My priorities for fiscal year 2004-2005 include:
  --Full implementation of the New Entrant Program as mandated by MCSIA
  --Reauthorization of FMCSA safety programs
  --Improved safety data to inform targeting of enforcement operations
  --Reduction in the backlog of rulemakings
  --Improving the credibility and integrity of the CDL program
  --Improving cycle time for response to household goods complaints.
                                 ______
                                 

                  Bureau of Transportation Statistics

       Prepared Statement of Richard Kowalewski, Deputy Director

    Mr. Chairman, Ranking Member Murray, members of the subcommittee, 
thank you for the opportunity to discuss the Bureau of Transportation 
Statistics' fiscal year 2005 budget request.
    The Bureau of Transportation Statistics (BTS) proudly joins other 
agencies in our Federal statistical system to provide the unbiased data 
that drive planning, projections, and policies at the Federal, State, 
and local levels. Those decisions in turn determine the course of 
countless business and civic initiatives that support our prosperity, 
quality of life, and well-being as a Nation. In the transportation 
arena, BTS is committed to helping ensure the health and growth of 
efficient, safe, and environmentally sound infrastructure and 
operations across the various transportation modes.
    The availability and use of BTS data support each of Secretary 
Mineta's Strategic Goals of safety, mobility, global connectivity, 
environmental stewardship, security, and organizational excellence. 
While our data are critical for decision making, they also provide an 
important, unbiased report card. The success of government programs 
cannot be simply proclaimed; it must be objectively measurable by the 
people those programs serve. Thus, BTS plays a critical role at both 
ends of the policymaking process: we fuel transportation decisions and 
help provide critical performance benchmarks. Operating under the 
strict guidelines that apply to any Federal statistical agency, and in 
line with congressional intent in creating BTS, we do our work 
objectively, free of bias toward any one mode of transportation.

                         RECENT ACCOMPLISHMENTS

    BTS has accomplished much in the past year and has set its sights 
on doing fewer things better in the budget year to come. Our fiscal 
year 2005 budget request of $32.2 million from the Highway Trust Fund 
reflects critical information needs and incorporates decisions we have 
made internally to further the work that supports our mandate. In 
addition, as authorized in the VISION 100 aviation legislation, we 
propose that $4.045 million in reimbursable funding from the Airport 
and Airway Trust Fund be used to cover direct costs of our air 
transportation statistics program, which produces our most-requested 
and closely watched data.
    BTS's air transportation statistics program is relied upon for 
decisions with far-reaching economic implications. Our data on 
passenger enplanements drive the Federal Aviation Administration's 
(FAA) distribution of Airport Improvement Grants, and our data on 
flight delays and their causes help in FAA's decisions about 
infrastructure and operational investments, as well as decisions by the 
airlines and the traveling public. We have worked with Alaskan carriers 
to improve the quality of the monthly traffic data that they report to 
BTS and which the U.S. Postal Service uses to decide which carriers are 
eligible to receive mail contracts for intra-Alaskan mail under the 
Rural Service Improvement Act. We provided airline financial and 
operating information for decisions on post-9/11 grants and loan 
guarantees to passenger and freight carriers. Our aviation data assist 
the Transportation Security Administration in decisions regarding the 
allocation and deployment of resources across the country, and support 
the Office of the Secretary in making decisions about service to 
underserved communities and on international routes.
    For more than 11 years, Congress also has turned to BTS for both 
in-depth and quick turn-around answers, briefings, and visual 
presentations of data. We have analyzed the impact of railroad 
rationalization in the upper Great Plains, compared the costs of 
highway and rail construction, and assessed the impact of international 
trade on highway demands in our border States. We have prepared maps 
showing structurally deficient and functionally obsolete bridges in 
each State and congressional district so that members of Congress can 
be better informed in setting priorities on infrastructure needs.
    As the smallest of the Federal statistical agencies, BTS has always 
worked hard to maximize available resources, matching the right 
expertise to the job at hand and tuning our programs based on 
customers' feedback. That feedback has helped us determine the most 
effective approach in doing fewer things better.
    In 1997, for example, we developed an innovative survey design that 
allowed us to cut the size of the Commodity Flow Survey in half, 
reducing its budgetary cost and burden on respondents, without 
compromising data quality. Between 2001 and 2003 we replaced a 30-year-
old patchwork mainframe computer system that had been running our 
aviation data programs and replaced it with a modern mid-tier computer 
platform to increase our efficiency and the data's usability. Our work 
in helping to develop, validate, and verify performance measures for 
DOT contributed toward the high ranking of the Department's fiscal year 
2003 performance report by the Mercatus Center of George Mason 
University--DOT's performance report tied for number one in the Federal 
Government.
    BTS is working to improve its operations through initiatives of the 
President's Management Agenda, and to reorganize our lines of business 
to be simpler, more easily managed, and more results-oriented. As 
envisioned in the Administration's Safe, Accountable, Flexible, and 
Efficient Transportation Equity Act (SAFETEA) legislation and our 
budget, BTS proposes to sharpen its focus around five core data 
programs and two cross-cutting research programs. The core data 
programs are freight, travel, transportation economics, air 
transportation, and geographic information systems. The cross-cutting 
programs assess overall transportation system performance and improved 
statistical methods to address transportation-specific problems.
    In the freight and travel areas, this past year saw the release by 
BTS of the full datasets from our two major survey activities, the 
National Household Travel Survey, collected in 2001-2002 with the 
Federal Highway Administration (FHWA), and the Commodity Flow Survey, 
collected in 2002 with the Census Bureau. Analysis of each of these 
datasets will play a critical role in driving Federal, State, and local 
transportation planning and investment for the next 5 to 10 years.
    BTS is especially pleased to have unveiled two new economic indices 
that for the first time provide a comprehensive picture of 
transportation activity, help us to analyze its economic impact, and 
provide better information on what passengers pay for airline service:
  --The monthly Transportation Services Index (TSI) measures outputs in 
        the for-hire movement of freight and people and is a new 
        leading economic indicator, better clarifying our understanding 
        of transportation's relationship to the economy.
  --The quarterly Air Travel Price Index (ATPI) illustrates the rate of 
        national and local market fluctuations in the price of air 
        travel. The ATPI yields greater understanding of the cause and 
        effect relationship between airline industry market decisions, 
        external market factors, and the affordability of travel.
    These indices provide new insight into interrelationships and 
potential macro-economic impacts of changes in transportation activity. 
This, in turn, helps economists better anticipate turning points in our 
Nation's economy. We are also working, consistent with the late Senator 
Moynihan's original vision for BTS, on improving our measures of the 
productivity of the Nation's transportation sector.
    In fiscal year 2004, BTS also released an innovative product called 
GeoFreight, an intermodal freight planning tool on CD-ROM that 
graphically displays the geographic relationship between freight 
movements and infrastructure. Developed jointly with FHWA, the tool was 
designed to aid the planning of State and local governments and augment 
their ability to anticipate demands on capacity.
    Our work on improved statistical methods has led to the adoption of 
a new method to protect the confidentiality of statistical data that 
responds to customer demands to make more data available while 
preventing the disclosure of confidential data. We also led the 
development of Information and Dissemination Quality Guidelines for the 
Department, as required by recent data quality legislation.
    We have also worked at increasing the accessibility of our data. 
Our Web-based data platform, TranStats, has won several awards as an 
exemplary e-government initiative, including the Industry Advisory 
Council/Federal CIO Council Excellence.Gov Award (Top 5 Winner), the 
Sun/Computerworld iForce Excellence Award for Business Intelligence, 
and the Computerworld Honors Program Award. Along with our other web-
based information services, we serve an estimated 3.7 million users per 
year, allowing users to analyze data on-line and access electronic 
copies of the documents of the National Transportation Library.

                         CHALLENGES THAT REMAIN

    While BTS has made good progress in many areas of our statistical 
programs, challenges remain that need to be addressed to improve BTS's 
performance, such as BTS's freight flow data for imports and exports, 
geolocation data on the Nation's transportation network, and exposure 
data for general aviation operations.
    Recently, the Transportation Research Board has called upon BTS to 
fill gaps in our freight data program. The modest budget increase we 
have requested for fiscal year 2005, along with our refocusing of 
effort on core programs, will allow us to increase sample sixes on our 
key freight and travel data, improving the quality of data available to 
our users.
    BTS has much to accomplish at a time when our Nation has a new 
level of interest in and understanding of how the interconnectedness of 
our transportation system affects global competitiveness and national 
security. We need to develop a more timely and complete understanding 
of freight flows, as our economy moves increasingly to a just-in-time 
rhythm. We need a more comprehensive overview of our Nation's mobility 
and connectivity by collecting data that link transit trips, passenger 
terminal information, highway usage and capacity, and levels of 
commercial service. We also need improved highway safety exposure data, 
allowing improved analysis of the area where most of our transportation 
deaths occur. Possession of these data would reveal areas of economic 
opportunity, help us set our course more precisely, and help us to 
better predict the potential transportation impacts of terrorist 
attacks.
    We look forward to working with the committee to meet the Nation's 
needs for reliable, accurate transportation data, so that our 
policymaking can be well-informed and our transportation planning can 
make accurate assessments of the Nation's transportation needs. We will 
continue to seek out innovative data collection strategies that provide 
better data quality at lower cost.
                                 ______
                                 

              Research and Special Programs Administration

     Prepared Statement of Samuel G. Bonasso, Deputy Administrator

    Chairman Shelby, Ranking Member Murray, and members of the 
committee, on behalf of the Research and Special Programs 
Administration (RSPA), thank you for the opportunity to address the 
important safety, environmental and other performance goals supported 
by the President's fiscal year 2005 funding request for RSPA. With the 
active participation of our State, local, private sector and university 
partners, RSPA has made significant advances in meeting our performance 
goals, and we are looking forward to working with the members of this 
committee and with the Congress in continuing to reduce deaths, 
injuries, property damage and economic consequences resulting from 
hazardous materials, pipeline, and other transportation incidents. 
Working together, we need to develop and implement the programs and 
systems America needs to meet the important transportation safety 
challenges facing the Nation.
    Effective fulfillment of RSPA's safety responsibilities is critical 
to both the transportation and economic needs of the Nation. 
Approximately 28 percent of America's freight ton-miles involve 
transportation of hazardous materials, regulated by RSPA. The safe and 
secure movement of hazardous materials is fundamental to America's 
economy and industry, delivering much of the petroleum products and raw 
materials that fuel American business. Hazardous materials are also 
fundamental to everyday personal needs--for example, chlorine treats 
our water, making it safe to drink; anhydrous ammonia fertilizes our 
fields, allowing America to feed our Nation and some of the world. The 
volume of hazardous materials regulated by RSPA is substantial:
  --The Office of Pipeline Safety regulates 2.3 million miles of 
        pipeline that move 63 percent of America's consumed energy--
        they are literally the arteries of our way of life. On a ton-
        mile basis, pipelines carry 21 percent of the Nation's freight.
  --The Office of Hazardous Materials Safety regulates over 800,000 
        daily shipments of hazardous materials--working with all modes 
        of transportation on packaging and handling to help assure safe 
        movement through America's transportation system. Hazardous 
        materials outside of pipelines account for 7 percent of the 
        freight ton-miles transported annually in the United States.
  --The Transportation Safety Institute conducts cutting-edge training 
        in hazardous materials safety, as well as safety, security and 
        environmental stewardship training in all modes of 
        transportation for State and local first responders, public and 
        private sector engineers, inspectors, and other employees.
    Equally important to the efficient operation of America's 
transportation systems are RSPA's emergency transportation and research 
activities. Through RSPA:
  --The Office of Emergency Transportation manages the DOT Crisis 
        Management Center, a 24/7 operations center to track and 
        respond to natural and human-caused transportation incidents; 
        and coordinates continuity of operations and emergency 
        transportation planning for all Department of Transportation's 
        (DOT) operating administrations and in direct coordination with 
        all other Federal departments.
  --The Office of Innovation, Research and Education leads DOT's 
        involvement in the President's Hydrogen Fuel Initiative, 
        coordinating with all DOT administrations, the Department of 
        Energy and other Federal agencies in conducting research and 
        development and standards-setting activities to ensure the 
        safety of hydrogen-fueled vehicles and the infrastructure to 
        support them.
  --The Office of Innovation, Research and Education manages 26 
        University Transportation Centers that conduct research in all 
        areas of transportation engineering and management, advancing 
        the state of the practice and preparing students to be the 
        transportation systems leaders of tomorrow.
  --The Volpe National Transportation Systems Center provides technical 
        systems expertise to all DOT agencies and non-DOT clients in 
        all areas of transportation systems, including safety, homeland 
        and national security, mobility, environmental stewardship, 
        systems engineering, navigation, operator performance, and 
        economic analysis.
    Implicit in all of these regulatory, technical, research and 
training activities supporting safety is a significant concern for 
national and homeland security. Our overall focus on safety supports 
administration and Congressional goals for improving transportation 
security. All of RSPA's offices work closely with the Department of 
Homeland Security to ensure that our program activities keep security 
as an important focus, an integral part of providing safe 
transportation systems.
    RSPA's budget is performance-based, keyed to DOT's six strategic 
goals, rather than to specific ``budget line activities.'' RSPA strives 
to deliver the results that Congress expects in all six DOT strategic 
areas:
  --Safety.--Enhancing public health and safety by working toward 
        elimination of transportation-related deaths and injuries.
  --Mobility.--Advancing accessible, efficient intermodal 
        transportation for the movement of people and goods.
  --Global Connectivity.--Facilitating a more efficient domestic and 
        global transportation system that enables economic growth and 
        development.
  --Environmental Stewardship.--Promoting transportation solutions that 
        enhance communities and protect the natural and built 
        environment.
  --Security.--Balancing homeland and national security transportation 
        requirements with the mobility needs of the Nation for personal 
        travel and commerce.
  --Organizational Excellence.--Advancing the Department's ability to 
        manage for results and achieve the goals of the President's 
        Management Agenda.
    The President's total budget request for RSPA in fiscal year 2005 
is $137.3 million, an increase of $11.7 million (9.0 percent) over the 
fiscal year 2004 enacted level. Seventy-five percent of the President's 
fiscal year 2005 budget request for RSPA is dedicated towards achieving 
results supporting the DOT safety strategic goal. Another 16 percent 
supports the environmental stewardship strategic goal, reducing 
environmental damage from pipeline incidents, with the remaining 9 
percent supporting the other goals. The additional resources requested 
will primarily support efforts to reduce hazardous materials incidents 
and to advance preparation for emergency transportation response.
    RSPA sets performance goals to implement the DOT strategic goals. 
Some of those goals, and the funding requested to achieve them, 
include:
  --Safety.--RSPA requests $103.3 million, an increase of $7.6 million, 
        to meet our three critical safety performance goals:
    --Reduce deaths, injuries, property damage and economic 
            consequences resulting from hazardous materials 
            transportation incidents.
    --Reduce death, injuries, and property damage resulting from 
            pipeline incidents.
    --Promote the safe transport of hydrogen fuels and fuel systems so 
            that alternative fuel vehicles can be developed as a safe 
            alternative to petroleum-fueled vehicles.
  --Mobility/Security.--RSPA requests $5.7 million, an increase of $2.0 
        million, in order to prepare our Nation's transportation 
        system--in advance--to aid people and property harmed by 
        natural and terrorist disasters.
  --Environmental Stewardship.--RSPA requests $22.5 million, an 
        increase of $1.7 million, to reduce the amount of oil or other 
        hazardous liquids released from pipeline systems.
  --Organizational Excellence.--RSPA requests $5.9 million, an increase 
        of $0.4 million, in order to improve our operating efficiencies 
        in all programmatic areas.
    RSPA is achieving results in all of our critical areas, and is 
committed to continuing improvements in transportation safety. For 
example:
  --The number of serious hazardous materials incidents in 
        transportation has dropped by 18.5 percent since 2000.
  --RSPA's Office of Pipeline Safety has addressed most of a 12-year 
        backlog of outstanding Congressional mandates and 
        recommendations from oversight agencies.
  --RSPA is ensuring that pipelines are tested and repaired according 
        to higher integrity management standards, and RSPA is working 
        with our Federal partners to expedite the repair permits.
  --Hazardous liquid pipeline incidents have decreased by 28 percent 
        and the volume of oil spilled has been significantly reduced.
  --Third party excavation accidents have decreased by 59 percent over 
        the past 10 years, even while housing starts were on the rise, 
        which brings construction risk near pipelines by encroachment 
        on rights-of-way.
  --RSPA's Transportation Capability Assessment for Readiness (TCAR) 
        scores continue to improve annually.
  --The Transportation Safety Institute trains over 50,000 students 
        annually, graduated its 650,000th student in 2003, and recently 
        acquired university credit for various courses.
  --The University Transportation Centers continue to graduate over 
        1,500 students with advanced degrees annually.
  --RSPA's Hazardous Materials Emergency Preparedness Grants program, 
        which prepares communities to respond to hazardous materials 
        incidents, received a ``moderately effective'' score of 83 
        percent on a Program Assessment Rating Tool (PART) analysis 
        conducted for the fiscal year 2005 budget cycle. We are working 
        to remedy implement the recommendations resulting from the PART 
        analysis.
    In conclusion, RSPA's requested $11.7 million increase will be 
invested in improving our performance, further reducing death, 
injuries, property damage and economic consequences resulting from 
transportation incidents.
    Again, Mr. Chairman, thank you for the opportunity to testify 
before you today. I look forward to responding to any questions you may 
have.
                                 ______
                                 

                       DEPARTMENT OF THE TREASURY

                  Financial Crimes Enforcement Network

             Prepared Statement of William J. Fox, Director

    Chairman Shelby, Senator Murray, and members of the committee, 
thank you for the opportunity to submit my statement for the record on 
the President's fiscal year 2005 budget request for the Financial 
Crimes Enforcement Network. This $7.271 million request reflects the 
important role FinCEN plays in the United States government's efforts 
to understand, detect, and prevent terrorist financing.
    On December 1, 2003, I became FinCEN's fourth director. Prior to 
coming to FinCEN, I was working as the principal assistant to the 
General Counsel of the Treasury Department on issues relating to 
terrorist financing, which were issues that occupied a great deal of my 
time. Coming from the Department, I understood, to a large extent, the 
nature of FinCEN's responsibilities and what it was doing to carry out 
the obligations imposed by these responsibilities. In these 5 months, I 
have done a great deal of listening and learning from inside and 
outside of FinCEN. I have met extensively with the law enforcement and 
intelligence communities that we serve and the financial industry that 
we help regulate. I also have met with some of my counterparts in 
foreign governments and communicated with many more and I have met with 
and listened to the staffs of interested committees in the Congress--
including this subcommittee.
    In this short time, I have found an organization populated with 
employees with diverse and highly specialized talents, who are 
extremely dedicated to the agency and its mission. I have found an 
agency that is a good steward of the human and capital resources that 
have been provided by the Congress. However, I have also found an 
agency facing many important challenges--challenges relating to the 
effective and efficient management of the extremely sensitive data 
collected under the Bank Secrecy Act; challenges relating to its 
analytic staff and the analytic product they produce; challenges 
relating to the administration of its regulatory programs under the 
Bank Secrecy Act; challenges relating to refocusing its important 
partnerships with financial intelligence units around the world--the 
Egmont Group; and, challenges relating to the agency's present 
organizational structure.
    My statement will address how FinCEN is going to meet these 
challenges and then it will focus on our fiscal year 2005 budget 
request.

                               BACKGROUND

    FinCEN's mission is to help safeguard the financial system of the 
United States from being abused by criminals and terrorists. FinCEN 
works to accomplish its mission through: (1) administration of the Bank 
Secrecy Act--a regulatory regime that provides for the reporting of 
highly sensitive financial data that are critical to investigations of 
financial crime; (2) dissemination of the data reported under the Bank 
Secrecy Act to law enforcement and, under appropriate circumstances, 
the intelligence community; (3) analysis of information related to 
illicit finance--both strategic and tactical analysis; and, (4) the 
education and outreach provided to law enforcement and the financial 
industry on issues relating to illicit finance. FinCEN has many 
attributes that are key to understanding the agency and how it works to 
achieve its mission:
  --FinCEN is a regulatory agency.--FinCEN has an obligation to 
        administer the Bank Secrecy Act, the principal regulatory 
        statute aimed at addressing the problems of money laundering 
        and other forms of illicit finance, including terrorist 
        financing. It is responsible for shaping and implementing this 
        regulatory regime and, in concert with the functional banking, 
        securities, and commodities regulators and the Internal Revenue 
        Service, for ensuring compliance with that regime. The agency 
        is also charged with protecting the integrity and 
        confidentiality of the information collected under the Bank 
        Secrecy Act.
  --FinCEN is a financial intelligence agency.--While not a member of 
        the intelligence community, FinCEN, with the help of the 
        Internal Revenue Service, collects, houses, analyzes and 
        disseminates financial information critical to investigations 
        of illicit finance.
  --FinCEN is a law enforcement support agency.--While FinCEN has no 
        criminal investigative or arrest authority, much of our effort 
        supports the detection, investigation and successful 
        prosecution of financial crime.
  --FinCEN is a network.--We are not directed to support one agency or 
        a select group of agencies. We make our information, products 
        and services available to all agencies that have a role in 
        investigating illicit finance. In fact, we network these 
        agencies. Our technology tells us when different agencies are 
        searching the same data and we put those agencies together--
        avoiding investigative overlap and permitting the agencies to 
        leverage resources and information.
    Given this important mission, FinCEN fits perfectly in the 
Department of the Treasury; possibly even more so after the Homeland 
Security reorganization rather than before that reorganization. The 
creation of the Office of Terrorism and Financial Intelligence within 
Treasury only enhances that fit. FinCEN will be able to help 
``operationalize'' Treasury's policy priorities on these important 
issues and our operational analytic work will complement the analysis 
that will eventually be done in the newly created Office of Financial 
Intelligence. I believe this coordinated effort will lead to a greater 
emphasis and understanding of money laundering, terrorist financing and 
other forms of illicit finance not only at Treasury, but within the 
United States, and that will make us all safer. FinCEN will also 
benefit from the Department-wide, policy-coordinating role this office 
will provide.

                  FINCEN'S COUNTER-TERRORISM STRATEGY

    The single, most important operational priority for FinCEN is 
counter-terrorism support to law enforcement and the intelligence 
community. To emphasize the importance of this work we have improved 
and are now implementing a comprehensive counter-terrorism strategy 
that draws from our analytic support to law enforcement, our regulatory 
tools and expertise, and our international networking capabilities. We 
believe the implementation of this strategy will strengthen our focus 
and ensure that FinCEN is more active and aggressive rather than 
reactive on issues relating to terrorism. The strategy has five basic 
components.

Analysis of Terrorist Financing Suspicious Activity Reports
    FinCEN analyzes suspicious activity reports for both tactical and 
strategic value. At the tactical level, we are implementing a program 
in which every report that indicates a connection to terrorism is 
immediately reviewed and validated and then analyzed with other 
available information. This information will be packaged and referred 
to the Terrorist Threat Integration Center (TTIC), FBI-TFOS, and other 
relevant law enforcement. Moreover, this information will be stored in 
a manner that facilitates its access and availability for analysis. We 
have already had success with this process resulting in important 
information being passed along to law enforcement agency.
    At the strategic level, we are also devoting analysts to study Bank 
Secrecy Act data and all other available information to gain an 
increased understanding of methodologies, typologies, geographic 
patterns of activity and systemic vulner-abilities relating to 
terrorist financing. These analysts will focus on regional and systemic 
``hot spots'' for terrorist financing, studying and analyzing all 
sources of information. Such focus, which produced the study mandated 
by the Congress on Informal Value Transfer Systems, can significantly 
add to the knowledge base of law enforcement. For example, we have 
begun a process to comprehensively study illicit trade in diamonds and 
other precious stones and metals and the links to terrorist finance. 
Although this initiative is currently underway, in order to fully 
implement it, we will need to upgrade analysts' security clearances and 
obtain additional equipment appropriate for the handling and processing 
of national security information.

USA PATRIOT Act Sections 311 and 314 Implementation
    Some of the new tools afforded us through the USA PATRIOT Act are 
proving to be invaluable in the war against terrorist financing, 
particularly Section 314 of the Act. FinCEN also has initiated a 
program to provide the analytic, regulatory and legal resources needed 
to support effective implementation of Section 311 by the Treasury 
Department. I have directed my staff to give priority to the pro-active 
targeting of those financial institutions and jurisdictions that are 
involved, wittingly or unwittingly, in the financing of terror. This 
prophylactic measure goes to the very heart of FinCEN's mission--to 
safeguard the financial system of the United States from money 
launderers and the financiers of terror.
    Building on a successful pilot program that we began with the 
Bureau of Immigration and Customs on a 314(a) money-laundering request, 
FinCEN is now dedicating several analysts to apply this program to all 
314(a) terrorism requests. Specifically, the analysts will run all 
314(a) terrorism-related requests against Bank Secrecy Act data 
concurrent with these requests being sent to financial institutions. 
Based on this initial data review, the law enforcement requester will 
then be able to request a more in-depth analysis if desired.

International Cooperation and Information Sharing
    FinCEN will increase the exchange of terrorist financing 
investigative and analytical information with other foreign financial 
intelligence units around the world. We are implementing a program by 
which FinCEN will automatically request information from relevant 
financial-intelligence-unit counterparts as part of any terrorism 
related analysis project. As part of this program, we are also 
upgrading our response to incoming requests for information from 
financial intelligence units by providing appropriate information and 
analysis from all sources of information.

Terrorism Regulatory Outreach
    We will continue our work in improving our ability to provide 
information to the regulated community to better identify potential 
terrorist financing activity. One area of particular focus will be 
money services businesses. Money services businesses continue to 
require more attention and resources, and FinCEN will undertake an 
initiative to educate segments of the industry most vulnerable to 
terrorist abuse. These segments include small businesses that typically 
offer money remittance services, check cashing, money orders, stored 
value products and other informal value transfer systems. As we learned 
from the attacks of September 11, funds used to finance terrorist 
operations can be and have been moved in small amounts using, for 
example, wire transfer, traveler's check and automated teller machine 
services. I have directed FinCEN's Office of Regulatory Programs and 
Office of Strategic Analysis to enhance our outreach program that will 
include training on how terrorists have used and continue to use money 
services businesses; the reason for and importance of the registration 
requirement for money services businesses; and the importance of 
complying with the reporting requirements of the Bank Secrecy Act, 
especially suspicious activity reporting. We are planning to streamline 
suspicious activity reporting for small money services businesses with 
a simplified form.

Analytic Skill Development
    As a general matter, I have directed that FinCEN make training of 
personnel the highest human resource management priority. The top 
priority of this new program will be analytic skill development 
relating to terrorist financing. We plan to begin by seeking reciprocal 
opportunities for terrorist finance analytic skill development within 
law enforcement, the Egmont Group, the intelligence community and the 
financial industry. This initiative is intended to build a foundation 
for continuous improvement of our analytic assets through cross 
training and diversification; production of joint terrorist financing 
threat assessments and other reports; understanding of intelligence 
processes; the international context of terrorist financing; and the 
financial industry perspective. In addition, we will need to support 
training focused on financial forensics, language skills, and 
geographically targeted studies that focus on culture, infrastructure 
and other unique aspects of a particular region.
    I believe the full implementation of this strategy will materially 
assist the Department of the Treasury and the United States in 
addressing the financing of terror. Approaching this problem in a 
systemic way with dedicated resources is, in our view, the best way to 
make this strategy a success.

                     FINCEN'S NEAR TERM CHALLENGES

    As I mentioned before, FinCEN is facing a number of significant 
challenges. Because each of these challenges affects FinCEN's 
effectiveness, I feel it is important to raise these challenges with 
the subcommittee.
Security and Dissemination of Bank Secrecy Act Information
    As the administrator of the Bank Secrecy Act, there is no duty I 
view as more critical then the effective collection, management and 
dissemination of the highly sensitive and confidential information 
collected under that Act. If FinCEN does nothing else, it must ensure 
that such data are properly collected, are secure and are appropriately 
and efficiently disseminated. This is FinCEN's core responsibility.
    FinCEN must modernize the way it houses and provides access to 
information collected under the Bank Secrecy Act. Currently, our data 
are accessed by most of our customers through an outmoded mainframe 
system. This system does not have the robust data mining capabilities 
or analytical tools we should be providing. This has led many of our 
customers to ask for wholesale copies of the data, or direct access to 
the data in a way that will not permit us to perform our 
responsibilities relating to the administration and management of the 
data. Accordingly, we must create a system that provides robust data 
mining and analytical tools to our customers in law enforcement and 
that preserves our ability to: (1) effectively administer and secure 
and audit use of the information; (2) network those persons who are 
querying the data to prevent overlapping investigations and encourage 
efficient use of law enforcement resources; and, (3) develop and 
provide adequate feedback to the financial industries we regulate, 
which will ensure better reporting. That system is called ``BSA 
Direct.''
    When fully implemented, BSA Direct will make available robust, 
state-of-the-art, data mining capabilities and other analytic tools 
directly to law enforcement. We plan to provide all access to these 
data through BSA Direct, working with our law enforcement customers to 
ensure that their individual systems will be able to extract the 
maximum value from the Bank Secrecy Act reporting. We will be exploring 
ways to enable these agencies to integrate the Bank Secrecy Act 
reporting with their other systems while maintaining, and even 
improving our ability to audit and network the use of the data and 
obtain feedback concerning their value. This new system will provide us 
with the capability to discharge our responsibilities relating to the 
administration of these sensitive data: security and access control, 
networking, and feedback. This system will also significantly enhance 
our coordination and information sharing abilities, as well as our 
ability to safeguard the privacy of the information and monitor BSA 
compliance. We have already started work on this system and its 
deployment is crucial to FinCEN moving forward and meeting its various 
challenges. We have requested in our fiscal year 2005 budget a transfer 
of $2.5 million from the Internal Revenue Service for this system.

Enhancing FinCEN's Analytical Capabilities
    Another challenge FinCEN is facing relates to its analytic 
capabilities. In my view, FinCEN must move away from its current 
emphasis on data checks and data retrieval, and move its analytic 
resources toward more robust and sophisticated analysis. FinCEN had 
moved to data checks and data retrieval in response to criticisms about 
lag time in responding to simple requests for information. Now, as our 
systems improve, our customers will be able to retrieve data 
themselves, which will give FinCEN more time and resources for analysis 
of data.
    I believe that FinCEN can and must provide value through the 
application of our focused financial analytic expertise to mining 
information and providing link analyses that follow the money of 
criminals and terrorists, or identify systemic or geographic weaknesses 
to uncover its source or the existence of terrorist networks. For 
example, in addition to providing geographic threat analysis for law 
enforcement, FinCEN has been studying systemic trends in money 
laundering and terrorist financing. We were instrumental in bringing 
the black market peso exchange system to the forefront of policy 
decisions, and we are focusing on other trends and patterns that we now 
see emerging in the global market. I recently made a trip to Dubai to 
participate in the growing dialogue on the potential use of diamonds 
and other commodities for illicit purposes, including money laundering 
and terrorist financing. We recently developed cases from Bank Secrecy 
Act data involving foreign gem companies with links to the United 
States and referred this information to law enforcement authorities. 
This is part of our focus on and study of what may be another iteration 
of money laundering and terrorist financing--commodity-based systems.
    In my view, while FinCEN still has some of the best financial 
analytic talent in the United States government, the challenges we face 
require us to further develop that talent to enable the full 
exploitation and integration of all categories of financial 
information--well beyond Bank Secrecy Act information. I have directed 
FinCEN's managers to concentrate on training, as well as the hiring of 
new, diverse financial analytic expertise.

Enhancing FinCEN's Technology
    As I have mentioned, information sharing is critical to our 
collective efforts to detect and thwart criminal activity and that is 
why I believe enhancing our technological capabilities is extremely 
important. Section 314(a) of the USA PATRIOT Act allows law enforcement 
to query United States financial institutions about suspects, 
businesses and accounts in money laundering and counter terrorism 
investigations. FinCEN facilitates this interaction between the 
financial industry and law enforcement by electronically sending law 
enforcement requests to various banks that, in turn, check their 
records and relay the information back to FinCEN to then provide to the 
requestor. This saves law enforcement time and resources. We are 
currently enhancing the Section 314(a) electronic capabilities to allow 
for the originating request to be made to FinCEN via a secure website. 
This system is an example of how critical technology is to our law 
enforcement counterparts.
    We must continue to work to enhance the development of the PATRIOT 
Act Communications System, a system that permits the electronic filing 
of reports required under the Bank Secrecy Act. This system was 
developed and brought on-line under a very tight legislative deadline. 
FinCEN received the E-GOV award for its work on this system. Filing 
these forms on-line is not only more efficient; it will help eliminate 
some of the data errors and omissions.
    As of April 19, 2004, 1.2 million Bank Secrecy Act forms had been 
electronically filed through this system. We now support nearly 1,100 
users, which include 15 of the top 25 filers of Bank Secrecy Act 
information. These top 25 filers accounted for approximately 50 percent 
of all Bank Secrecy Act forms filed in fiscal year 2003. While this is 
all good news, the bad news is that the current number of forms filed 
electronically remains quite small on a percentage basis. The forms 
being filed through the PATRIOT Act Communications System represents 
only approximately 5 percent of the universe of all Bank Secrecy Act 
reports filed. I have directed our PATRIOT Act Communications System 
team to reach out to the financial industry and determine what more 
needs to be done to convince them to file electronically. As we learn 
about what is holding institutions back from filing, I have directed 
our team to work closely with system developers to build the system 
stability and tools necessary to improve the overall percentage of 
filing.
    FinCEN presently lacks the capacity to detect Bank Secrecy Act form 
filing anomalies on a proactive, micro level. As I mentioned earlier, 
BSA Direct will integrate Bank Secrecy Act data into a modern data 
warehouse environment and it will include tools to flag Bank Secrecy 
Act form filing anomalies for action by FinCEN and/or referral to 
appropriate authorities. In the meantime, FinCEN is developing a 
request to the Detroit Computing Center to provide periodic exception 
reports on financial institutions whose Bank Secrecy Act form filing-
volume varies beyond prescribed parameters during prescribed time 
frames. While we will not be able to conduct the sophisticated 
monitoring that will be available with BSA Direct, this interim step 
should produce an alert in the event of a catastrophic failure to file 
forms, as was experienced in the Mirage case in which the Mirage Casino 
in Las Vegas failed to file over 14,000 currency transaction reports in 
an 18-month period.

Enhancing FinCEN's Regulatory Programs
    The administration of the regulatory regime under the Bank Secrecy 
Act is a core responsibility for FinCEN. Given the nature of our 
regulatory regime--a risk-based regime--our partnership with the 
diverse businesses in the financial services industry is the key to our 
success. I must tell you that it is my perspective that the financial 
industry is generally a model of good corporate citizenship on these 
issues. The industry's diligence and commitment to the recordkeeping 
and reporting requirements of the Bank Secrecy Act is by and large 
outstanding. The industry's cooperation with FinCEN in implementing 
many of the provisions of the USA PATRIOT Act has strengthened the 
foundation of our efforts to safeguard the financial system from 
criminal abuse and terrorist financing. I have met with many of our 
industry partners in the last several months, both old and new, and I 
have been struck with how concerned they are that the information they 
provide be of value to the fight against terrorist financing and other 
financial crimes. In turn, FinCEN is committed to enhancing the 
guidance they need as they strive to meet the requirements and 
objectives of new regulations.
    The challenge before FinCEN on this issue is simple: we must ensure 
the remaining regulatory packages required by the USA PATRIOT Act are 
completed and implemented. Moreover, as we work with our regulatory 
partners to implement this regulatory regime, we must provide constant 
feedback and guidance. We have asked the industry to create anti-money 
laundering programs that are risk-based--custom tailored to each 
institution based upon the business in which that institution engages 
and the customers that institution has. We must find ways to help the 
industry define that risk. Development of secure web-based systems that 
will foster the communication discussed above is a step in the right 
direction. But we must continue to find new and better ways to reach 
out to the industry. They understand the threat money laundering and 
illicit finance poses to our financial system and they are willing to 
help.
    Perhaps our most significant challenge lies in ensuring that 
financial institutions are appropriately examined for compliance with 
the Bank Secrecy Act and its implementing regulations. As you know, we 
have issued and will continue to issue anti-money laundering program 
regulations that will bring new categories of businesses under this 
form of Bank Secrecy Act regulation for the first time.
    We have and will continue to rely on the judgment, expertise, and 
resources of the Federal banking, securities and commodities 
regulators. But the expansion of the anti-money laundering regime comes 
with the additional responsibility and challenges of examining 
thousands of addresses and businesses for compliance. We have relied on 
the Internal Revenue Service to examine those non-bank institutions. 
The addition of the insurance industry and dealers in precious stones, 
metals, and jewels, two categories of financial institutions for which 
we will shortly issue final anti-money laundering program regulations, 
will themselves stretch the resources of agencies responsible for 
examination. We must find ways to ensure that these regulatory programs 
are implemented in a fair, consistent and timely manner that is focused 
on achieving the goals of the Bank Secrecy Act. Although difficult, 
this is an issue that must be resolved.
    Finally, we intend to take even a more active role in working with 
our regulatory partners to ensure the effective examination of 
financial institutions. We will find appropriate ways to enhance our 
ability to provide prompt, interpretive guidance to examiners, obtain 
consistency in the application of the regulations across industry 
lines, and identify and address compliance issues as they arise.

Enhancing FinCEN's International Program
    FinCEN's international initiatives and programs are driven by a 
stark reality: finance knows no borders. Next year will mark the tenth 
anniversary of the founding of the Egmont Group--a milestone event that 
FinCEN will host in Washington, DC next June. The Egmont Group is an 
international collection of ``financial intelligence units''--entities, 
which, like FinCEN, are charged with the collection and analysis of 
financial information to help prevent money laundering and other 
illicit finance. The Egmont Group has achieved remarkable growth since 
its inception in 1995. Membership has risen from 6 charter members to 
84. This membership number will rise to 92 this year and is expected to 
top 100 by the time of the June 2005 Plenary.
    The Egmont Group serves as an international network, fostering 
improved communication and interaction among financial intelligence 
units (FIUs) in such areas as information sharing and training 
coordination. The goal of the Group is to provide a forum for FIUs 
around the world to improve support to their respective governments in 
the fight against financial crimes. This support includes expanding and 
systematizing the exchange of financial intelligence information, 
improving expertise and capabilities of personnel employed by such 
organizations, and fostering better and more secure communication among 
FIUs through the application of technology.
    Egmont's secure web system permits members of the group to 
communicate with one another via secure e-mail, and to post and assess 
information regarding trends, analytical tools, and technological 
developments. FinCEN, on behalf of the Egmont Group, maintains the 
Egmont Secure Web. Currently, 76 of the 84 members (90 percent) are 
connected to the secure web site. I am very pleased to announce that 
FinCEN will launch a new and more efficient secure web site for Egmont 
in June. We expect this new site will generate more robust usage, which 
will enhance international cooperation among Egmont members.
    FinCEN has played a significant role in the growth and health of 
the Egmont Group and it maintains bilateral information sharing 
agreements with financial intelligence units around the world. However, 
in my view, this program has not received the priority it should have 
in recent times. Merely because of the simple statement I made 
earlier--that finance knows no borders--we must step up our 
international engagement with our counterparts around the world. Our 
plan is to do three principal things:
  --Lead the Egmont Group to begin focusing on actual member 
        collaboration. Egmont members should be collaborating in a more 
        systemic way to address issues relating to terrorist financing, 
        money laundering and other illicit finance at both a tactical 
        and strategic level.
  --Enhance the FinCEN analytical product we provide to our global 
        counterparts when we receive requests for information. Today, 
        we principally provide the results of a data check. We think we 
        owe our colleagues more in-depth analysis of the information we 
        provide. As noted before, we will also be making more requests 
        for information and analysis from our partners--particularly 
        when the issue involves terrorist financing or money 
        laundering.
  --Foster exchanges of personnel with financial intelligence units 
        around the world. We have already begun discussions with 
        certain counterparts about such an exchange and we are hopeful 
        we can begin this program soon. The benefits of this type of 
        exchange are obvious. It is the best way we can learn together 
        how to address a truly global problem.
    FinCEN will also enhance its support for Treasury policy officials' 
work in the Financial Action Task Force (FATF) and FATF regional 
bodies. We will continue our work with the State Department in the 
drafting and editing of the ``International Narcotics Control Strategy 
Report.'' Finally, we will continue our important efforts on financial 
intelligence unit outreach and training. Presently, we are working with 
the United Arab Emirates on a South Asia FIU Conference for 
Afghanistan, Bangladesh, India, Maldives, Pakistan and Sri Lanka.
    Additionally, FinCEN has given its support and participation to the 
``3+1'' Working Group on terrorist financing in the Tri-border Area. 
The issues of information sharing and the bolstering of FIUs in the 
participating states of Argentina, Brazil and Paraguay are critical 
issues for the U.S. delegation to the ``3+1'' Working Group led by the 
Department of State's Office of Counter-Terrorism.

FinCEN's Organizational Structure
    We have been working closely with Treasury on our efforts to more 
effectively marshal our resources at FinCEN. As a result, I recently 
proposed a realignment of FinCEN that reflects my priorities to enhance 
FinCEN's analytical component and improve its focus and services 
devoted to outreach, education and technology on behalf of both its 
clients and the financial services community. We have briefed your 
staff on this proposal and, just last week; have received approval from 
the Department to go forward with this realignment.
    Essentially, the realignment provides the ability to pull out the 
non-analytical functions presently entangled in FinCEN's analytical 
unit so that those managers and analysts can focus exclusively on 
analysis. We are also combining all client services and systems under a 
single manager in order to ensure that our technology is coordinated 
and better focused on serving its users. Similarly, I want this 
organizational structure to highlight the importance of education and 
training of our law enforcement clients and the regulated community. 
Only by working closely and cooperatively with these groups can FinCEN 
truly understand what services it must provide and what requirements it 
must meet to assist in the detection, prevention and dismantling of 
terrorist financing.

                    FISCAL YEAR 2005 BUDGET REQUEST

    The proposed fiscal year 2005 budget is designed to assist in 
strengthening our role in the United States Government's efforts to 
understand, detect, and prevent terrorist financing. I also believe it 
will allow us to begin to meet the challenges that I have outlined 
above. The President's fiscal year budget request would provide 
$64,502,000 and 291 full-time equivalents for FinCEN. This request 
includes:
  --$1.533 million and 4 FTE for program increases to:
    --(1) enhance regulatory support to newly covered industries as 
            required under the USA PATRIOT Act ($0.278 million and 2 
            FTE);
    --(2) enhance access to Bank Secrecy Act information by putting 
            information technology aids in place to the Gateway system 
            to increase the current 1,000 law enforcement users to 
            3,000 users by fiscal year 2008 ($1.055 million and 2 FTE); 
            and,
    --(3) procure financial and administrative services which would 
            enable FinCEN to consolidate its accounting and financial 
            reporting by using a Treasury franchise service provider, 
            assuring continued submission to TIER and other accounting-
            related reporting in the Treasury format ($0.200 million 
            and FTE).
  --$2.5 million transfer from the Internal Revenue Service for the 
        Bank Secrecy Act (BSA) Direct System. See infra.
  --$3.238 million and 10 FTE for adjustments necessary to maintain 
        current levels ($1.716 million) and program annualizations for 
        fiscal year 2004 initiatives ($1.522 and 10 FTE).

                               CONCLUSION

    The fiscal year 2005 budget request for FinCEN supports the 
President's fight against terrorism, and continues to build the 
framework necessary for accomplishing our complex mission of protecting 
the United States financial systems from abuses imposed by criminals 
and terrorists and assisting law enforcement in the detection, 
investigation, disruption and prosecution of such illicit activity 
through our role as the administrator of the Bank Secrecy Act.
    I look forward to continuing to work with you to meet these 
challenges and enhance our contributions to the war on financial crime 
and terrorist financing.
    Mr. Chairman, this concludes my statement.
                                 ______
                                 

                Alcohol and Tobacco Tax and Trade Bureau

       Prepared Statement of Arthur J. Libertucci, Administrator

    Mr. Chairman, Senator Murray, and members of the subcommittee, it 
is my pleasure and honor to have the opportunity to highlight the 
Alcohol and Tobacco Tax and Trade Bureau's (TTB) accomplishments for 
the past year and discuss our fiscal year 2005 budget submission.
    The Alcohol and Tobacco Tax and Trade Bureau was established 
January 24, 2003, as a result of the Homeland Security Act of 2002. The 
Act authorized the transfer of all of the firearms, explosives, and 
arson functions of the Bureau of Alcohol, Tobacco and Firearms (ATF) to 
the Department of Justice and established TTB within the Department of 
the Treasury. While the agency was given a new name, the history of 
TTB's regulatory responsibilities dates back to creation of the 
Department of the Treasury and the first Federal taxes being levied on 
distilled spirits in 1791.
    The mission of TTB is to collect alcohol, tobacco, firearms and 
ammunition excise taxes, to ensure that alcohol beverages are labeled, 
advertised, and marketed in accordance with the law, and to administer 
the laws and regulations in a manner that protects the revenue, 
protects the consumer, promotes voluntary compliance, and facilitates 
import and export trade in beverage and industrial alcohols.
    Not since the late 1940's has there been such a large overhaul and 
reorganization of the government and its agencies. The challenges in 
standing up a brand new bureau were many, but the men and women on 
board at the time of the transition understood and were ready for the 
challenging job that lay ahead. When we began, we only had about half 
of our projected FTE on board. Most of fiscal year 2003 and part of 
fiscal year 2004 were dedicated to hiring personnel in all of our 
offices in Washington, DC, and around the country, and finding 
appropriate office space for field personnel.
    Late in 2003 we began the move to our new headquarters location, 
two blocks from the Department. This was accomplished in two phases. A 
majority of the offices located in Washington, DC, which include 
Headquarters and Field Operations staff, moved September 2003. My staff 
and the Office of Chief Counsel moved April 2004. Our goal in both 
moves was to continue with business as usual, carrying out our mission, 
and have as seamless a transition as possible.

                              AUTHORITIES

    TTB oversees the regulation of alcohol under the Federal Alcohol 
Administration Act (FAA Act) and the Internal Revenue Code of 1986 
(IRC). Under the FAA Act, TTB regulates the authorized operations, 
labeling, advertising, and trade practices for those engaged in the 
alcohol beverage industry. This includes trade practice provisions, 
which regulate such practices as exclusive outlets, tied house 
arrangements, commercial bribery, and consignment sales. These 
provisions are intended to ensure fair dealing within the industry and 
to protect the consumer by prohibiting sales arrangements that result 
from anti-competitive practices.
    We also administer the IRC provision relative to the qualification 
and operation of distilleries, wineries, breweries, and industrial 
alcohol producers and users. Under this authority, we administer 
classification and collection of tax on alcohol products, and the 
collection of various occupational taxes from alcohol dealers. TTB's 
responsibilities under the IRC cover the production, packaging, 
bottling, labeling, and storage requirements related to alcohol 
products.
    With respect to tobacco, TTB work involves chapter 52 of the IRC, 
relating to the manufacture, importation, exportation, and distribution 
of tobacco products. Specifically, we examine applications and issue 
permits for tobacco manufacturers and importers, and export warehouses, 
and oversee their operations. TTB classifies a wide variety of tobacco 
products for tax purposes, and collects the tax on such tobacco 
products, as provided under the statute and implementing regulations. 
Finally, TTB also administers the excise tax on firearms and ammunition 
pursuant to its authority under the IRC.

                                MISSION

    TTB administers Federal tax laws on alcohol, tobacco, firearms, and 
ammunition, and ensures that the alcohol and tobacco commodities TTB 
regulates are lawfully sold in the United States. In carrying out its 
mission responsibly, TTB must be sensitive to the industry's concerns 
as the government's customers, by reducing delays and regulations that 
impede business while also providing a tangible benefit to the American 
public. TTB's history indicates that an appropriate regulatory presence 
provides a deterrent against tax evasion schemes. TTB is committed to 
carrying out its responsibilities in a manner that makes effective and 
efficient use of the public resources entrusted to us. We carry out our 
mission without imposing inappropriate or undue burden on those whom we 
regulate and from whom we collect taxes. At the same time we maintain 
an aggressive enforcement program that deters violations by industry 
members and promotes voluntary compliance.
    The split from our predecessor agency has enabled TTB to return to 
its roots and focus on collecting the revenue and protecting the 
public. In the year since our inception, we have returned to that core 
mission, and we have proven that despite myriad administrative details, 
we have been able to focus on excise tax collection. Allow me to 
explain some of our highlights of the past year.
    TTB created a Field Operations Directorate that includes the pre-
established National Revenue Center in Cincinnati, Ohio, which 
reconciles returns, reports, and claims; screens applications and 
issues permits; and provides expert technical assistance for industry, 
the public, and government agencies to ensure fair and proper revenue 
collection. The NRC is currently undergoing a business process 
reengineering study in order to maximize customer service and 
efficiency, while allowing TTB to handle an ever-increasing workload 
with existing staff.
    The Trade Investigations Division (TID), staffed with 
Investigators, has seven field groups located across the country 
dedicated to ensuring that only qualified applicants are granted 
permits to engage in the production and distribution of alcohol and 
tobacco products. Field investigations of industry members are 
conducted to help promote voluntary compliance with the laws and 
regulations enforced by TTB and prevent misleading labeling and 
advertising of alcohol beverages.
    Investigators also respond to credible information suggesting a 
health-related contamination of an alcohol or tobacco product. In 
addition, TID conducts trade practice and Certificate of Label Approval 
(COLA) fraud investigations. Some investigations over the year have 
resulted in revocations of permits or in the applicant withdrawing the 
permit as it is unable to meet the government requirements to operate. 
The work done by Trade Investigations is not only about educating our 
customers, but showing our presence and clearly helping carry out our 
unique and necessary mission.
    Because of a greater field presence, in fiscal year 2003 we 
accepted 13 Offers-in-Compromise (OIC) for a total of $1.162 million. 
In fiscal year 2004, we have so far accepted 12 OICs for a total of 
$270,086, and we have an additional 7 cases pending for $176,472. As an 
example, we collected a $35,000 OIC from a company who was found to 
have been receiving and shipping product without proper label approval. 
Investigators also conducted a product integrity investigation into a 
winery in the Southwest and found numerous label, record keeping, and 
administrative violations. We have also participated in counterfeit 
alcohol and tobacco investigations along the border in Texas and New 
Mexico.
    TTB's Tax Audit Division and program was first established in late 
fiscal year 2003 as part of TTB's strategic plan to collect the revenue 
that is rightfully due from the alcohol, tobacco, and firearms and 
ammunitions industries because in the past, ATF's program priorities 
and investigations were placed primarily on firearms and explosives. 
The division was established to provide a systematic approach to 
safeguard over $14 billion in annual revenue collected by TTB.
    The Tax Audit Division verifies the proper payment of tax and 
ensures compliance with the laws and regulations that protect the 
revenue and promote voluntary compliance. TTB Tax Audit uses a risk-
based approach to target non-compliant industry members. A goal in 2004 
is to establish a baseline for measuring tax revenue audited in a 5-6 
year period and the industry compliance rate (percentage of taxpayers 
audited with no material findings, thereby validating the amount of tax 
paid was accurate and rightfully due).
    TTB's accomplishments in Tax Audit include establishing 10 audit 
offices across the country and recruiting and hiring 80 audit staff. 
The average staff person has 10 years of previous audit experience and 
holds one audit certification (i.e. Certified Public Accountant). TAD 
also established a formal industry-training program: 75 percent of the 
workforce has been trained in three or more industries (Distilled 
Spirits Plants, Beer, Wine, Manufacture of Non-beverage Products, and 
Firearms). They also implemented an automated audit documentation tool 
to facilitate a standard audit approach and create efficiencies, and 
developed an audit work plan scheduling 110 taxpayers for review in 
2004.
    I am pleased to report that initial audit findings have identified 
approximately $4.7 million in additional tax revenue due, and to date, 
these audits have resulted in approximately $500,000 in additional 
revenue collected by TTB. Further, these audits have identified an 
additional $523,000 in revenue due to the governments of Puerto Rico 
and the Virgin Islands for taxes collected on articles (i.e. rum) 
produced in Puerto Rico or the Virgin Islands (also called cover over).
    These divisions work hand in glove with the Risk Management Staff 
who develop, implement, and maintain programs that ensure TTB is 
collecting all the revenue due and protecting the public. Divisions 
within Headquarters Operations often support the work done by TTB 
Auditors and Investigators in the field.
    The Regulations and Procedures Division (RPD) drafts new and 
revised regulations under the Internal Revenue Code and the Federal 
Alcohol Administration Act. They issue rulings, procedures, and 
informational documents to clarify the law and regulations. Most 
notably, they evaluate important policy issues before TTB and write 
proposed regulations and Treasury Decisions for publication in the 
Federal Register and the Code of Federal Regulations.
    In 2003, much attention was placed on the issuance of limitations 
set for health claims related to consumption of alcoholic beverages. On 
March 3, 2003, TTB, along with the Treasury Department, issued final 
regulations to prohibit the appearance on labels or in advertisements 
of any health-related statement that is untrue or tends to create a 
misleading impression. The regulations require that specific health 
claims must be truthful, adequately substantiated by scientific or 
medical evidence, disclose the health risks associated with both 
moderate and heavier levels of alcohol consumption, and outline the 
categories of individuals for whom any alcohol consumption poses risks. 
The new rules took effect June 2, 2003.
    In addition, in March 2003, TTB and the Treasury Department issued 
proposed regulations that would clarify the status of flavored malt 
beverages by refining the regulatory definitions of ``beer'' and ``malt 
beverage.'' The proposal would limit the amount of alcohol added to 
beer or malt beverages through flavors use. It would also require 
display of alcohol content on flavored malt beverage labels, and would 
prohibit references to distilled spirits on all malt beverage labels. 
The proposal garnered a considerable amount of congressional interest 
and TTB received over 16,000 comments from the public; the norm is 10-
20 comments per Notice of Proposed Rulemaking. In the weeks and months 
following the closure of the comment period, staff catalogued and 
reviewed the comments. A decision will be published once Treasury 
completes the review.
    This past year brought the opening of the new laboratory facility 
that TTB's Scientific Services Division shares with the ATF. This 
state-of-the-art facility, which was dedicated in June 2003, in 
Ammendale, Maryland, provides chemists and support staff an optimum 
working environment in which to process samples for its customers. The 
Laboratory supports TTB by providing expertise in the analytical 
analyses of distilled spirits, wines, malt beverages, specially 
denatured alcohol, non beverage alcohol, and tobacco products. TTB has 
a second lab in Walnut Creek, California, known as the Compliance 
Monitoring Laboratory that primarily conducts tests of alcohol 
beverages. In this regard, TTB uses a market basket sampling approach 
as well as other methods to evaluate products on the market and ensure 
that products are properly labeled, do not contain prohibited 
substances, and that the products do not impose a health hazard to 
consumers.
    An important component of TTB's external relations are its 
partnerships in the international arena. The International Trade 
Division (ITD) acts as TTB's liaison on issues related to alcohol 
beverages, and facilitates the trade of alcohol beverages by serving as 
an advisor to industry members, various U.S. Government agencies and 
embassies. In this capacity TTB is represented at international trade 
meetings and participates in international trade negotiations, 
primarily working with the Office of the United States Trade 
Representative (USTR).
    Again, through ITD, TTB contributed to the World Wine Trade Group's 
(WWTG) progress toward a labeling agreement designed to facilitate 
trade in wine among the member countries. The WWTG is an informal group 
of seven countries who have a common interest in exporting wine 
worldwide. The United States, Canada, Chile, Argentina, South Africa, 
New Zealand and Australia are members of this group.
    Also, in the international trade arena, TTB continues to work with 
USTR in crafting a Memorandum of Understanding (MOU) with Mexico to 
clarify requirements for U.S. bottlers who receive bulk tequila. The 
United States has worked hard to convince the Mexican government to 
reconsider their proposal to ban the exportation of bulk tequila. 
Mexico cited failures by other countries in protecting the standard of 
tequila as a reason for suggesting the ban. Such a ban would adversely 
impact the U.S. distilled spirits industry's ability to profitably 
continue to sell and distribute tequila in the United States and all 
over the world, and, in turn, cause Mexico to inadvertently hurt one of 
their own most profitable exports. TTB participated in several meetings 
this year in Mexico, the United States, and Canada and played a key 
role in delaying the implementation of the bulk shipment ban by 
describing to the Mexican government our past efforts in enforcing the 
integrity of tequila and by stressing our continued commitment to 
protect this beverage and demonstrating how the TTB enforcement 
mechanism makes such a ban unnecessary. The MOU seeks to both clarify 
and prevent undue extraterritorial requirements on U.S. bulk tequila.
    One of the largest components of Headquarters Operations is the 
Advertising, Labeling and Formulation Division. This division carries 
out TTB's statutory mandate to prevent consumer deception and ensure 
that alcohol labels provide the consumer with adequate information as 
to the identity and quality of the product.
    In fiscal year 2003, ALFD's staff of nine label specialists 
reviewed 101,000 Certificate of Label Approval (COLA) applications and 
issued nearly 75,200 certificates. Four formula specialists reviewed 
over 1,800 domestic beverage alcohol formulas, and approximately 1,500 
pre-import applications.
    In May 2003, ALFD launched an electronic filing system for use by 
industry members and third parties to file applications for COLAs. This 
new web-based system, known as COLAs Online, provides industry members 
with a streamlined, more expedient and paperless means of obtaining a 
COLA. COLAs Online allows industry members to submit COLA applications 
via the Internet, as well as provides a way for ALFD employees to 
review the application electronically. Submitted applications are 
electronically approved, returned for correction, or rejected. The 
system also provides an online capability for industry members to 
obtain the status of electronically filed forms and the Public COLA 
Registry section of COLAs Online allows the public to view approved 
COLAs, including images of the alcohol labels. We currently receive 
approximately 15 percent of all COLA applications electronically and we 
expect that amount to steadily increase with time.
    In addition to these divisions, TTB is supported by a world class 
cadre of attorneys and Office of Management personnel. Often these are 
the employees who serve as the glue to the functions we perform as a 
Bureau. Further, a majority of services we use are contracted out and 
managed though a Memorandum of Agreement with ATF. This arrangement 
facilitates TTB becoming a stand-alone Bureau within the Department of 
Treasury. The memorandum will be renegotiated, but TTB continues to 
search for, and has found, many new ways to less expensively outsource 
required services including moving many management functions to the 
Bureau of Public Debt.

                FISCAL YEAR 2005 APPROPRIATIONS REQUEST

    The funding request for fiscal year 2005 is $81.9 million and 544 
FTE, a $2.4 million increase over fiscal year 2004. This increase 
represents adjustments necessary to maintain current levels of 
operations. It supports TTB's core mission to protect the public and 
collect the revenue. The request is fiscally sound, and I believe that 
we have proven that while we are a small Bureau, we are focused and 
effective, providing results-driven service to America.
    One of our priorities for fiscal year 2005 is to be completely 
separate from ATF's Information Technology services. ATF is not a 
service provider and is part of the Department of Justice. At this 
time, ATF has given written notice that beginning in fiscal year 2006, 
it will no longer service TTB's information technology needs. Also, ATF 
may not be able to provide administrative and other management services 
to TTB. We have formulated a plan that will help us cover services 
internally and externally by outsourcing from the public and private 
sectors. As resources become available, we believe we can judiciously 
acquire the services needed to run our Bureau, although much work needs 
to be done to complete this task by fiscal year 2006.

                               CONCLUSION

    Through the judicious and responsible use of the resources Congress 
provides, we look forward to continuing to provide services that are 
not only unique in American Government, but provide a clear service to 
America by collecting taxes and protecting the public. It is not only 
my honor to lead the men and women of this Bureau, but I appreciate 
your support of this new Bureau and our wholehearted efforts to carry 
out our mission. Thank you.
                                 ______
                                 

                     U.S. OFFICE OF SPECIAL COUNSEL

         Prepared Statement of Scott J. Bloch, Special Counsel
    I am pleased to present testimony on behalf of the U.S. Office of 
Special Counsel and our fiscal year 2005 budget request. As the new 
Special Counsel, I look forward to working with the U.S. Senate in my 
role as independent guardian of the merit system of civil service by 
protecting Federal employees from unfair workplace discrimination or 
mistreatment, including reprisal for whistleblowing, as well as 
imposing corrective action to protect those employees and bringing 
disciplinary action against negligent supervisors.

                                 GOALS

    My goals for the agency are twofold: (1) to continue to strengthen 
the civil service merit system by vigorously enforcing the three 
statutes for which the Office of Special Counsel bears responsibility: 
the Civil Service Reform Act, the Whistleblower Protection Act, and the 
Hatch Act; (2) to provide an intense, more visible level of enforcement 
of the Uniformed Services in Employment and Re-Employment Rights Act 
(USERRA).

              GUIDING PRINCIPLES FOR ACHIEVING THESE GOALS

    The integrity of the civil service merit system depends on the 
alertness and effectiveness of its watchdogs. The most significant 
challenge we face into next year is to eliminate our pending case 
backlog and to develop methods to make the agency more efficient and 
effective in its main mission, while at the same time assuring 
complainants a fair review. No Federal employee should have to wait 
years, in some instances, for a valid complaint or situation to be 
addressed or an offending supervisor disciplined.
    We will accomplish this by asking for great energy and focus of the 
current staff, and by bringing on new talent, skilled at locating 
issues and understanding problem solving, keen on protecting rights and 
mindful of the need to address cases that lack jurisdiction or do not 
meet the requisite thresholds. In all of this, we will be guided by the 
understanding that this is being done so that we can better service the 
merit system and protect whistleblowers. If we can do all of that, then 
we can institute a mode of operation that prevents us from allowing 
such a backlog of cases to surface again.
    During this challenging time in our Nation, the security of the 
country depends on our armed forces. And our armed forces depend as 
never before on the vital roles played by national guardsmen and 
reservists. Every reservist and guardsman must know that the United 
States stands fully behind them, and will investigate and fight for 
justice on their behalf regarding their employment and re-employment 
after active service deployments. Without extremely strong enforcement 
in this area, serving in the guard and reserves becomes less 
attractive, and the entire military system currently in use becomes 
weakened.
    The teeth behind our effectiveness in enforcing each of our 
mandates lie in our ability to litigate in pursuit of justice. To 
become a more effective enforcer implies an increase in meritorious 
litigation, which I hope to pursue.
    Finally, I know that Congress also shares our desire to protect 
Federal whistleblowers; however, the protection does not occur if 
Federal employees do not know about the existence and purpose of the 
Office of Special Counsel. Therefore, a critical function is our 
extensive outreach and training efforts so that Federal employees know 
they can call us when they have a complaint or problem within their 
agency.

                        RELEVANT FUNDING FACTORS

    For fiscal year 2005, the OSC is requesting $15.449 million, in 
order to fund approximately 113 full-time employees (FTE) and related 
non-personnel costs.
    The purpose of this requested increase is to manage and process the 
agency's steadily increasing workload since fiscal year 2000 of 
prohibited personnel practice complaints, whistleblower disclosures, 
and Hatch Act matters, and to reduce persistent case processing 
backlogs--including serious backlogs in the processing of whistleblower 
disclosures. Given the increasing workload of OSC, 113 FTE is a modest 
request.
    Looking at the data for the past several years, I believe several 
factors account for or contribute to this workload increase. They 
include: publicity about an increased number of high-profile cases 
handled by the OSC, including whistleblower disclosures, and four 
Public Servant Awards issued to whistleblowers by the OSC; heightened 
awareness and concern over national security disclosures after the 
events of September 11, 2001; increased public interest in elections 
since the 2000 presidential election, and the start of the 2004 
campaigns; the OSC's 2302(c) Certification Program; and significant 
improvements in OSC's web site, increasing awareness by government 
employees and others of the OSC and its functions.
    I will highlight specific areas that I believe warrant an increase 
in staffing:
  --In April 2004, soon after I became the new Special Counsel, I 
        established a new Special Projects Unit (SPU) specifically to 
        examine the organization's system for handling cases, to handle 
        the pending backlogs, and to consider and experiment with new 
        methods for increasing the efficiency and effectiveness of all 
        other aspects of the OSC. Several of the most experienced OSC 
        attorneys are now assigned to the unit to help remove the 
        current backlog of cases and to prevent such problems in the 
        future. This includes a careful look at the agency's web site 
        and methods of electronic filing.
  --Given the increasing numbers of complaints and cases in all units 
        of the agency, increased levels of labor and staff costs are 
        required to ensure no backlogs will build up again.
  --Regarding prohibited personnel practice complaints, increased staff 
        costs are also required for higher compliance with the 240-day 
        prosecution deadline currently required by statute.
  --I am confident of our ability to fulfill our stated goal of 
        providing a more visible level of enforcement of USERRA, even 
        in (and especially in) the midst of one of the largest-ever 
        demobilizations of reservists from overseas in the coming year. 
        In conjunction with other Federal entities, we will 
        aggressively prosecute USERRA claims. But this may require a 
        higher number of staff focused in the USERRA area.
  --Public awareness of the OSC's Disclosure Unit (DU) has grown in 
        recent years and the greater awareness of national security 
        issues, following the terrorist attacks of September 11, 2001, 
        and subsequent events, have also caused a record number of 
        whistleblower disclosure filings with the OSC. During fiscal 
        year 2002-2003, for example, the DU received 535 or more 
        disclosures each year--compared with 380 disclosures in fiscal 
        year 2001 and an average of 360 in the preceding 4 fiscal 
        years. Many of the disclosures filed after fiscal year 2001 
        have dealt with national security issues (some involving 
        complex and sensitive classified material) that have required 
        the work of more than one DU staff attorney.
      As of September 30, 2003, the total number of cases pending in 
        the DU was a record 690 (up drastically from 556 at the end of 
        fiscal year 2002, and 287 at the end of fiscal year 2001). A 
        significant number of these cases were more than a year old, 
        including matters designated after initial review as the 
        highest priority disclosure--an allegation of a substantial and 
        specific danger to public health and safety likely to merit 
        referral to the head of the agency involved for investigation. 
        The OSC is requesting additional FTE allocation to DU backlog 
        reduction efforts (i.e., to provide timelier resolutions of 
        whistleblower disclosures filed with the OSC).
      By law, the OSC has 15 days to review a disclosure and to 
        determine whether there is a substantial likelihood that the 
        information provided discloses any violation of law, rule, or 
        regulation; gross mismanagement; gross waste of funds; abuse of 
        authority; or a substantial and specific danger to public 
        health or safety. Given the increasing numbers and complexity 
        of disclosures in recent years, as well as the time required to 
        contact whistleblowers, examine information submitted, perform 
        necessary analysis, and draft required correspondence, this 
        timetable has, in reality, proven to be unattainable in most 
        cases. This has resulted in a persistent backlog.
      While the OSC is fully committed to directing whatever resources 
        are required to immediately process and refer critical national 
        security disclosures, additional resources (not only in staff 
        but in facilities and other resources needed to properly handle 
        such critical matters) are needed.
      The Disclosure Unit backlog has become an issue of understandable 
        concern to Congress. It has also been a pressing concern to the 
        OSC, which has implemented several measures in recent years in 
        efforts to improve upon its timeliness in processing 
        whistleblower disclosures. For example, the DU has implemented 
        a priority system for matters received; those priorities are 
        tracked using the agency's automated case tracking system; 
        additional employees have been detailed to DU work; and, as 
        funds have permitted, a limited number of additional staff has 
        been allocated to the unit.
  --In response to recent calls for the OSC to attack the problem more 
        aggressively, the OSC has begun the process of applying more 
        intensive and focused strategic workforce planning to that 
        problem, as part of a comprehensive strategy to address all 
        areas of backlog in the agency. No strategy can succeed, 
        however, without adequate funding to support additional staff 
        and associated resources. The OSC's fiscal year 2005 budget 
        request will provide funding for the additional staff needed to 
        more adequately comply with the 15-day time limit for DU 
        decisions, and to make progress toward the goal of reducing the 
        Unit's backlog.
  --The increased amount of litigation necessary to strongly enforce 
        adherence to the statutes also has a cost in terms of employee 
        resources.
  --Next, in this busy election year, we expect our Hatch Act 
        complaints and cases to increase as they always do during the 
        national election cycle. The unit has received a significant 
        increase in the number of complaints alleging Federal, State, 
        and local Hatch Act violations, and a steadily growing number 
        of requests for advisory opinions on the Act. Between fiscal 
        year 2001-2003, the Hatch Act Unit received an average of 198 
        complaints per year, compared to 84 complaints on average in 
        each of the previous 3 fiscal years. Likewise, there has been a 
        significant increase in the number of alleged Hatch Act 
        violations referred for field investigation--i.e., 35 in fiscal 
        year 2003, compared to 8 in fiscal year 2002, and 10 in fiscal 
        year 2001.
      Hatch Act enforcement spawned lengthy and resource-intensive MSPB 
        litigation activity by OSC in fiscal year 2003.
      The OSC's fiscal year 2005 budget request will provide funding 
        for the staff resources needed to handle increasing numbers of 
        Hatch Act complaints, opinions, and enforcement efforts, 
        including litigation.
  --As mentioned, outreach within the Federal workforce is critical to 
        the mission of OSC. Success in outreach obviously generates a 
        greater numbers of complaints, whistleblower disclosures, 
        allegations and requests for assistance than in previous years. 
        I believe our excellent professional staff will rise to the 
        occasion, but the agency needs an increase in FTEs and an 
        increased travel budget to keep up with those demands.
  --Higher labor funding is also required to better address Freedom of 
        Information Act (FOIA) processing, investigations, and 
        enforcement.
  --The OSC's fiscal year 2004 funding was intended to pay for the cost 
        of 113 FTE, but the agency has incurred several unfunded 
        mandates: increased benefit costs (transit subsidy increases), 
        new requirements for financial statements and audits, 
        significant increase in costs under an interagency agreement 
        for receipt of administrative services, and unanticipated real 
        estate taxes for its D.C. office. Salaries and benefits make up 
        approximately 83 percent of OSC's operating expenses for fiscal 
        year 2004, so the agency has little ability to reprogram funds 
        when salaries and benefits for authorized FTE exceed 
        appropriations. While these types of costs may be easily 
        absorbed by most agencies' budgets that dwarf OSC's, these 
        types of expenses can easily swamp a relatively tiny agency 
        like ours, materially having an impact on achieving goals and 
        even core missions.
  --To be successful in meeting our goals of vigorously enforcing the 
        statutes for which we are responsible, with the least possible 
        headcount, we are moving to further automate several steps 
        within our processes, which also bears costs in equipment and 
        development resources.

                             PROGRESS MADE

    As noted earlier with respect to prohibited personnel practice 
complaints, the OSC's ongoing and intensive efforts to improve upon its 
responsiveness began to yield results in fiscal year 2003. The agency 
processed 85 percent of those complaints within the 240-day timetable 
established by Congress. The OSC intends to build on these results, and 
achieve close to 100 percent success in this regard--all the while 
avoiding any backlogs.

                                SUMMARY

    The largest part of the requested increase in the fiscal year 2005 
budget, therefore, is for the full cost of the fiscal year 2004 FTE 
increase. The capacity to fund 113 FTEs is needed to properly manage 
OSC's statutory responsibilities and to reduce, if not eliminate, 
processing delays.
    Our office exists to ensure good government. When people behave in 
ways that do not promote good government, or jeopardize safety and 
health in the Nation, we must take corrective and disciplinary action. 
We exist to promote good, efficient, fair government, and integrity for 
the Nation among the Federal workforce. The fiscal year 2005 budget 
request will enable OSC to reach its mission to promote good government 
in an expeditious way.
    Thank you for your interest in the Office of Special Counsel.
                                 ______
                                 

                      FEDERAL ELECTION COMMISSION

          Prepared Statement of Ellen L. Weintraub, Vice Chair

    Mr. Chairman, Ranking Member Murray, and members of the committee, 
it is my privilege to present the Federal Election Commission's (FEC's) 
fiscal year 2005 appropriation request. To begin, on behalf of the 
agency, I thank you for last year's appropriation. Your bipartisan 
support of the FEC budget has enabled us to continue to implement the 
Bipartisan Campaign Reform Act of 2002 (BCRA), which amended the 
Federal Election Campaign Act of 1971.
    Our fiscal year 2005 appropriation request is for $52,159,000, an 
increase of $2,016,596 or 4.02 percent, and for 391 FTE, the same as 
our fiscal year 2004 FTE level. This year, as last year, the FEC is 
seeking only a modest increase over the fiscal year 2004 budget of 
$50,142,404 (less the government-wide across-the-board 0.59 percent 
rescission) and 391 FTE. I am pleased to report this request conforms 
to the President's fiscal year 2005 budget request for the FEC.
    Additionally, last year Congress appropriated $800,000 (less the 
0.59 percent rescission) to the Commission for the operations of the 
Office of Election Administration (OEA), with the understanding that 
any remaining funds and other assets of the OEA would be transferred, 
pursuant to section 801 of Public Law 107-252, to the Election 
Assistance Commission (EAC) once the EAC was constituted. We are 
pleased to report, effective April 1, 2004, the OEA and all of its 
assets (including $500,527 in unobligated funds, property and records), 
personnel and liabilities, were transferred to the EAC.
    The fiscal year 2005 request represents a continuation of fiscal 
year 2004 funding levels, adjusted for inflation, and salary and 
benefit increases ($1,744,700--a 4.85 percent increase). As such, it 
represents a Current Services request for fiscal year 2005, with no 
additional funds or staff for new programs or initiatives by the FEC 
and represents an overall increase of only 1.92 percent for non-
personnel costs. These minimal increases are detailed in our fiscal 
year 2005 Budget Justification.
    In its annual review of legislative recommendations, the Commission 
has submitted 12 recommendations for legislative action. Four of those 
were unanimously endorsed as priority recommendations; the remaining 8 
as non-priority. The 4 priority recommendations, in brief, are that 
Congress: (1) allow as a permissible use of Federal campaign funds 
donations to State and local candidates and for any other lawful 
purpose that does not violate subsection (b) of section 439a; (2) 
increase the amount that authorized committees may give to authorized 
committees of other candidates; (3) modify terminology of ``reason to 
believe'' finding; and (4) require mandatory electronic filing of 
Senate reports. The remaining 8 recommendations, while placed in the 
non-priority category are, nonetheless, supported unanimously by the 
Commission as substantive or technical in nature. We are confident 
these legislative changes will result in efficiencies, not only for the 
FEC, but also for the regulated community.
    Over the past few years, the FEC has achieved major successes, 
including meeting statutory and court deadlines for the BCRA 
implementation and legal challenges to the BCRA, as well as the 
expansion of the compliance program. These successes are the result of 
FEC efforts and support from our Congressional oversight committees. In 
addition, two programs have received accolades from the regulated 
community--the Administrative Fine Program and Alternative Dispute 
Resolution (ADR) Program. With the addition of these two programs, we 
have been able to successfully streamline the enforcement process.
    I now will provide a brief overview of the FEC's three core program 
areas and relate those areas to the agency's fiscal year 2005 budget 
request.

                           DISCLOSURE PROGRAM

    The FEC's disclosure program includes not only the review and 
placement of information on the public record, but also educational 
outreach, including campaign finance workshops and seminars, a toll-
free line for consumer requests, and automatic fax transmission of our 
publications 24 hours a day, 7 days a week. FEC meeting agendas and 
related documents also are available on our web site. Our disclosure 
program accounts for over a third of the agency's staffing (137 FTE), 
distributed among the Public Records Office, Information Technology 
Division, Reports Analysis Division, Press Office, Information Office 
and those sections of the Office of General Counsel that formulate 
proposed regulations and draft responses to advisory opinion requests.
    Improvements in productivity, aided by IT enhancements, generally 
have enabled the FEC to keep pace with the large increases in Federal 
campaign finance activity during recent election cycles, activity which 
has nearly doubled in the last 12 years. Total disbursements for a non-
Presidential election cycle have increased from $1.1 billion in 1986, 
to $3.8 billion for the 2000 presidential and 3.1 billion for the 2002 
congressional cycle--a 282 percent increase. We anticipate $4 billion 
in total disbursements for Federal campaigns in the 2004 cycle, from 
about 8,000 committees filing over 90,000 reports and generating 3 
million itemized transactions. The 2006 cycle, a congressional cycle, 
should be slightly lower in volume than the 2004 presidential cycle. 
Every election cycle since 1992 has seen a new record in total spending 
in Federal elections for Congressional and Presidential elections. With 
your help, we are building an impressive communications system capable 
of handling our Information Technology (IT) needs well into the future. 
This system offers the capability of instantly updating our database 
and expanding the types of information collected. As you are aware, 
however, this system is expensive. The average annual cost is about $1 
million to maintain the electronic filing system.
    With the passage of mandatory electronic filing, we are beginning 
to see the benefits of timeliness and work process improvements such a 
sophisticated system affords. Since the institution of electronic 
filing, median time to process all documents has improved from 10 to 11 
days to 5 to 6 days.

                           COMPLIANCE PROGRAM

    Obtaining voluntary compliance is the foundation of the FEC's 
strategic and performance plans, and is at the core of our mission 
statement. A credible enforcement program, however, is necessary to 
provide sufficient incentive to the regulated community to achieve this 
voluntary compliance. In fiscal year 2005, we anticipate assigning 189 
FTE to the compliance function, including enforcement, supervisory and 
support staff from OGC, Information Technology and the Audit Division. 
In the audit track of the compliance program, we are pleased to report 
sufficient resources have been provided to allow the Commission to 
initiate 40 to 45 audits ``for cause'' for the 2004 election cycle, as 
opposed to 25 in the 1998 cycle. Details on the compliance program are 
contained in the fiscal year 2005 Budget Justification.
    The first major overhaul of the FEC's enforcement program occurred 
in May 1993. Faced with a large number of complex cases the Commission 
developed the Enforcement Priority System (EPS), to prioritize cases 
for substantive enforcement action. This system is designed to provide 
a consistent and impartial ranking of cases based on the relative 
seriousness of the alleged violations, and gives us a tool to match the 
seriousness of a particular case to the resources available to 
undertake the investigation. We use the EPS in conjunction with the 
case management system, which enables the Commission to measure 
performance with regard to the substantive resolution of cases by issue 
and to measure timeliness of enforcement actions. Under EPS, the 
Commission has activated more cases, closed more cases with substantive 
action, and resolved some cases that would otherwise have been 
dismissed.
    The EPS has enabled the Commission to focus limited enforcement 
resources on the more important enforcement actions and to close low-
rated and stale cases. The increased level of civil penalties assessed 
by the Commission following implementation of the EPS has demonstrated 
the benefits of pursuing more substantive cases. In 1991, there were 
262 cases closed with civil penalties totaling $534,000; in 1995, there 
were 229 cases closed with $1,967,000 in civil penalties. By fiscal 
year 2003, there were 377 cases closed with civil penalties and fines 
totaling $2,774,603.
    Before 2000, the FEC's enforcement program was administered 
entirely by the Office of General Counsel. Two new components of the 
Commission's enforcement efforts--the Administrative Fine Program and 
the ADR program--are administered by the Staff Director. The goal of 
the ADR Program is to resolve matters quickly and effectively through 
bilateral negotiations. Both the ADR and Administrative Fine programs 
are designed to expand the FEC enforcement presence and resolve certain 
types of cases without resorting to the more lengthy traditional 
enforcement process. The Commission has met its compliance goals. 
Today, the Commission focuses its legal resources on the more complex 
enforcement matters, while using administrative processes to handle 
less complex matters. For example, from fiscal year 1995 through fiscal 
year 2000, the FEC closed an average of 197 cases each fiscal year. In 
fiscal year 2001, with the addition of the Administrative Fine and ADR 
programs, the FEC closed 518 cases, a 163 percent increase over the 
fiscal year 1995-2000 annual average of 197 cases. In fiscal year 2002, 
the FEC closed 229 cases, including enforcement, ADR and administrative 
fine cases. The total in fiscal year 2003 was 535 closed cases. We are 
confident the figure for fiscal year 2004 will be higher.

                         PUBLIC FUNDING PROGRAM

    The Commission also administers the program providing a public 
subsidy to Presidential election campaigns. During fiscal year 2005, 
approximately 64 FTE from the Audit Division, Office of General 
Counsel, and Information Technology Division, will be directly involved 
in this program, which will entail audits of the seven candidates 
receiving matching funds for the 2004 election. In addition, two 
general election candidate committees will be audited, as will two host 
committees and two convention committees, for a total of 13 
Presidential audits in fiscal year 2004 and 2005. This program began 
certifying eligible primary candidates for matching funds and 
processing submissions for funding awards on January 2, 2004.
    On a related matter, we believe it is appropriate to bring to your 
attention the potential shortfall in the Presidential Public Funding 
Program. There was a brief shortfall with the February primary matching 
payments for the 2004 Presidential election, which was restored with 
the February deposits to the Fund. This is the only anticipated 
shortfall for the 2004 cycle. We did not experience a major shortfall 
for the 2004 Presidential election because several major candidates 
decided not to take Federal matching funds for the 2004 primaries; 
however, this may change in future elections. The Treasury Department 
maintains the matching fund account which is comprised of money derived 
from a taxpayer check-off system. Shortfalls in 1996 and 2000 occurred 
for several reasons. First, the eligibility requirements for receiving 
matching funds have not been adjusted for inflation since 1974, thus 
allowing more candidates to qualify for matching funds. Second, the 
``front-loading'' of the primary and caucus nominating process which 
puts a premium on ``early'' fundraising for Presidential candidates, 
resulted in a high volume of funds being raised in 1995 and 1999 that 
were eligible for matching payments in January of 1996 and 2000. Absent 
legislative action, the Public Funding Program faces potential 
shortfalls because of declining participation in the check-off program, 
and the failure to index contributions to inflation while the pay-outs 
are indexed.
    The foregoing summarizes the FEC's fiscal year 2005 budget request. 
For a more detailed review of this request, I would urge members of the 
committee to consult our more detailed Budget Justification, which 
includes charts delineating how our budget request would be allocated 
and how it compares to previous years. It also demonstrates how the FEC 
has developed and used strategic and performance planning.
    Again, I thank you, Mr. Chairman and the committee, for your 
continued support and the opportunity to present our fiscal year 2005 
budget request.
                                 ______
                                 

                 OFFICE OF NATIONAL DRUG CONTROL POLICY

            Prepared Statement of John P. Walters, Director

    I am pleased to set forth the fiscal year 2005 budget request for 
the Office of National Drug Control Policy (ONDCP). I want to thank the 
subcommittee for its strong bipartisan commitment to our shared 
national goal of reducing drug use in America, especially among our 
youth. This subcommittee provides critical funding to support ONDCP's 
programmatic, policy, and budget development functions.
    Your support of ONDCP's $510.959 million budget request permits 
ONDCP to continue fulfilling our dual mission of serving as the 
President's primary Executive Branch support for counter-drug policy 
and program oversight and simultaneously managing our own programmatic 
responsibilities. We continue to work to achieve results of our stated 
goals and we are meeting those goals. For example, in February 2002, 
President Bush unveiled his goal of reducing youth drug use by 10 
percent in 2 years in the National Drug Control Strategy. That goal has 
been exceeded. The 2003 Monitoring the Future Study confirms that 
current use (past 30 days) of any illicit drug between 2001 and 2003 
among students declined by 11 percent. Similar declines were seen for 
past year use (11 percent) and lifetime use (9 percent).
    ONDCP takes seriously its primary statutory responsibility to 
develop national drug control policy and a supporting budget, to 
coordinate and oversee the implementation of that policy and budget, 
and evaluate drug control programs to ensure that our efforts are 
coordinated and focused on obtaining measurable results. In addition to 
our policy role, ONDCP is responsible for managing and evaluating four 
key programs: The National Youth Anti-Drug Media Campaign, the Drug-
Free Communities Support Program, the High Intensity Drug Trafficking 
Areas Program (HIDTA) Program, and the Counterdrug Technology 
Assessment Center (CTAC).
    ONDCP is requesting $510.959 million in budget authority for fiscal 
year 2005. The fiscal year 2004 enacted level is $522.247 million. The 
budget request reflects four program accounts: Salaries and Expenses; 
the Counterdrug Technology Assessment Center (CTAC); Other Federal Drug 
Control Programs; and the High Intensity Drug Trafficking Areas (HIDTA) 
program.

A. Salaries and Expenses: $27.609 million
    In fiscal year 2005, ONDCP is requesting $27.609 million for 
Salaries and Expenses to support a full complement of 125 Full-Time 
Equivalents (FTEs) and a pay raise. The request reflects a decrease of 
$222,321 below the fiscal year 2004 enacted amount. This request is 
essential if ONDCP is to carry out its policy, budget, and programmatic 
responsibilities in a manner consistent with achieving measurable 
results. This includes:

            Operational Request: $26.259 million
    Will provide compensation and benefits for all authorized FTEs 
including a full complement of Executive Level (EX) positions; contract 
services; rental payments to the General Services Administration; 
travel and transportation; communications and utilities; printing and 
reproduction; supplies, materials and equipment.
    Includes resources to support 125 FTEs, an increase of 5 FTEs over 
the fiscal year 2004 enacted level. This FTE increase is requested to 
offset the loss of many of the 30 military detailee positions the 
Department of Defense has supported at ONDCP since 1996. Increasing the 
staff level to 125 FTEs will enable ONDCP to assess and respond to the 
drug threat facing the Nation. ONDCP will be able to monitor agency 
implementation of the National Drug Control Strategy programs and 
improve interagency coordination. ONDCP will be able to evaluate 
programs and identify those that work. Additionally, ONDCP will be able 
to provide policy guidance and oversight to the Counterdrug Technology 
Assessment Center (CTAC), High Intensity Drug Trafficking Area (HIDTA) 
Program, and Other Federal Drug Control Programs.
    Provides for two new initiatives: High Speed TS Communication Line 
Costs and Communication Line Costs for DOD Intel-Link computers on-
site. ONDCP will need to assume these costs because of budget 
realignments within the DOD Counterdrug budget.

            Policy Research Request: $1.350 million
    This request will continue and expand ONDCP's policy research 
program, an increase of $7,965 over the fiscal year 2004 enacted 
amount. ONDCP conducts research to develop and assess drug policy, 
identify and detail changing trends in the supply of and demand for 
illegal drugs, monitor trends in drug use and identify emerging drug 
problems, assess program effectiveness, and improve the sources of data 
and information about the drug situation. The requested funding will 
support a wide range of new and continuing policy research projects.

B. Counterdrug Technology Assessment Center (CTAC): $40 million
    In fiscal year 2005, ONDCP is requesting $40 million to support the 
Counterdrug Technology Assessment Center (CTAC). The fiscal year 2004 
enacted level is $41.752 million. The aggregate request includes 
funding for two distinct components: Research and Development Program 
($18 million) and the Technology Transfer Program ($22 million).

            Technology Research and Development: $18 million
    Demand Reduction R&D Program: $12 million.--CTAC's Demand Reduction 
Initiatives, in conjunction with the National Institute on Drug Abuse 
(NIDA), will continue to improve upon existing technology available for 
substance abuse, dependence, and addiction research. CTAC has 
established a ``niche'' in developing and installing advanced 
neuroimaging instrumentation at drug abuse research facilities 
operating under grants from NIDA. The Demand Reduction Technology 
Review Committee (DRTRC) has been established in conjunction with NIDA 
to address and prioritize research initiatives with which CTAC can 
assist in the future.
    Supply Reduction R&D Program: $6 million.--This funding will 
provide for developing technology for use by Federal, State, and local 
law enforcement agencies in reducing the supply of illegal drugs by 
developing technologies that satisfy identified law enforcement 
requirements for increased investigative capability. Once tested and 
evaluated, developed technologies become available either through the 
Technology Transfer Program or through independent purchase. Sponsored 
R&D items in fiscal year 2004 include a panoramic 360-degree video 
surveillance camera, a Project 25 digital audio body-wire, and a Title 
III telephone intercept expansion capability.

            Technology Transfer Program (TTP): $22 million
    The Technology Transfer Program (TTP) relies on technical and 
operational performance testbed evaluations and outreach to industry to 
acquire additional items for law enforcement. The TTP makes available 
state-of-the-art, affordable, easily integrated, and maintainable tools 
to enhance the capabilities of State and local law enforcement agencies 
for counterdrug missions. TTP is not a grant program; rather, it 
provides drug crime fighting information technology and analytical 
tools, communications interoperability, tracking and surveillance, and 
drug detection devices from a catalog of items proven to be 
operationally effective by Federal, State, and local law enforcement. 
Hands-on training and maintenance support are provided to all 
recipients, and TTP maintains extensive records of State and local 
applications and jurisdiction statistics on every aspect of the program 
including the status of deliveries, departments receiving equipment, 
and training records.

C. Other Federal Drug Control Programs: $235 million
    In fiscal year 2005, ONDCP is requesting $235 million for the Other 
Federal Drug Control Programs. The fiscal year 2004 enacted level is 
$227.649 million. This account provides funds to a diverse group of 
ongoing programs: the National Youth Anti-Drug Media Campaign, the 
Drug-Free Communities Support Program, World Anti-Doping Agency (WADA) 
Membership Dues, the U.S. Anti-Doping Agency, Counterdrug Intelligence 
Executive Secretariat, National Drug Court Institute, and Performance 
Measures Development.

            The National Youth Anti-Drug Media Campaign: $145 million
    In fiscal year 2005, ONDCP is requesting $145 million for the 
National Youth Anti-Drug Media Campaign. The fiscal year 2004 enacted 
level is $144.145 million. The Media Campaign uses multi-media 
advertising and public communications strategies aimed at youth and 
parents to promote anti-drug attitudes and behavior. The Campaign is a 
comprehensive national effort that integrates paid advertising at 
national and local levels with Web sites, clearinghouses, media events, 
outreach to the entertainment industry, and strategic partnerships that 
enable messages to resonate in ways that generate awareness and 
ultimately change beliefs and intentions toward drug use by teens.
    Recently, ONDCP released results from the Monitoring the Future 
(MTF) Survey, which revealed that current use of illicit drugs among 
8th, 10th, and 12th graders was down a statistically significant 11 
percent from 2001. This reduction surpassed the President's ambitious 
goal of reducing youth drug use by 10 percent in 2 years. Moreover, MTF 
revealed that exposure to anti-drug advertising had an effect on 
improving youth anti-drug attitudes and intentions.
    While these results are promising, each day 4,800 kids try 
marijuana for the first time and more adolescents continue to enter 
treatment for marijuana dependence than for all other drugs combined, 
demonstrating the need for continued funding. Therefore, this request 
continues funding for ONDCP's Media Campaign, an integrated effort that 
combines paid and donated advertising with public communications 
outreach.
    In January 2004, the Media Campaign launched a new effort to urge 
friends and parents of teenagers to take early action against drug use. 
This new effort targets those closest to the user--friends and 
parents--and encourages them to intervene at an early stage. Giving 
friends and parents of teens the skills necessary to recognize symptoms 
of drug use and underage drinking, and to take action to stop it, can 
make a difference in the futures of young people at an important 
crossroads in their lives, before they need addiction treatment and 
before they encounter life-altering or deadly consequences.

            The Drug-Free Communities Support Program: $80 million
    In fiscal year 2005, ONDCP is requesting $80 million for the Drug-
Free Communities Support Program (DFCSP). The fiscal year 2004 enacted 
level is $69.587 million. The DFCSP provides a competitive process to 
award matching Federal grants of up to $100,000 per year directly to 
local community anti-drug coalitions for the purpose of supporting 
local efforts to prevent or reduce drug use among youth. The program 
currently supports over 600 community coalitions in all 50 States, the 
District of Columbia, Puerto Rico, and the U.S. Virgin Islands. 
Together, these community anti-drug coalitions serve a national network 
of local citizens, community leaders, and key professionals working 
daily to help keep young people free of the well-known dangers of drug 
use, including the underage use of alcohol and tobacco. Approximately 
30 of the DFCSP grants have been awarded to communities where American 
Indian or Alaskan Native youth are the majority of young people served. 
Approximately 40 percent of DFCSP grants go to communities in small 
towns and rural areas.
    Of the total amount of $80 million that ONDCP is requesting for 
this program in fiscal year 2005, $74.2 million will be awarded in 
grants to as many as 750 community anti-drug coalitions. An additional 
amount of $1 million is requested to continue support for the National 
Community Anti-Drug Coalition Institute to provide much-needed training 
and technical assistance to the growing number of coalitions around the 
country. An amount of $4.8 million is requested to support all other 
costs associated with grants management, program evaluation, and 
program administration.

            World Anti-Doping Agency Membership Dues: $1 million
    In fiscal year 2005, ONDCP is requesting $1 million for World Anti-
Doping Agency (WADA) Membership Dues. The fiscal year 2004 enacted 
level is $0.795 million. The dues assessment is formula driven and 
accounts for the increase from fiscal year 2004. WADA receives its 
funding in equal amounts from the International Olympic Committee and 
world governments. Governments are divided into six geographic regions. 
The United States, along with Canada, Central America, the Caribbean, 
and South America, are part of the Americas region. The Americas region 
is required to contribute 29 percent of the governments' funding. As of 
fiscal year 2004, the regions dues are based upon the relative 
contribution levels to the Organization of American States.
    Created in 2001, WADA is a partnership among world governments, 
intergovernmental organizations, the Olympic movement, athletes, and 
other entities concerned about the consequences of doping and drug use 
in sport. WADA's mission is to promote healthy, doping free sport at 
the international level. WADA's doping-control program is key to 
upholding the fundamental rights of athletes to participate in doping-
free sport through an effective detection and deterrence program, 
promoting consistency and ensuring an independent, quality-controlled 
process seeking equity for all athletes in all sports in all countries. 
In addition to drug testing, WADA's budget funds education and 
prevention programs for athletes at all age and levels (with a 
particular emphasis on youth) and research related to drug use in 
sport.

            United States Anti-Doping Agency: $1.5 million
    ONDCP is requesting $1.5 million to support the United States Anti-
Doping Agency (USADA). The fiscal year 2004 enacted level is $7.158 
million. Since fiscal year 2002, funding to support USADA has been 
passed directly from ONDCP to USADA. USADA is a non-profit entity under 
the leadership of an independent board of directors. USADA began 
operations October 1, 2000, with full authority for drug testing, 
education, research, and adjudication for U.S. Olympic, Pan Am Games, 
and Paralympic athletes. Congress and the President have subsequently 
recognized USADA as the official anti-doping agency for the above-
stated purposes (Public Law 107-67). Since its inception, USADA has 
received worldwide acclaim for its effective and innovative testing and 
education initiatives.
    The $1.5 million request would support USADA's ongoing drug testing 
regime that includes management, sample collection, and testing 
procedures. The fiscal year 2005 request considers the adjudication 
costs as the result of increased testing and the implementation of 
blood testing, which is more costly (and accurate) than urine drug 
testing. The request would also fund drug-related research, educational 
programs aimed at school-aged athletes and coaches, efforts to inform 
athletes of the rules governing the use of performance enhancing 
substances, and the ethics of doping and its harmful health effects. 
The public awareness efforts will be particularly important since the 
World Anti-Doping Agency adopted a new universal Code in March 2003 
that will govern U.S. amateur athletes.

            Counterdrug Intelligence Executive Secretariat: $4.5 
                    million
    In fiscal year 2005, ONDCP is requesting $4.5 million for the 
administration and operations of the Counter-drug Intelligence 
Executive Secretariat (CDX). The fiscal year 2004 enacted level is 
$2.982 million. The CDX staff was established to coordinate the 
implementation of the General Counterdrug Intelligence Plan (GCIP) 
established in February 2000 and revalidated in May 2002. Fiscal year 
2005 funding of CDX will ensure that the action items established by 
GCIP, as well as additional projects requested by the interagency 
Counterdrug Intelligence Coordination Group, can be accomplished.

            National Drug Court Institute: $1 million
    In fiscal year 2005, ONDCP is requesting $1 million for the 
National Drug Court Institute (NDCI). The fiscal year 2004 enacted 
level is $0.994 million. Due to the fact that nearly 50 percent of the 
Nation's drug courts have only been in operation for the last 4 years, 
the Institute's education, research, and scholarship programs request 
these funds to continue the expansion of its discipline-specific and 
topic-specific drug court training programs for practitioners; to 
convene regional evaluation trainings in order to provide a forum for 
practitioners and researchers to enhance drug court evaluation 
techniques; to continue to publish and disseminate monographs on 
important and timely drug court issues; to continue to publish and 
disseminate the National Drug Court Institute Review; and to continue 
to publish and disseminate best practices fact sheets for drug court 
practitioners.

            Performance Measures Development: $2 million
    In fiscal year 2005, ONDCP is requesting $2 million for Performance 
Measures Development. The fiscal year 2004 enacted level is $1.988 
million. ONDCP will use the requested funding to develop and implement 
data sources to monitor illegal drug use and supply for national 
policy-makers. Projects funded with these resources will include 
efforts to work with selected programs to develop and/or improve needed 
data sources. In recent years, ONDCP has worked with the National 
Institute of Justice to redesign and expand the Drug Use Forecasting 
program into the Arrestee Drug Abuse Monitoring program. ONDCP has also 
worked with the DEA to improve the methodology of the Heroin Signature 
Program and the Domestic Monitoring Program. The requested funding will 
continue this collaborative interagency effort to develop and implement 
programmatic performance measures.

D. High Intensity Drug Trafficking Areas (HIDTA): $208.35 million
    In fiscal year 2005, ONDCP is requesting $208.35 million for the 
operations of the High Intensity Drug Trafficking Area program ($206.3 
million for grants and Federal transfers and $2.050 million auditing 
for services and associated activities, including development and 
implementation of a data collection system to measure program 
performance). The fiscal year 2004 enacted level is $225.015 million. 
Each HIDTA has an Executive Committee (EXCOM) that serves as the 
governing body for the individual HIDTA. The EXCOM consists of an equal 
number of representatives from local/State and Federal agencies. The 
EXCOM is responsible for the development and implementation of the 
HIDTA Strategy and the attendant initiatives and budgets, as well as 
for the fiscal operations of the HIDTA.
    The HIDTA mission includes coordination efforts to reduce the 
production, manufacturing, distribution, transportation, and chronic 
use of illegal drugs, as well as the attendant money laundering of drug 
proceeds. In addition, HIDTAs assess regional drug threats, develop 
strategies to address the threats, integrate initiatives, and provide 
Federal resources to implement initiatives. These resources are 
allocated to link local, State, and Federal drug enforcement efforts 
and to optimize the investigative return on limited fiscal and 
personnel resources. Properly targeted, HIDTAs offer greater efficiency 
in countering illegal drug trade in local areas by facilitating 
cooperative investigations, intelligence sharing (coordinated at HIDTA 
Investigative Support Centers), and joint operations against drug-
trafficking organizations.
    Since fiscal year 2002, in addition to recurring HIDTA funding, 
ONDCP has provided additional funds to HIDTAs that have developed and 
conducted investigations against major drug trafficking organizations 
with connections to the Consolidated Priority Organization Target 
(CPOT) list. (The CPOT list, developed in 2001 by key Federal law 
enforcement entities, with input from the Intelligence Community and 
other Federal agencies, is comprised of the drug trafficking 
organizations generally agreed to represent the most significant drug 
threat to the United States. The list, which is maintained by the 
Justice Department, is updated periodically and is not public.) In 
fiscal year 2004, ONDCP has proposed to make approximately $16 million 
available to generate and advance investigations of domestic targets 
with a nexus to or affiliation with major drug trafficking 
organizations on the CPOT list. ONDCP hopes that continued 
discretionary funding will be available for HIDTAs through the CPOT 
Initiative in fiscal year 2005.
    At present, 406 United States counties (about 13 percent of the 
total) in 43 States, Puerto Rico, the United States Virgin Islands, and 
the District of Colombia are designated as part of 28 HIDTAs. Since 
January 1990, counties in the following 28 areas have been designated 
as HIDTAs: Houston, Los Angeles, South Florida, New York, and the 
Southwest Border, which includes partnerships in South Texas, West 
Texas, New Mexico, Arizona, and Southern California (in 1990); 
Washington/Baltimore, and Puerto Rico/U.S. Virgin Islands (in 1994); 
Atlanta, Chicago, Philadelphia/Camden (in 1995); Gulf Coast (Alabama, 
Louisiana, and Mississippi), Lake County, Indiana, the Midwest (Iowa, 
Kansas, Missouri, Nebraska, North Dakota, and South Dakota), Northwest 
(Washington), Rocky Mountain (Colorado, Montana, Utah, and Wyoming) (in 
1996); Northern California (San Francisco Bay Area) and Southeast 
Michigan (in 1997); Appalachia (Kentucky, Tennessee, and West 
Virginia), Central Florida, Milwaukee, and North Texas (Northern Texas 
and Oklahoma) (in 1998); and Central Valley California, Hawaii, New 
England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode 
Island, and Vermont), Ohio, and Oregon (in 1999); Northern Florida and 
Nevada (in 2001). The HIDTAs nationwide contribute significantly to the 
removal of drug traffickers and the trafficking organizations that 
drive the illegal drug market and also to the elimination of tons of 
illegal drugs that flow each year through high intensity drug 
trafficking areas to other American communities.

                               CONCLUSION

    Thank you for the opportunity to provide this formal statement for 
the record. I will be happy to address any questions you may have and I 
look forward to working with this subcommittee as we work to meet the 
goal of reducing drug use in America, especially among our youth.
                                 ______
                                 

                      SURFACE TRANSPORTATION BOARD

              Prepared Statement of Roger Nober, Chairman

    Chairman Shelby and members of the subcommittee, I am Roger Nober, 
Chairman of the Surface Transportation Board (Board). I thank you for 
the opportunity to submit this statement setting forth the Board's 
budget request for fiscal year 2005.

                        BACKGROUND ON THE BOARD

    The Board is a three-member, bipartisan, decisionally independent 
adjudicatory body organizationally housed within the Department of 
Transportation (DOT) with jurisdiction over certain surface 
transportation economic regulatory matters.
    The rail oversight of the Board encompasses rate reasonableness, 
car service and interchange, mergers, line acquisitions, line 
constructions, and abandonments. The jurisdiction of the Board also 
includes certain oversight of the intercity bus industry and pipeline 
carriers; and rate regulation involving noncontiguous domestic water 
transportation, household goods carriers, and collectively determined 
motor carrier rates. The Board is statutorily empowered, through its 
exemption authority, to promote deregulation administratively.
    The Board's Section of Environmental Analysis performs 
environmental reviews on the Board's construction, abandonment, and 
merger matters as required by the National Environmental Protection 
Act. These reviews have become more complex and require significant 
resources.

              THE BOARD'S FISCAL YEAR 2005 BUDGET REQUEST

    In fiscal year 2005, the Board requests budget resources totaling 
$21,283,000. This budget request mirrors the Board's fiscal year 2004 
budgetary authority approved by Congress, adjusted for the fiscal year 
2005 pay raise and some program increases. In this budget request, the 
Board also seeks resources and authority to operate at 150 FTEs, or 
five more FTEs than the current level.
    The Board would use the additional funds to address two primary 
costs. First, the additional resources are requested to cover salary 
and employee benefit costs associated with the fiscal year 2004 and 
fiscal year 2005 pay increase. Unlike many agencies, there is little 
room at the Board's current budget level to absorb a pay increase 
without the additional resources, because fixed costs, including salary 
and rent, comprise about 95 percent of the agency's expenses. Absorbing 
even a small amount of the pay increase impairs the Board's ability to 
perform its statutory mission.
    Second, the Board would use most of the additional resources to 
implement initiatives to expedite resolution of rail rate disputes 
between railroads and their largest customers and to offer a meaningful 
forum for the railroads' smaller customers. In fiscal year 2003, the 
Board adopted new rules to streamline the rail rate process, and it now 
provides for mediation and for technical conferences among the parties 
and Board staff that have produced agreements on numerous discovery and 
technical issues, thereby resolving matters that in the past would have 
taken months to litigate before the Board. Nevertheless, the press of 
large rate cases will continue, and we also expect parties will file 
small rate cases once new procedures for such cases are in place. 
Therefore, one of the additional FTEs would be to implement the 
congressional desire that the agency have an Administrative Law Judge, 
who would assist in fostering agreements among the parties in various 
agency proceedings and would expedite the resolution of small rate 
matters. Additional FTEs would provide the Board with another 3-person 
rate team for fiscal year 2005 to continue to resolve rate cases within 
their statutory deadlines.
    The requested authorization for 150 FTEs also will provide the 
Board with the discretion to hire staff to replace tenured, retirement-
eligible staff prior to their anticipated retirement date. Several 
retirements can be expected in the near future, and having the 
flexibility to hire qualified people when they are available is 
particularly important for a high-rated agency that must hire economic 
and technical expertise when they are available in the labor market.
    Consistent with appropriation acts for past fiscal years, the Board 
requests a provision allowing user fee collections to be credited to 
the appropriation as offsetting collections and used for necessary and 
authorized expenses, to the extent that they are collected. The overall 
budget request reflects the workload that is expected and the statutory 
and regulatory deadlines associated with the resolution of the cases 
filed.

   RECENT DEVELOPMENTS THAT IMPACT THE BOARD'S BUDGET REQUEST--YUCCA 
                                MOUNTAIN

    Under the Interstate Commerce Act, the Board must authorize the 
construction of new rail lines that are part of the national rail 
system. Since the Board submitted its budget request for fiscal year 
2005, it has been named a cooperating agency in the environmental 
review associated with building a rail line to the repository at Yucca 
Mountain, in Nye County, Nevada. The Department of Energy (DOE) has 
been working for years on a program to use Yucca Mountain as a 
repository for spent nuclear fuel and high-level radioactive waste that 
would be transported there from throughout the United States.
    On April 2, 2004, DOE announced that its preferred mode to 
transport the radioactive materials from throughout the United States 
to Yucca Mountain was ``mostly rail,'' and it selected as its preferred 
corridor for a new rail line to Yucca Mountain one beginning near 
Caliente, Nevada. Then on April 8, 2004, DOE announced its intent to 
prepare an Environmental Impact Statement (EIS), as required by the 
National Environmental Policy Act, for construction and operation of 
this rail line.
    On May 5, 2004, DOE formally requested that the Board, along with 
the Bureau of Land Management and the Air Force, become a cooperating 
agency on the environmental review of the Caliente Corridor leading to 
the Yucca Mountain facility. DOE made this request due to the Board's 
statutory authority to review rail construction projects and its 
expertise in doing so.
    Our responsibilities as a cooperating agency have already begun. 
The Board's Section of Environmental Analysis attended the opening 
meetings to determine the scope of the environmental review for this 
project. Three meetings were held in Nevada over 3 days the week of May 
3rd in Armagosa Valley, Goldfield, and Caliente. A meeting was also 
held the week of May 10th in Reno, and another is scheduled for May 17 
in Las Vegas. Additional meetings are planned for this month and there 
will be numerous meetings this year and throughout the EIS process, 
which the DOE expects to last at least 2 years.
    DOE has not yet determined whether it will structure the line in a 
way that would trigger Board review. While the Board receives many 
applications to build new rail lines that are subject to the Board's 
jurisdiction, not every rail line construction project requires Board 
approval. The Board has jurisdiction over and must approve the 
construction of any common carrier rail line--a rail line on which the 
railroad must provide service to any shipper who requests it. However, 
the Board does not license the construction of a private rail line--a 
line over service is not available to the general public.
    When the Board receives an application to build and operate a new 
rail line, it conducts the required environmental review of these 
projects and, unless the project is not in the public convenience and 
necessity, licenses the project. In the typical case, the Board is the 
lead agency for any necessary environmental review.
    In conducting the environmental review, the Board is usually able 
to accept certain services that are paid for by the project proponent. 
For example, to complete the environmental review of a rail 
construction project, the applicant selects a third-party contractor 
from the Board's list of pre-approved contractors and retains it. 
Although the contractor works at the direction of the Board's Section 
of Environmental Analysis, the project proponent pays the contractor. 
The Board is not reimbursed for its staff time or travel.
    In discharging our duties as a cooperating agency, the Board will 
require a third party contractor who will assist the Board by attending 
meetings regarding the EIS, evaluating the environmental concerns, and 
providing the specialized, technical expertise concerning issues 
affecting the rail line construction that would supplement the work of 
the Board's Section of Environmental Analysis. The Board is working 
with DOE for DOE to reimburse the Board for the costs associated with 
this contractor.
    However, it would be difficult for the Board to accept any offer 
for DOE to pay for Board staff and travel since, as discussed, in the 
future DOE may seek Board approval for this line.
    Since DOE may become an applicant before the Board, the Board does 
not want to risk compromising its independence in considering the 
merits of a DOE application by accepting financial support from DOE for 
additional salary and travel costs. The Board's review of such a 
proposal must be independent. Otherwise, if the Board issued a license, 
that issuance could be subject to challenge in court on grounds that 
the agency's independence was jeopardized by its acceptance of 
reimbursements beyond those reimbursements that are ordinarily 
permissible in any rail construction case. A successful challenge could 
be costly to the taxpayers and delay the project.
    The Yucca Mountain EIS process will require the resources for two 
full-time staff and travel costs for the biweekly participation 
meetings. The Board's participation in the Yucca Mountain EIS will 
require 25 percent of the Board's current environmental staff, which 
would adversely affect the Board's ability to conduct the environmental 
reviews required for abandonment and rail line construction cases 
currently pending before the Board and those that may be in the 
pipeline awaiting formal filing. In order to fully participate, the 
Board would need an additional 2 FTEs and $250,000 above what it has 
requested for fiscal year 2005.

                       OVERALL GOALS OF THE BOARD

    In the performance of its functions, the objective of the Board is 
to ensure that, where regulatory oversight is necessary, it is 
exercised efficiently and effectively, integrating market forces, where 
possible, into the overall regulatory model. In particular, the Board 
seeks to resolve matters brought before it fairly and expeditiously. 
Through use of its regulatory exemption authority, streamlining of its 
decisional process and the regulations applicable thereto, and 
consistent application of legal and equitable principles, the Board 
seeks to facilitate commerce by providing an effective forum for 
efficient dispute resolution and facilitation of appropriate business 
transactions. The Board continues to strive to develop, through 
rulemakings and case disposition, new and better ways to analyze unique 
and complex problems, to reach fully justified decisions more quickly, 
and to reduce the costs associated with regulatory oversight.
    To be more responsive to the surface transportation community by 
fostering governmental efficiency, innovation in dispute resolution, 
private-sector solutions to problems, and competition in the provision 
of transportation services, the Board will:
  --Continue to strive for a more streamlined process for the 
        expeditious handling of rail rate reasonableness and other 
        complaint cases, in an effort to provide additional regulatory 
        predictability to shippers and carriers;
  --Continue to process diligently cases before the Board and to ensure 
        that appropriate market-based transactions in the public 
        interest are facilitated;
  --Continue to develop new opportunities for the various sectors of 
        the transportation community to work cooperatively with the 
        Board and with one another to find creative solutions to 
        persistent industry and/or regulatory problems involving 
        carriers, shippers, employees, and local communities; and
  --Continue to work to ensure the provision of rail service that is 
        responsive to the needs of customers.

           FISCAL YEAR 2004 AND 2005 ACTIVITIES OF THE BOARD

    Building upon the Board's success in fiscal year 2003--including 
issuing 890 decisions in fiscal year 2003, developing regulations to 
expedite the resolution of large rate cases,\1\ investigating ways to 
improve the process for small rate cases,\2\ and informally resolving 
disputes between railroads and between railroads and their customers--
the Board will continue to look for ways to streamline or otherwise 
improve applicable regulations and the regulatory process and to 
promote private-sector resolution of problems. In this regard, the 
Board will entertain any proposed exemptions from regulation that might 
be appropriate and resolve as expeditiously as possible petitions for 
rulemaking filed by parties. The Board will also continue to look 
independently for ways to shorten and streamline its procedures for 
bringing and prosecuting both large and small rate cases, and to make 
the environmental review process for new rail line construction cases 
more streamlined as well. And it will continue to use its processes to 
encourage private-sector dispute resolution.
---------------------------------------------------------------------------
    \1\ Ex Parte No. 638, Procedures to Expedite Resolution of Rail 
Rate Challenges to be Considered Under the Stand-Alone Cost 
Methodology.
    \2\ Ex Parte No. 646, Rail Rate Challenges in Small Cases.
---------------------------------------------------------------------------
    As noted, the Board is requesting resources for 5 additional staff 
positions in fiscal year 2005. In particular, the Board would use those 
resources to establish a new rate team, to hire an administrative law 
judge, and to add additional staff to its office that handles consumer 
complaints. Although the Board has attempted to use retirements within 
the agency to begin to realign its resources for its future needs, it 
cannot complete that realignment through retirements alone.
    The Board is seeking staff resources for three rate team personnel, 
who will help move the rate docket forward. The workload involving rail 
rates and services is expected to increase in fiscal year 2004 and 
remain stable through fiscal year 2005, particularly given the likely 
continuing expiration of long-term coal transportation contracts. 
Currently, the Board has 5 coal rate complaint cases at various States 
of adjudication and 5 petitions to reopen and reconsider in former coal 
rate complaint cases, for a total of 10 rate cases under review. These 
proceedings will require significant staff attention and additional 
resources, given the complex nature of the cases, the numerous steps 
such as motions and discovery resolution, and the tight 9-month 
statutory timeframes for completion once the record is closed. Indeed, 
the bulge in rate cases is already producing a strain on our resources, 
which have historically been geared to handle two rate cases at a time. 
(It is for this reason that we are requesting additional resources from 
Congress for one additional 3-person rate team for fiscal year 2005.) 
Additionally, the Board will continue to handle rail cases involving 
questions of whether certain rail activity cannot be regulated at the 
State or local level because such regulation is preempted by Federal 
law.
    In July and August, 2003, the Senate Committee on Commerce, Science 
and Transportation considered and reported S. 1389, The Surface 
Transportation Board Reauthorization Act of 2003. S. 1389 is a bill to 
reauthorize the Surface Transportation Board for 5 years, beginning in 
fiscal year 2004. Section 4 of S. 1389 addressed the small rate case 
issue, and directed the Board to modify its small rate case procedures 
to address many of their identified problems within 180 days. 
Subsection 4) of that bill specifically directed that, when revising 
its small rate case procedures, the Board ``may provide for an initial 
determination of such [small] rate challenges by an administrative law 
judge, with an opportunity for appeal of such determination by the full 
Board[.]'' At a subsequent hearing on rail regulatory matters held in 
October 2003, several Senate Commerce Committee members again noted the 
benefits of the Board having an Administrative Law Judge to consider 
small rate cases in the first instance, oversee discovery, and issue 
preliminary decisions in matter of months compared to years with large 
rate cases. The Administrative Law Judge would decide the cases under a 
clear standard with cases being appealable to the full Board and 
ultimately to the courts.
    The final additional staff position would provide the Board 
expertise on passenger rail service and would coordinate and resolve 
scheduling and operational issues between freight railroads and between 
those railroads and their customers. The Board's Rail Consumer 
Assistance Program is an informal mechanism for resolving disputes that 
has proven very effective, but additional resources will help it 
address the increasing number of inquires that result from it becoming 
more widely known.
    With respect to rail carrier consolidations, we are not aware of 
any major rail mergers in the immediate future. Therefore, the workload 
in this category is expected to remain somewhat stable through fiscal 
year 2005 because this category includes a broad array of control 
transactions among larger railroads and smaller railroads. Of course, 
it is impossible to know whether a major merger may be proposed during 
fiscal years 2004 or 2005. As noted, the Board continues to resolve 
issues related to past Class I rail mergers. Also, the Board will 
continue to handle other rail consolidations involving smaller 
railroads that are filed with it.
    Concerning other rail restructuring matters, rail abandonment 
decisions are expected to remain somewhat constant through fiscal year 
2005. While the number of rail abandonments has remained at this level 
for the past number of years, the increased complexity of abandonment 
filings continues to require more than one decision in certain cases. 
The Board continues to see a high volume of ``post abandonment'' 
activity relating to trail use, as proponents avail themselves of the 
National Trails System Act, and also relating to offers of financial 
assistance to continue freight rail service.
    With the notable exception of the Yucca Mountain rail line 
construction project, the Board projects that its line construction 
docket will remain constant through fiscal year 2005. We emphasize that 
demands on the Board to conduct environmental reviews for such 
transactions continue to grow, and that such activities require a 
significant number of resources to complete.
    Other line transaction activity is expected to increase slightly 
through fiscal year 2005 as more carriers continue to sell unprofitable 
or marginally profitable lines as an alternative to service 
abandonment, particularly in light of the recent economic downturn. In 
the past few years, the Board has seen a number of line acquisitions by 
both small carriers and noncarriers as rail carriers restructure their 
rail systems.

                                SUMMARY

    The Board's budget request would ensure the resources needed for 
the Board to continue to implement its responsibilities expeditiously 
and effectively as Congress intends. I would be happy to answer any 
other questions that the Committee may have about the Board's fiscal 
year 2005 budget request.
                            Attachment No. 1

                                              SALARIES AND EXPENSES
                                             [Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
                                                                           Fiscal Year  Fiscal Year
                                                              Fiscal Year      2004         2005      Difference
                                                              2003 Actual    Estimate     Request        From
----------------------------------------------------------------------------------------------------------------
Permanent Positions.........................................          145          145          150            5
Full-time Equivalents.......................................          137          145          150            5

Personnel Compensation and Benefits.........................      $15,268      $16,025      $17,703       $1,678
Travel......................................................          $41          $80          $87           $7
Other Costs.................................................       $3,998       $3,416       $3,493          $77
                                                             ---------------------------------------------------
      TOTAL BUDGET RESOURCES................................      $19,307      $19,521      $21,283       $1,762
----------------------------------------------------------------------------------------------------------------

                          CHANGES IN RESOURCES

    For personnel compensation and benefits, $17,703,000 is requested 
to support the Board's permanent positions. Included in this request is 
$144,000 to fund the annual cost of the January 2004 pay raise and 
$221,000 for the January 2005 pay raise. The request also includes 
$50,000 for lump-sum leave payments to retiring employees.
    A travel budget of $87,000 is requested primarily for on-site 
visits to railroads to finalize audits and review public accountants' 
workpapers, to physically inspect proposed rail abandonment and 
construction sites, and to verify environmental data provided by 
parties to proceedings, conduct operational reviews, meet with shippers 
regarding rail service issues and compliance, defend the Board's 
decisions in courts across the country, and generally provide 
presentations, upon request, on issues within the Board's jurisdiction. 
Due to the increased number of environmental reviews associated with 
new rail construction cases and attendance at field hearings on high-
profiled cases, staff travel has increased and is expected to remain at 
the increased level through fiscal year 2005.
    Funding to cover other costs is requested at $3,493,000. Included 
in this number are rental payments to the General Services 
Administration (GSA) and payments for employee training, telephone 
service, postage, information technology systems support and equipment, 
miscellaneous services and supplies, and reimbursable services acquired 
from other Federal agencies. The increase in other costs is mainly 
associated with the projected increase in rental payments to GSA and an 
increased level of security for all Federal agencies. The Board has 
increased its level of physical security in light of recommendations by 
GSA and the Department of Homeland Security and has implemented a 
Business Continuity Plan along with sheltering-in-place procedures to 
provide for the physical security of its employees and the continuity 
planning and continuance of its statutory mission.

                            Attachment No. 2

                    FISCAL YEAR 2005 CONGRESSIONAL BUDGET JUSTIFICATION WORKLOAD SUMMARY \1\
----------------------------------------------------------------------------------------------------------------
                                                                   Actual Fiscal   Estimated \2\   Estimated \3\
                                                                     Year 2003      Fiscal Year     Fiscal Year
                                                                       Board        2004 Board      2005 Board
                        Workload Category                          Decisions and   Decisions and   Decisions and
                                                                   Court-related   Court-related   Court-related
                                                                       Work            Work            Work
----------------------------------------------------------------------------------------------------------------
Rail Carrier Control Cases......................................              52              55              55
Rail Rates and Service..........................................              70              86              86
Rail Abandonments and Constructions.............................             512             501             501
Other Line Transactions.........................................             186             204             204
Other Rail Activities...........................................              33              51              47
Non-Rail Activities.............................................              39              51              53
                                                                 -----------------------------------------------
      Total.....................................................             890             948             946
----------------------------------------------------------------------------------------------------------------
\1\ At this time, the Board believes that the number of Board decisions and court-related work is the best
  measure of workload at the Board. Certain activities performed at the Board that provide direct and indirect
  support for rulemakings and decisions in specific cases are not reflected in these workload numbers. Such
  activities not reflected include: enforcement activities; rail audits and rail carrier reporting oversight;
  administration of the rail waybill sample and development of the Uniform Rail Costing System; and case-related
  correspondence and informal public assistance.
\2\ Estimated workloads for fiscal year 2004 and 2005 are based on historical information regarding actual
  filings and best estimates of probable future filings by parties. Because the Board is principally an
  adjudicatory body, it does not directly control the level or timing of actual case filings.
\3\ Ex Parte No. 638, Procedures to Expedite Resolution of Rail Rate Challenges to be Considered Under the Stand-
  Alone Cost Methodology.

                                 ______
                                 

                      OFFICE OF GOVERNMENT ETHICS

          Prepared Statement of Marilyn Glynn, Acting Director

    Thank you for the opportunity to submit a statement in support of 
the request of the U.S. Office of Government Ethics (OGE) for fiscal 
year 2005 resources of $11,238,000 and 80 FTEs. This request represents 
an increase of $500,000, primarily to meet expected increases in 
personnel costs.
    The Office of Government Ethics is responsible for overseeing the 
ethics program of the executive branch, a program designed to help 
prevent conflicts of interest and promote integrity in Government. OGE 
sets the requirements of the program, develops executive branch-wide 
policies, serves as a resource/consultant to agency ethics officials 
and monitors agency programs to help ensure that the agencies are 
carrying out their responsibilities effectively. OGE also plays a 
significant role in the review and certification of the financial 
disclosure forms of nominees to positions requiring Senate 
confirmation. The day-to-day activities of the program are the 
responsibility of each executive branch agency. These activities 
include initial collection and review of financial disclosure forms; 
providing advice and training to agency employees on the criminal 
conflict of interest laws and the executive branch standards of 
conduct; and investigation and administrative enforcement of the 
standards of conduct.
    The ethics program that is directed by OGE is part of the basic 
infrastructure that supports good governance within the Federal 
executive branch. The resources expended by OGE to help promote 
integrity and prevent conflicts of interest are small in comparison to 
the resources expended by investigators and prosecutors who enforce 
ethics and conflict of interest rules and laws. Moreover, our 
preventive efforts help guard against the loss of resources through 
inadvertent or deliberate misuse. We believe the resources we have 
requested are those necessary to adequately support a strong ethics 
program.

                            FISCAL YEAR 2005

    We would like to highlight some of the major programs anticipated 
for fiscal year 2005.
    During any fiscal year in which a Presidential election occurs, OGE 
anticipates a large influx of Presidential appointees, regardless of 
the outcome of an election. OGE's role in clearing Presidential 
nominees is designed to help them understand the application of the 
conflict of interest requirements to their Government service and to 
secure their agreement to taking the necessary steps to resolve 
potential conflicts of interest. Our goal is to review nominee 
statements in a timely manner to avoid any unnecessary delay in the 
nomination/confirmation process. OGE's resources are shifted from other 
programs during this period to handle the increased workload in our 
financial disclosure review systems. Once an individual is appointed, 
OGE follows through to see that any agreements made by an appointee to 
address potential conflicts of interest are carried out. In addition, 
during this period, OGE will continue to conduct a second level review 
of over 1,000 annual and termination financial disclosure statements 
filed by Presidential appointees each year.
    As a part of the change that typically occurs after a Presidential 
election, OGE also will provide ethics training through OPM, and the 
White House if requested, to incoming Presidential appointees, new 
noncareer SES and Schedule C appointees, and White House staff. 
Additionally, we expect to help agencies provide accurate post-
employment advice to employees who are leaving the government.
    In the education and training area, OGE will develop instructor and 
participant guides to be used by departments and agencies to deliver 
their annual ethics training, as well as training evaluation 
instruments to measure what employees learned from various instructor-
led and web-based training courses. In training ethics officials, OGE 
will develop and conduct additional instructor-led ethics training 
courses for ethics practitioners, trainers, counselors, financial 
disclosure reviewers, and enforcement officials in headquarters and the 
regions.
    To reach ethics officials outside the Washington area, OGE plans to 
offer regional symposia for approximately 240 ethics practitioners in 
the field. OGE maintains an e-mail list service to communicate with 
2,000 practitioners and enforcement personnel world-wide. OGE also will 
host the 15th Annual National Government Ethics Conference for 
approximately 700 ethics practitioners in September 2005.
    The Office has added an employee survey to its evaluations of 
individual agency ethics programs. Begun on a more limited basis this 
fiscal year, these surveys will be carried out throughout fiscal year 
2005 in approximately one-third of the 35 Federal agencies evaluated. 
The information gathered through the surveys helps provide OGE with a 
better basis on which to judge the effectiveness of the individual 
agency programs under review and the overall executive branch ethics 
program.
    OGE desk officers will maintain their day-to-day communications 
with agencies assigned to them. This continuing liaison between OGE and 
agency ethics staffs enables OGE to respond to the needs of the 
agencies in a timely and accurate manner. In addition, this interaction 
provides OGE with an early warning that an agency ethics program is 
deficient or has problems that require specialized attention.
    OGE will continue to provide international technical assistance at 
the request of the Departments of State and Justice. In fiscal year 
2005, OGE plans to participate in Global Forum IV, the Follow-up 
Mechanism for the Inter-American Convention Against Corruption and the 
evaluation mechanisms of the Council of Europe's Group of States 
Against Corruption. The United States will also be reviewed under the 
latter two mechanisms during fiscal year 2005.
    These are just some of the programs and activities envisioned for 
fiscal year 2005. We are pleased with the past success of the executive 
branch ethics program and look forward to the challenge of maintaining 
and enhancing the quality of the program.

                       NONDEPARTMENTAL WITNESSES

    [Clerk's note.--The following testimonies were received by 
the Subcommittee on Transportation, Treasury and General 
Government, and Related Agencies for inclusion in the record. 
The submitted materials relate to the fiscal year 2005 budget 
request.
    The subcommittee requested that public witnesses provide 
written testimony because, given the Senate schedule and the 
number of subcommittee hearings with Department witnesses, 
there was not enough time to schedule hearings for 
nondepartmental witnesses.]

       Prepared Statement of the International Loran Association

    On behalf of the International Loran Association (ILA), I am 
writing in conjunction with your work on the fiscal year 2005 
Department of Transportation, Treasury and Related Agencies 
Appropriations bill. I respectfully request that this submission be 
made part of your hearing record in conjunction with the subcommittee's 
work.
    The ILA is asking the committee to support $25 million in funding 
from the fiscal year 2005 Federal Aviation Administration (FAA) 
budget--the same level as requested last year--as the next increment 
necessary to continue modernization and enhancement of Loran.
    In recent years, the committee has provided about $120 million to 
modernize and upgrade Loran because it is a multimodal navigation 
system with demonstrated cost/benefits important for our national 
transportation safety and security objectives. In fact, at this 
juncture, it would cost about $100 million to decommission the system, 
approximately the same amount that will be required to complete the 
modernization. However, the most compelling reason to continue 
providing resources to complete this work is because Loran is the only 
multimodal system we have in the United States that can support the 
global positioning satellite (GPS) system in all modes of 
transportation, as well as in timing applications affecting the 
majority of our population.
    In previous years, our submissions for the hearing record have 
documented numerous security, economic and technical issues as to why 
the operation of our national infrastructure and the safety of our 
citizens should not be placed at risk by depending solely on GPS for 
vast transportation, timing and navigation needs. The Volpe Center's 
``Vulnerability Assessment of the Transportation Infrastructure Relying 
on the Global Positioning System'' in 2001 framed those issues 
regarding overdependence on a single system, and an ever-growing body 
of evidence continues to be amassed to validate the continuation of 
Loran as the most complementary and cost effective system available to 
support GPS and eliminate national vulnerabilities. Indeed, ongoing 
studies have verified that not only is Loran the only other multimodal 
system we have, but also that Loran is the most complementary and most 
cost effective system we have.
    As you and other committee members are aware, the FAA, the U.S. 
Coast Guard (USCG), academic and industry experts have conducted an 
active Loran evaluation program spanning several years and a final 
report on that evaluation program is to be submitted to the U.S. 
Department of Transportation (DOT) on March 31, 2004. There are two 
major aspects to the report: one is the technical evaluation to ensure 
a modern or enhanced Loran system can meet the performance requirements 
of the FAA and USCG; and the other is a Loran benefit-cost study 
completed by the Volpe Center in 2003. It is fair to say that the 
technical evaluation section will be very positive, particularly 
because virtually all of the contributing studies have been 
continuously presented at numerous professional conferences and other 
technical fora. In addition, previous DOT-sponsored economic studies on 
Loran have been uniformly positive, and given the identified need for a 
national GPS backup, it is virtually assured that the economic section 
of the Loran evaluation study will be very favorable as well.
    Other recent government documents also indicate there is widespread 
acknowledgement that Loran is indeed the best system the country can 
utilize to backup and support GPS.
    For example, in April 2003, a Memorandum of Agreement (MOA) 
regarding the recapitalization, modernization, and operation of Loran 
was finalized and approved by the FAA, USCG, and DOT. This interagency 
MOA states: ``The parties recognize the multi-modal nature of the Loran 
navigation system and the necessity of managing Loran as a national 
asset in a multi-modal manner. The purpose of this agreement is to set 
forth terms by which the parties will provide service in order to 
provide a multi-modal backup to the Global Positioning System (GPS) 
based services''. In referencing the Volpe Study on GPS vulnerabilities 
cited above, the MOA states: ``both the FAA and USCG acknowledged that 
GPS is indeed vulnerable to intentional and unintentional interference 
and that backup systems are required for both the National Airspace 
System (NAS) and the Marine Transportation System (MTS) . . . The FAA 
and USCG also recognize that Congress, aviation, maritime, and other 
users regard Loran-C as a national asset that must be preserved as a 
part of the nation's critical infrastructure''.
    In January 2004, the DOT released a report for Secretary Mineta 
entitled: ``Radionavigation Systems: A Capabilities Investment 
Strategy,'' which also contained some important findings, even though 
much of the report's information was approximately 1 year old. First, 
it once again clearly identified Loran as the only multimodal backup to 
GPS and the best theoretical backup to GPS. Second, although the Loran 
report is less than 1 month away, it includes a recommendation to 
``Complete the evaluation of enhanced Loran to validate the expectation 
that it will provide the performance to support aviation Non-Precision 
Approach (NPA) and maritime Harbor Entrance and Approach (HEA) 
operations. If enhanced Loran meets the aviation NPA and maritime HEA 
performance criteria, and is cost effective across multiple modes, the 
Federal Government should operate Loran as an element of the long-term 
radionavigation system mix''. In addition, the report looks forward and 
identifies Loran as a backup for the new aviation Automatic Dependent 
Surveillance--Broadcast (ADS-B) system and the new marine Automatic 
Identification System (AIS), both of which will be widely used in the 
future. Finally, the report suggests exploration of the collocation of 
GPS augmentation and Loran facilities, which would not only maximize 
their synergies but also optimize cost savings to the Nation.
    From an international perspective, there is also recognition 
regarding the need and benefits of Loran. Ultimately, that realization 
will provide a major economic opportunity for U.S. technology because 
of equipment standardization and market globalization, similar to what 
has occurred with GPS. For example, in August 2003 the European 
Maritime Radionavigation Forum published a study entitled: ``GNSS 
Vulnerabilities & Mitigation Measures: A Study for the European 
Maritime Radionavigation Forum,'' and among its conclusions were: 
``There is a significant risk of losing GNSS for limited periods and in 
limited areas . . . The consequences of losing GNSS will become greater 
as reliance on it increases . . . Loran could provide an effective 
backup in Europe, at a capital cost estimated at =50m''.
    In addition, the ILA was invited to participate in a meeting in 
Japan last fall, where representatives from Japan, China, Korea, 
Russia, and the United States were asked to address the question of GPS 
vulnerabilities and how to solve the problem. Virtually the entire 
conference focused on one system: Loran.
    In summary, recognition of the various safety, security, economic, 
and political benefits that Loran can provide to the Nation has 
continued to grow rapidly, based on solid scientific and economic 
studies by our government, academia, industry, and other governments. A 
positive Loran report will be delivered to the DOT on March 31, 2004, 
and the DOT has committed to making a long-overdue Loran policy 
decision. It is now a certainty that Loran provides the Nation with the 
ability to mitigate GPS vulnerabilities in multimodal transportation 
and timing applications that play key roles in the continuing 
operations of the national infrastructure, and that the technology does 
so at a remarkably low cost.
    Loran's future, and its ability to complement GPS, depends on the 
continuation of the modernization program, which is already well 
underway. As previously documented, that modernization program will 
reduce Loran's operations and maintenance costs from approximately $27 
million a year to approximately $15 million annually, and enable 
multimodal support at a fraction of the cost other single mode system 
require. Moreover, the enhanced Loran system that will evolve from the 
modernization program will provide better performance than the single 
mode systems, and provide a national roadmap to future GPS-based 
systems that can incorporate Loran as a backup, such as ADS-B and AIS.
    As you and all committee members well understand, GPS has 
recognized vulnerabilities that could potentially affect the safety of 
tens of millions of Americans and the security of our critical national 
infrastructure. In combination with a modernized Loran system, GPS and 
Loran can together form the basis of a national infrastructure that is 
extremely robust, now and well into our future.
    For these reasons, we urge the committee to support fiscal year 
2005 funding in the FAA budget of no less than $25 million to continue 
a Loran modernization program that will help assure our Nation's 
transportation safety and infrastructure security objectives are 
achieved in a most cost-effective manner for government providers, 
private users, and taxpayers.
                                 ______
                                 
          Prepared Statement of Bernard H. Berne, M.D., Ph.D.

  OPPOSITION TO BUDGET REQUEST FOR APPROPRIATION TO FEDERAL BUILDINGS 
FUND FOR FOOD AND DRUG ADMINISTRATION CONSOLIDATION, MONTGOMERY COUNTY, 
                                MARYLAND

    I am a resident of Arlington, Virginia. I serve the Food and Drug 
Administration (FDA) as a Medical Officer and as a reviewer medical 
device approval applications. I am submitting this statement as a 
private individual.
    I ask your subcommittee to deny the administration's request to 
provide $88,710,000 to the General Services Administration's (GSA's) 
Federal Buildings Fund for the construction of a FDA Consolidation in 
Montgomery County, Maryland. This request appears on page 961 of the 
President's Budget for fiscal year 2005.
    The General Services Administration (GSA) is now designing and 
constructing this facility. GSA would use the additional funds to 
continue this wasteful project in suburban White Oak, Maryland. Please 
deny these funds for the following reasons:

Economic Considerations
    FDA will need to pay rent to GSA if it occupies this facility. The 
rents would likely be higher than rents that GSA and FDA pay to private 
property owners, since GSA would not need to enter into competitive 
bidding processes.
    Congressional authorizing committees need to evaluate the current 
costs of the consolidation and compare them to the costs of maintaining 
FDA's current facilities. No Congressional committee has done this 
during the past 15 years.

Lack of Need for Relocating FDA to White Oak Facility
    All or nearly all of FDA's offices that would move to White Oak are 
presently located in satisfactory leased facilities. Some, such as my 
own, are now in excellent buildings. There is no clear need or economic 
reason to relocate these offices to White Oak or to consolidate any 
part of FDA at this location.
    White Oak is an unsatisfactory location for FDA's headquarters 
consolidation. The project would promote urban sprawl.
    FDA's White Oak facility would occupy 125 acres next to a golf 
course in a suburban residential neighborhood in Montgomery County, 
Maryland. The FDA site is outside of the Capital Beltway on a largely 
forested 750-acre property surrounded by heavily congested roads and 
highways. The site is 3 miles from the nearest Metro station, and has 
only infrequent bus service.
    An FDA consolidation at White Oak would bring 6,000 FDA employees 
to this Washington area suburb. Most would need to commute for much 
longer times and distances than they presently do. White Oak is more 
than 20 miles from most present FDA facilities.
    I and thousands of other FDA employees presently commute to work by 
Metro, as our workplaces are near Metro stations. This will be 
impossible at White Oak.
    FDA employees driving to White Oak will add traffic congestion and 
air pollution to the Washington Metropolitan Area. This is especially 
unfortunate because the Washington Metropolitan Area already has the 
second worst traffic congestion of all urban areas in the United 
States. The Federal Government will need to subsidize many improvements 
to roads and public transit to accommodate the many FDA employees and 
associated businesses that would relocate from better locations to this 
distant suburb.
    FDA employee surveys have revealed widespread opposition to this 
relocation. Three years ago, a survey of those employees who would 
relocate first to White Oak showed that 70 percent opposed the move. 
Many stated that the relocation would impair FDA's ability to regulate 
drugs and medical devices.
    It is clear that the location of the facility will have long-
lasting adverse effects on FDA's ability to recruit and retain 
qualified employees. Further, many more FDA employees will telecommute 
than presently do. They will rarely work at the new facility. This will 
greatly diminish FDA's efficiency and will contradict a major goal of 
the FDA consolidation at White Oak.
    The Washington Metropolitan area has a number of better sites at 
which FDA can consolidate. Some of these, such as the Southeast Federal 
Center in the District of Columbia, are near other Federal facilities 
and Metrorail stations.

Legal Issues
    On February 23, 2001, I and a number of other FDA employees joined 
the Sierra Club and the Forest Conservation Council in a law suit that 
is intended to stop the White Oak project. For a number of reasons, 
FDA's occupancy of any buildings at White Oak would be illegal. The 
U.S. District Court for the District of Columbia is presently 
considering this suit.
    The White Oak facility would house the Office of the Commissioner 
of Food and Drugs, as well as most other FDA headquarters offices. This 
would violate 4 U.S.C  72, which states:

    ``All offices attached to the seat of government shall be exercised 
in the District of Columbia, and not elsewhere, except as otherwise 
expressly provided in law.''

4 U.S.C. 72 is derived from the 1790 Act that established the District 
of Columbia as the Nation's capital. The first Congress enacted this 
law, which President George Washington signed.
    There is no law that expressly provides that FDA's headquarters 
offices shall be exercised outside of the District of Columbia.
    The FDA Revitalization Act (Public Law 101-635; 21 U.S.C.  369b), 
authorizes the Secretary of HHS to enter into contracts to acquire 
property and to construct and operate a consolidated FDA headquarters 
facility. This Act does not provide the location of the consolidated 
facility.
    I ask Congress not to appropriate funds to support an illegal 
activity. The 1790 Act had the worthy purpose of ensuring that all 
central offices of the Federal Government would consolidate in the 
Federal capital District, and not elsewhere. The consolidated FDA 
facility would be one such office that is ``attached to the seat of 
government''.
    Article 1, Section 8, of the Constitution gives Congress exclusive 
jurisdiction over the District of Columbia. Your committee should take 
no action to support the location of FDA's headquarters at a location 
that is outside of the District. Any such action would tend to vitiate 
this section of the Constitution, which 4 U.S.C.  72 is intended to 
support.
    Executive Order 12072, Aug. 16, 1978, (40 U.S.C. 490 note) states 
in Section 1-1, Subsection 101:

    ``Federal facilities and Federal use of space in urban areas shall 
serve to strengthen the nation's cities and to make them attractive 
places to live and work. Such Federal space shall conserve existing 
urban resources and encourage the development and redevelopment of 
cities.''

White Oak is not in or near any city. An FDA consolidation at White Oak 
(which is in an ``urban area'', the Washington Metropolitan Area) would 
not strengthen any cities. The FDA facility would not encourage the 
development or redevelopment of any cities.
    Executive Order 12072, Section 1-1, Subsection 101, contains the 
word ``shall'' in several locations. FDA therefore can not legally 
locate its headquarters in suburban White Oak.
    Executive Order 12072 and several Federal statutes require that 
heads of Federal agencies consult with local city officials to obtain 
their recommendations for and objections to all proposed new Federal 
facilities. Neither GSA nor FDA officials ever consulted with officials 
of the District of Columbia or of the City of Rockville in Montgomery 
County, Maryland, concerning the White Oak facility.
    This lack of consultation violated Executive Order 12072 and 
several laws. It prevented District and Rockville officials from 
recommending alternative sites for the consolidated facility within 
their own jurisdictions and from objecting to the selection of the 
White Oak site.
    The Public Buildings Act of 1959, as amended, requires that the 
Committee on Environment and Public Works of the U.S. Senate approve 
prospectuses that describe the location and maximum costs of any large 
buildings that GSA may wish to construct before Congress can 
appropriate funds to design and construct such buildings. That 
Committee has never approved a prospectus that describes FDA's White 
Oak facility.
    Paragraph 7 of Senate Rule XVI requires that committee reports on 
general appropriations bills identify each provision ``which proposes 
an item of appropriation which is not made to carry out the provisions 
of an existing law, a treaty stipulation, or an act or resolution 
previously passed by the Senate during that session.'' If your 
committee proposes any appropriation of funds for an FDA consolidation, 
your Committee Report needs to identify this appropriation as being one 
that is not made to carry out the provisions of any existing law, 
treaty, or act or resolution that the Senate has previously passed 
during this session.
    The Treasury and General Government Appropriations Act, 2000 
(Public Law 101-58), the Consolidated Appropriations Act, 2001 (Public 
Law 106-544), the Treasury and General Government Appropriations Act, 
2002 (Public Law 107-67), the Consolidated Appropriations Resolution, 
2003 (Public Law 108-7), and the Consolidated Appropriations Act, 2004 
(Public Law 108-199) appropriated funds to GSA that could support FDA's 
consolidation in Montgomery County, Maryland. However, all of these 
Acts contain provisions that state:

    ``Provided further, That funds available to the General Services 
Administration shall not be available for expenses of any construction, 
repair, alteration, or acquisition project for which a prospectus, if 
required by the Public Buildings Act of 1959, as amended, has not been 
approved, except that necessary funds may be expended for each project 
for required expenses for the development of a proposed prospectus.''

    The Public Buildings Act of 1959, as amended, requires a prospectus 
that describes FDA's White Oak facility because the project's cost 
exceeds $1,500,000. No prospectus that described this facility had been 
approved before Public Law 101-58, Public Law 106-544, Public Law 107-
67, and Public Law 108-199 were enacted into law. Therefore, GSA may 
only legally use the funds appropriated in these Acts for ``required 
expenses for the development of a proposed prospectus''. GSA cannot 
legally use the funds to design and construct any buildings.
    The report of the Committee on Appropriations of the House of 
Representatives (House Report 107-152, July 23, 2001), which 
accompanied the bill (H.R. 2590) that became Public Law 107-67, states 
on p. 65 under the heading: ``General Services Administration'' 
``Federal Buildings Fund'' ``Construction and Acquisition'' 
``Recommendation'' the following: ``All construction projects funded in 
this bill are subject to authorization by the Committee on 
Transportation and Infrastructure''.
    FDA's White Oak project was one of the construction projects funded 
under Public Law 107-67 (H.R. 2590). Despite this, GSA is presently 
designing and starting to construct the FDA consolidation without an 
approved prospectus and without receiving authorization by the 
Committee on Transportation and Infrastructure. GSA's actions are 
contrary to the House Appropriations Committee's statement in House 
Report 107-152, and, further, are illegal.
    Some GSA officials claim that the FDA Revitalization Act (Public 
Law 101-635) authorizes appropriations to GSA without the need for 
prospectus approvals. This claim is incorrect. Public Law 101-635, 
which amended the Federal Food, Drug and Cosmetic Act, authorized 
appropriations that permit the Secretary of HHS to enter into contracts 
to construct and operate a consolidated FDA facility.
    Public Law 101-635 specifically limits the role of the 
Administrator of General Services in the FDA consolidation to 
consultation with the Secretary of HHS. Public Law 101-635 does not 
authorize any appropriations that can permit GSA to conduct any such 
activities, nor does it authorize any appropriations to GSA's Federal 
Buildings Fund. Clearly, GSA will use any new funds illegally, just as 
it is using the previously appropriated funds.
    The National Environmental Policy Act (NEPA) of 1969 requires that 
Federal agencies compare in an Environmental Impact Statement (EIS) 
alternative locations for any large new Federal facility. However, the 
EIS for the White Oak FDA facility did not make any such comparisons.
    The EIS only compared the environmental impacts of an FDA 
consolidation at White Oak with the ``no action'' alternative. 
Following this legally inadequate comparison, GSA and FDA officials 
selected White Oak as the location for the facility.
    GSA and FDA officials therefore violated NEPA when they selected 
the White Oak site. Congress should not appropriate funds to support 
this illegal selection.
    A Federal court may prevent FDA from consolidating its facilities 
at White Oak for one or more of the above reasons. Congress should not 
provide funds for FDA to occupy the White Oak facility until the 
Federal courts decide whether the project can proceed.
    I therefore ask that your subcommittee not provide the requested 
$88,710,000 to GSA in this legislation. Thank you.
                                 ______
                                 
      Prepared Statement of the American Passenger Rail Coalition

    Chairman Shelby and Members of the Subcommittee on Transportation, 
Treasury and General Government, thank you for the opportunity to 
provide testimony on fiscal year 2005 funding for Amtrak, the Nation's 
intercity passenger railroad. My name is Harriet Parcells and I am 
Executive Director of the American Passenger Rail Coalition (APRC), a 
national association of railroad equipment suppliers and rail 
businesses.
    For fiscal year 2005, Amtrak has requested $1.79 billion. Of this 
total, nearly $800 million is for capital investments to continue the 
work taking place under the leadership of Amtrak President David Gunn 
to bring Amtrak into a state of good repair. Amtrak's request for 
operations is $570 million, $11 million less than Amtrak requested in 
fiscal year 2004 and an indication that Mr. Gunn's efforts to improve 
efficiency, reduce costs and implement management reforms at Amtrak are 
yielding positive results. APRC supports Amtrak's budget request and 
asks the subcommittee to fund Amtrak at $1.79 billion. While we 
recognize that funding constraints face the subcommittee, APRC believes 
that funding Amtrak much below $1.79 billion would jeopardize the 
substantial progress taking place at Amtrak. The administration's 
fiscal year 2005 budget of $900 million for Amtrak is nearly 50 percent 
below Amtrak's budget request and $318 million or 26 percent below 
Amtrak's current appropriation of $1.218 billion. Funding Amtrak at 
$900 million would provide virtually no funding to continue the 
important capital investments identified in Amtrak's Five Year 
Strategic Capital Plan and that Amtrak has been undertaking since 2003. 
Amtrak President David Gunn has stated that funding at $900 million 
would lead to a shutdown of the national system. APRC also supports 
strong funding for the rail safety and research and development 
programs at the Federal Railroad Administration.

            AMTRAK RIDERSHIP IS STRONG ON TRAINS NATIONWIDE

    Amtrak is a valued means of transportation used by million of 
Americans annually. For travel in metropolitan corridors, Amtrak 
provides a cost-effective, efficient alternative to congested highways 
and airports. For residents of rural communities, Amtrak trains are 
often the only convenient, affordable, all-weather public 
transportation available. In fiscal year 2003, 24 million passengers 
rode Amtrak trains, the highest level in Amtrak's history. Ridership 
gains occurred on routes across the system. Each month from June-
December 2003, gains in rail ridership ranged from 7-12 percent over 
levels for the same period in 2002. Amtrak ticket revenues also rose 
each month from June-December 2003. Thanksgiving ridership was Amtrak's 
highest ever for this holiday--Amtrak carried approximately 595,000 
passengers over the 7 days from Tuesday, November 25-Monday, December 
1. Ridership on Amtrak's long-distance trains was particularly strong, 
with increases of 14 percent or more over last year.
    Some policymakers question the need for long-distance trains, yet 
the strong growth in ridership on these trains underscores the 
important mobility and economic benefits they provide, especially for 
America's small cities and rural communities (see table 1).

TABLE 1.--AMTRAK MONTHLY RIDERSHIP GROWTH JUNE-DECEMBER FISCAL YEAR 2003
                      COMPARED TO FISCAL YEAR 2002
                           [Amount in percent]
------------------------------------------------------------------------
                                            Systemwide     Long-distance
                  Month                        Total          Trains
------------------------------------------------------------------------
June....................................            +6.8           +13.6
July....................................            +7.1            +9.4
August..................................            +7.3           +14.1
September...............................           +11.4           +22.2
October.................................           +10.7           +30.9
November................................           +11.7           +32.0
December................................  ..............           +16.3
------------------------------------------------------------------------
Source: Amtrak and NARP News (Jan. 2004 issue).

    California's Pacific Surfliner trains, operating between San Diego 
and Los Angeles and Santa Barbara, continue to experience record-
breaking ridership. Two million passengers rode these trains in fiscal 
year 2003, a 25 percent increase over fiscal year 2002. Ridership on 
other major rail corridors in the State--the San Joaquin service and 
the Capitol Corridor--also had strong ridership growth. Ridership on 
the Texas Eagle rose 20 percent in fiscal year 2003 over 2002 levels. 
In the Midwest, eight trains that serve the region experienced a 16 
percent rise in ridership from May-December 2003 compared to 2002. In 
the Northeast, Acela Regional trains carried more passengers than any 
other Amtrak service in the Nation--nearly 6 million riders--up 3.7 
percent over last year. The Pennsylvanian train ridership surged 64 
percent, benefitting from a routing change that terminated the train in 
Pittsburgh rather than Chicago.
    Ridership Gains Continue in Fiscal Year 2004.--Gains in Amtrak 
ridership continued in first 4 months of fiscal year 2004 (Oct. 2003-
Jan. 2004). Northeast Corridor ridership was up over 6 percent; 
ridership on long-distance trains was up nearly 20 percent.

      AMTRAK'S ABILITY TO CONTINUE CAPITAL INVESTMENTS IS CRUCIAL

    Amtrak President David Gunn and the Amtrak Board of Directors began 
implementing a program of capital investments in fiscal year 2003 that, 
if sustained over the next several years, will bring the national 
Amtrak system into a state of good repair. These capital investments 
are essential to improving the reliability, safety and efficiency of 
the national Amtrak system. Amtrak's accomplishments to date in making 
capital improvements are significant. In fiscal year 2003, 147,600 
concrete ties were installed in the Northeast Corridor, replacing old 
wood ties. Twenty-two miles of continuous welded track were installed 
and track bed was improved. These investments will provide a smoother 
ride for travelers and reduce track maintenance costs. Track 
improvements to a third track have increased capacity and enabled 
speeds to rise from 60 to 110 mph. Thirty-three miles of signal cables 
were replaced, 37 miles of electric catenary hardware renewed and 22 
bridges retimbered. Substantial improvements were and continue to be 
made to rolling stock. Twenty-one wrecked Amfleet and Superliner 
railcars were rebuilt and 23 food service cars were remanufactured and 
restored to service on routes around the country. One hundred and three 
railcars and locomotives went through heavy overhauls or were 
remanufactured. APRC urges Congress to provide Amtrak with sufficient 
funding in fiscal year 2005 to enable the railroad to continue these 
essential capital investments.

     RAIL CAPITAL INVESTMENTS PRODUCE U.S. JOBS AND OTHER BENEFITS

    The U.S. rail manufacturing and supply industry contributes to the 
health of the U.S. economy, with over $20 billion in annual sales 
(approximately $7 billion to U.S. intercity, commuter and transit 
passenger railroads) and over 150,000 workers employed. Capital 
investments made by Amtrak support jobs for Americans in factories and 
businesses in States across the country. Investments in transportation 
infrastructure are vital to the efficient movement of people and goods 
and a robust, competitive economy. Every billion dollars invested in 
transportation infrastructure projects creates approximately 42,000 
jobs.
    In the Pacific Northwest, investments in new rail infrastructure 
and equipment by Washington, Oregon and public and private partners to 
improve the quality and speed of rail service in the Pacific Northwest 
High Speed Rail Corridor resulted in a tripling in intercity passenger 
rail ridership over levels 10 years ago. With further investments, the 
region anticipates rail ridership to grow to 2.2 million by the year 
2018. The Midwest Regional Rail Initiative, a plan to link cities and 
communities throughout the Midwest with improved passenger rail 
service, is projected to stimulate substantial public and private 
investment and create 2,300 permanent new rail service jobs, 6,300 
construction jobs (over 10 years) and 18,200 indirect jobs. Public 
investments to bring the Acela high-speed rail service to the Northeast 
Corridor generated economic benefits for States and businesses around 
the country. Contracts were signed with over 70 suppliers in more than 
20 States.

         AIR-RAIL INTERMODAL CONNECTIONS PROVIDE MANY BENEFITS

    Intermodal transportation hubs that provide an easy transfer for 
travelers between modes--from airplanes to intercity passenger trains 
or intercity trains to local transit systems--enhance the efficiency of 
the overall transportation system and provide many benefits to 
travelers. While progress in developing intermodal connections has been 
made since enactment of the ``Intermodal Surface Transportation 
Efficiency Act of 1991'', much work remains in this area. Only a few 
U.S. airports, such as Newark Airport in New Jersey and Burbank Airport 
in California, provide an easy transfer between Amtrak trains and 
airplanes. At Newark Airport, Continental Airlines and Amtrak have 
created a code-sharing arrangement, the only one in the Nation, which 
covers rail travel for Continental passengers between Newark Airport 
and six cities on the Northeast Corridor. A study comparing travel by 
several different modes (Amtrak, NJ Transit or by car) to Newark 
Airport from nearby cities (Newark, NYC, Philadelphia, Trenton) found 
that considerable time can be saved when rail transportation is used. 
An added benefit is that adverse weather and road conditions which 
cause great time increases for auto travel generally don't impact rail. 
At Maryland's BWI Airport, travelers can easily connect between trains 
and airplanes by a bus service that operates between the airport and 
Amtrak's BWI train station. This service works well and is used by many 
travelers. In Pennsylvania, part of the plan for the new Harrisburg 
International Airport terminal is a $10 million train station, which 
will connect to the new airport terminal by a glass-enclosed moving 
sidewalk. A larger number of U.S. airports have convenient rail transit 
connections to the airport: Atlanta's Hartsfield Airport; Chicago's 
Midway and O'Hare Airports; St. Louis Lambert Field Airport; Washington 
DC's Reagan National Airport and others. These types of intermodal 
connections are commonplace throughout Europe and other parts of the 
world where airports have become true multi-modal transportation 
centers. U.S. transportation policy and funding should continue to 
encourage development of intermodal centers and easy connections 
between modes to boost the efficiency of the U.S. transportation system 
and ease travel for passengers.

  RAIL INFRASTRUCTURE BONDS TO COMPLEMENT APPROPRIATED FUNDS FOR RAIL

    The need for funding to improve railroad infrastructure greatly 
exceeds what is available through annual Federal appropriations. States 
lack adequate funding to make these investments alone. An innovative 
Federal-State partnership is needed. Several bills have been introduced 
in the Senate and the House of Representatives that would fund 
investments in rail infrastructure through tax-credit bonds or private 
activity bonds. In the Senate, two comprehensive rail authorization 
bills have been introduced. The American Rail Equity Act of 2003 (AREA) 
or S. 1505 was introduced by Senator Kay Bailey Hutchison and 
cosponsors. S. 1505 establishes a non-profit Rail Infrastructure 
Finance Corporation (RIFCO) that is authorized to issue $48 billion in 
tax-credit bonds for rail infrastructure investments over 6 years. It 
also authorizes $12 billion for Amtrak over 6 years. A second bill, the 
American Railroad Revitalization, Investment and Enhancement Act of the 
21st Century (ARRIVE 21) or S. 1961 was introduced by Senator Ernest 
Hollings and cosponsors and creates a non-profit public-private 
partnership, the Rail Investment Finance Corporation (RIFCO), that is 
authorized to issue $30 billion in tax-credit bonds over 6 years. S. 
1961 also reauthorizes Amtrak at $1.5 billion per year for 6 years. In 
the House, the Transportation and Infrastructure Committee approved 
RIDE-21 (HR 2950) which authorizes $59 billion in rail infrastructure 
improvements and establishes authority for States or State compacts to 
issue $12 billion in tax-credit bonds and $12 billion in private 
activity bonds over 10 years for investments for high-speed rail 
infrastructure. APRC strongly supports enactment of legislation that 
would establish a non-profit corporation authorized to issue bonds for 
investments in rail infrastructure. The bonds would help address the 
large unmet need for investments in rail infrastructure to improve 
passenger and freight rail service and capacity and would complement 
rail funding available through the annual appropriations process.
    Chairman Shelby and members of the subcommittee, thank you for the 
opportunity to provide testimony on the needs of our Nation's passenger 
rail system.
                                 ______
                                 
 Prepared Statement of the Coalition of Northeastern Governors (CONEG)

    As the subcommittee begins the fiscal year 2005 transportation 
appropriations process, the Coalition of Northeastern Governors (CONEG) 
is pleased to share with the subcommittee testimony on the fiscal year 
2005 Transportation and Treasury Appropriations bill. The CONEG 
Governors commend the subcommittee for its past support of funding for 
the Nation's highway, transit, and rail systems. Although we recognize 
the extensive demands being made upon Federal resources in the coming 
year, we urge the subcommittee to continue the important Federal 
partnership role that is vital to strengthening the multi-modal 
transportation system. This system is a critical underpinning to the 
productivity of the Nation's economy and the security and well-being of 
its communities.
    First, the Governors urge the subcommittee to fund the combined 
highway, transit and safety programs at levels that will continue the 
progress in recent years to improve the condition and safety of the 
Nation's highways, bridges and transit systems. These improvements, 
documented in the U.S. Department of Transportation's 2002 Conditions 
and Performance Report to Congress, were made possible by the 
substantial level of investments made by the Federal-State partnership 
in highway, bridge and transit infrastructure under the Transportation 
Equity Act for the 21st Century (TEA21). Continued and substantial 
investment in these infrastructure improvements--in both urban and 
rural areas--is necessary if the Nation's surface transportation system 
is to safely and efficiently move people and the substantial growth in 
freight movement that is projected in the coming decade. According to 
the Conditions and Performance Report, a combined Federal highway and 
transit program of $53 billion annually is needed simply to maintain 
our Nation's highways and transit systems in the current conditions.
    Within the transit program, the Governors strongly urge the 
subcommittee to provide funding levels that at least maintain the basic 
program structure and address the solvency of the mass transit account. 
Further, the Governors urge the subcommittee to continue the 
traditional 80/20 Federal-State match for the New Start Program and the 
Bus and Bus Facilities Discretionary Grant Program. These programs have 
been instrumental in ensuring that needed funds are invested to improve 
and extend transit services in both our urban and rural communities.
    Second, the Governors strongly urge the subcommittee to provide at 
least $1.8 billion in fiscal year 2005 for intercity passenger rail. 
Intercity passenger rail is a vital part of the Nation's transportation 
system, particularly in the Northeast and Mid-Atlantic region, where it 
provides essential mobility, enhances capacity of other modes, and 
provides much needed redundancy to the Nation's transportation system. 
In recent years, the Congress has imposed discipline on the management 
of Amtrak operations, with the result being greater financial 
accountability and oversight of the Federal Government's investment in 
intercity passenger rail. While the Congress, administration and States 
continue to work cooperatively to determine the future of intercity 
passenger rail and Amtrak in the Nation's transportation system, a 
funding level of $1.8 billion in fiscal year 2005 will help provide a 
period of stability for intercity passenger and commuter rail 
operations. This funding level is critically needed to maintain 
services and begin a program of essential investments in equipment and 
infrastructure to bring the system back to a state of good repair for 
reliable service. The United States Department of Transportation 
Inspector General has noted that over $1 billion in capital funds is 
needed annually just to sustain the current intercity passenger rail 
system, regardless of who operates that system. The States are already 
major investors in the current intercity passenger rail system, with 
the Northeast and Mid-Atlantic States having invested over $4 billion 
in intercity passenger rail operations and infrastructure since 1991.
    Third, the Governors urge the subcommittee to continue funding for 
investments in Intelligent Transportation Systems (ITS) that can 
maintain and enhance the capabilities and security of the Nation's 
transportation system. ITS helps States and communities along the 
densely populated Atlantic Coast region improve the safe and reliable 
operations on highway and transit systems on a daily basis. The 
Northeast's rural areas and communities also benefit significantly from 
ITS investments. The region's ITS systems, including those provided by 
TRANSCOM and the I-95 Corridor Coalition, have demonstrated their 
critical role, both in the emergency management and recovery phases, 
when security demands put added pressure on the region's transportation 
networks.
    Fourth, safety on the Nation's highways, transit and rail systems 
remains a priority of the Governors. The safety of the aging rail 
tunnels along the Northeast Corridor is a particular concern, and we 
urge the subcommittee to fund life safety improvements for the Amtrak-
owned Baltimore and New York tunnels. The Governors also support 
maximum funding for the Section 130 Highway-Rail Crossing Program. As 
part of the Federal-State partnership to correct hazardous conditions 
on the Nation's highways, investments in highway-rail crossings can 
reduce injuries and death from accidents even as they allow higher 
train speeds and increased reliability.
    Fifth, the Governors urge the subcommittee to provide sufficient 
funding for border crossing and gateway infrastructure projects. A 
strong program--one that invests in transportation projects addressing 
both security and transportation needs--can contribute to safer, more 
efficient and secure flows of people and goods across international 
borders and through gateways.
    Sixth, the Governors also support the President's funding request 
of $20 million for the Surface Transportation Board. The Board is 
essential for oversight and effective implementation of decisions 
affecting the ongoing process of railroad consolidations that will 
affect local and regional economies across the Nation.
    Finally, the Governors support continued Federal investment in 
transportation research and development programs, particularly the 
Federal Railroad's Next Generation High Speed Rail program. This 
program enhances safety and helps stimulate the development of new 
technologies, which will benefit improved intercity rail service across 
the Nation.
    The CONEG Governors thank you, Ranking Member Patty Murray, and the 
entire subcommittee for the opportunity to share these priorities and 
appreciate your consideration of these requests.
                                 ______
                                 

      Prepared Statement of the National Treasury Employees Union

    NTEU represents 150,000 Federal employees in 29 Federal agencies 
and departments, including the men and women who work at the Internal 
Revenue Service. I appreciate the opportunity to provide the 
subcommittee with comments on the IRS budget for fiscal year 2005.
    There are several items in the administration's IRS budget that 
NTEU believes would be detrimental to the IRS' mission. The two most 
egregious items include the administration's proposal to contract out 
tax collection to private tax collection agencies, and an inadequate 
budget request that will prevent the IRS from continuing to improve its 
customer service record while bolstering enforcement efforts.

                         PRIVATE TAX COLLECTION

    The Treasury Department's fiscal year 2005 budget proposal to allow 
the IRS to use private collection agencies to collect Federal income 
taxes is risky, costly, and unnecessary. NTEU strongly opposes this 
plan. This proposal would risk exposing sensitive taxpayer information, 
would subject taxpayers to the abusive tactics of private debt 
collectors, and would cost U.S. citizens much more money than if IRS 
employees did the job.
    IRS employees are the most reliable, cost-effective means for 
collecting Federal income taxes. IRS employees can collect outstanding 
debt more cheaply than private contractors. With an appropriation of 
$296 million for compliance, the IRS could collect an additional $9.47 
billion in revenue per year. That's a $31 return per dollar spent, 
compared to only $3 revenue per dollar spent for private collection 
agencies. Furthermore, there is the potential for abusive treatment 
from private debt collectors. There is a very real risk of exposing 
sensitive taxpayer information to those who might misuse it. In this 
era of identity theft, I do not believe the Federal Government should 
engage in practices that could needlessly expose confidential taxpayer 
information.
    A February 2003 Treasury Inspector General for Taxpayer 
Administration (TIGTA) report faulted the IRS for failing to conduct 
background checks on more than 2,100 private contract employees working 
in offices in Maryland who had access to sensitive information. In 1996 
and 1997 tax years, Congress authorized a pilot program to test private 
tax collection. The 1996 program resulted in such egregious abuses by 
private debt collectors that the 1997 program was cancelled. According 
to an IRS Internal Audit Report (Ref. No. 080805, 12/19/97), the 
private debt collectors under contract to the Federal Government 
committed hundreds of violations of the Fair Debt Collection Practices 
Act--including calling a taxpayer at 4:19 a.m.
    There is widespread opposition to privatization of tax collection. 
Several taxpayer advocacy groups: the Tax Executives Institute; the 
National Association of Enrolled Agents; Citizens for Tax Justice; 
Consumer Federation of America; Consumers Union; National Consumer Law 
Center; National Consumers League; and large segments of the taxpaying 
public oppose the privatization of collection duties. Specifically, 
Global Strategy Group, Inc. conducted a poll last year that found 66 
percent of respondents disapprove of allowing the Internal Revenue 
Service (IRS) to hire private debt collection companies. When details 
of the IRS's plan were provided, the number in opposition rose to 79 
percent. The results of this poll strongly indicate that Americans 
across all political, geographic and income lines oppose this proposal.
    While the IRS is liable for damages caused by an IRS employee's 
misuse of sensitive taxpayer information, taxpayers would not have 
proper redress with the Federal Government for misuse of their 
confidential information by contractors. Instead, taxpayers would be 
left to seek damages against the private collection agency. It is plain 
and simple. This plan to privatize tax collection at the IRS will hurt 
U.S. taxpayers and will hurt IRS workers.
    Having cited these failed attempts for private tax collection, I 
would urge the subcommittee to prohibit any appropriation funds from 
being used for contracting out tax collection services to recover U.S. 
debt.
                                  rifs
    While NTEU agrees with IRS' goal of enhancing tax compliance and 
enforcement, we don't agree with the approach of eliminating front-line 
employees in order to pay for additional compliance efforts. As the 
number of tax returns continues to grow, the number of IRS employees 
continues to shrink. As the IRS Oversight Board pointed out in its 2003 
Annual Report, the IRS workload has increased by 16 percent while at 
the same time the number of full time equivalent employees has 
decreased by 16 percent from 1999 to 2002. This is caused by a number 
of circumstances, including an increasingly complex tax code and an 
increasing number of tax returns--paper as well as electronic returns. 
This has led to a serious decline in the size of the IRS workforce as a 
way to cope with increasing budgetary demands.
    NTEU strongly encourages the subcommittee to increase the IRS 
budget by 10 percent over fiscal year 2004, as recently recommended by 
the IRS Oversight Board in its fiscal year 2005 Budget/Special Report 
(March 2004). The administration expects the IRS to do more with fewer 
resources and this is simply an unrealistic demand placed on the IRS 
workforce. If Congress wants more out of the IRS, then they are going 
to have to pay for it. The IRS Oversight Board makes a compelling case 
for increasing the IRS budget because it will ultimately mean an 
increase in Treasury revenues.
    I would encourage Congress to work with the administration to 
anticipate costly events--such as pay increases or costly changes to 
the tax code--and budget accordingly. This did not happen last year. 
For instance, NTEU encouraged the IRS to make a supplemental funding 
request for administering last summer's child tax credit refunds to 
taxpayers. To our dismay, the request was not made and IRS was forced 
to do more work without any additional resources. This places a great 
burden on an IRS workforce that is expected to provide business results 
while improving customer service. This is unrealistic and unfair. 
Improving customer service, enhancing tax return processing and 
increasing tax compliance will only occur if Congress and the 
administration support increased funding for staffing, advanced 
technology and equipment, and better training.
    The IRS is using the excuse of bolstering compliance to justify a 
recently announced reduction in force (RIF) of roughly 1,600 IRS Case 
Processing and Insolvency support employees in 92 locations across the 
country--only to turn around and hire 1,000 new employees to do the 
same work in four consolidated IRS Service Center sites. NTEU opposes 
the RIF and urges the IRS to keep its employees in the field, serving 
the local taxpayers. NTEU urges Congress to appropriate the needed 
funding to keep these employees in the field.
    Presumably, IRS intends to save money and increase efficiency with 
this move, but there is no evidence of cost savings and IRS' business 
case assumptions are faulty. IRS has failed to provide information on 
the cost of hiring and training new employees when the current 
employees already know how to do the job.
    In responding to the announcement of the RIFs, former IRS 
commissioner Donald Alexander was recently quoted as saying, 
``Centralization is not always more efficient, especially when it moves 
support people away from those they are supporting.''
    As one of the rationales for the current centralization, the IRS 
indicates that Case Processing had not been reorganized since the 
1970's. However, several attempts have been made to centralize Case 
Processing over the years, but have failed and this function has 
remained in the field. In fact, Case Processing functions were located 
in Service Centers until the IRS reorganized 25 years ago to locate 
these functions closer to the employees who perform collection and exam 
work. Reorganizing for the sake of reorganization is a waste of time 
and money, neither of which the IRS can afford to squander.
    Case processing support employees assist Revenue Agents and Revenue 
Officers in resolving issues related to overdue taxes. One of the more 
important duties performed includes releasing liens on property once 
overdue taxes are paid so that a taxpayer can secure a loan and 
calculate interest penalty abatements.
    Insolvency employees are responsible for monitoring tax compliance 
throughout the life of the bankruptcy, including trust fund taxes and 
pyramiding of business taxes. Insolvency employees must adhere to 
strict deadlines in order to avoid violations of the automatic stay and 
possible sanctions. Failure to take timely and appropriate actions 
could result in the IRS being sued for damages and/or attorney fees. 
Centralizing Insolvency work means that the new employees will need to 
know the local rules and standing orders of the various bankruptcy 
courts that take precedence under the Bankruptcy Code. It is 
unreasonable to expect employees to be able to follow the rules of 
dozens of different States and courts, likely resulting in delays and 
errors and a greater cost to the IRS.
    The IRS has failed to provide information on how local taxpayers 
will be affected by its plan. Despite a lack of information from the 
IRS on the affect on taxpayers, NTEU believes that this RIF will indeed 
affect taxpayers nationwide.
    Federal-State disclosure agreements--and the statutes that govern 
these agreements--differ by State. Centralizing the Insolvency work 
will mean that employees in the centralized sites will need to be 
responsible for knowing and adhering to all 50 variations. It will take 
longer for cases to close if they have to be shipped to a centralized 
site and this could hurt the taxpayer who is waiting for her case to be 
closed.
    Currently, if a taxpayer has a question about the process, she can 
find one of the Case Processing employees locally and get her question 
answered. If these jobs are shipped out of State, it will be much more 
difficult for the taxpayer to get her question answered, or for the 
cases to be resolved in a timely and complete manner.
    Finally, this removes accountability at the local level. If a 
member of Congress is contacted by a taxpayer constituent with an IRS 
case processing problem, that member will be directed to some out of 
State Service Center where the new employee has no comprehension of the 
region, much less the local personnel involved in closing a case, or 
the member of Congress making the inquiry.
    NTEU agrees with the IRS that there is a great need to bolster 
enforcement efforts, but this RIF does not guarantee new or enhanced 
enforcement positions. Once again, this is a waste of time and money 
for the IRS. This is unfair to the current employees who are trained 
and successfully performing the Case Processing and Insolvency work; 
this is unfair to the taxpayers who rely on the services provided by 
their local Case Processing workers.
    IRS also has plans for a RIF of approximately 2,200 employees at 
the Memphis Submission Processing Center. NTEU strongly disagrees with 
the IRS' decision to conduct this RIF. The IRS claims that it is taking 
this action because there has been an increase in electronic filing of 
tax returns, and it no longer needs employees to process paper returns. 
However, according to the General Accounting Office (GAO-02-205), the 
IRS has fallen far short of meeting its electronic filing goals. IRS is 
using unrealistic, optimistic assumptions to project the increase in 
electronic tax return filing and then using these assumptions to 
justify the RIF.
    I commend the House of Representatives Appropriators who recognize 
the risks of reducing IRS staffing of manual submission processing. In 
House Committee Report 108-243, they have asked IRS to report back 
prior to ``initiating any premature and ill considered reductions in 
force . . .'' (see H. Rept. 108-243, IRS MANUAL SUBMISSIONS 
PROCESSING).
    NTEU recognizes that electronic filing will eventually become a 
reality of IRS' modernization efforts. But we strongly believe that any 
resulting reorganizations should occur when there is a genuine need for 
a shift to an e-filing workforce and every effort should be made to 
avoid a RIF by retraining and placement of current employees.
    These examples of reducing the IRS workforce demonstrates the need 
for Congress to commit to funding the IRS at adequate levels so the IRS 
is not made to choose between bolstering enforcement and providing the 
superior service our taxpayers expect and deserve. I hope the 
subcommittee will give serious consideration to the Oversight Board's 
recommendation and increase the IRS fiscal year 2005 budget by 10 
percent over fiscal year 2004.

                               PAY PARITY

    The administration has proposed a completely inadequate 1.5 percent 
raise for civilian Federal workers in 2005, and a 3.5 percent pay raise 
for members of the military. NTEU supports the higher raise for all 
employees and I applaud the Senate's budget resolution calling for 
civilian-military pay parity in 2005.
    This vote--and in particular, the bipartisan nature of the vote--
not only sends an important message to Federal employees that they are 
valued and respected but it is another important step in the 
government's continuing efforts to recruit and retain the high-quality 
employees the public wants and expects in Federal agencies.
    The Senate budget resolution is in step with a recently approved 
House resolution, which supports the concept of pay parity between 
Federal civilian and uniformed military employees. By a vote of 299-
126, the members of the House went on record in support of equal pay 
raises for both groups of public employees in 2005. The House vote 
reflected the importance of pay parity and signaled that members of 
Congress understand the need for fair pay in the competition with 
private sector employers for the most talented workers.
    The vote by the full Senate on the pay issue preceded the rejection 
earlier this year of language supporting civilian-military pay parity 
by the House Budget Committee in its 2005 budget resolution.
    Congressional action on Federal pay reflects the role that civilian 
employees play not only serving the public in their specific agencies, 
but in the continuing fight against terrorism. They work in a variety 
of capacities that impact national security, including such roles as 
helping secure the country's borders, protecting the food supply, and 
much more. Again, I commend those Senators who voted for the pay parity 
resolution and urge the appropriators to fund civilian pay on par with 
military pay at a 3.5 percent increase for fiscal year 2005.

                            CONTRACTING OUT

    Finally, after a bipartisan compromise was reached on the fiscal 
year 2004 Omnibus Appropriations bill, the White House insisted that 
the conference committee strip language that would have provided a 
level playing field for Federal employees whose jobs are made available 
for private competition.
    One bipartisan provision that was stripped from the bill would have 
required contractors to show significant cost savings (the lesser of 10 
percent or $10 million) over the in-house competitor in order to be 
awarded a competition. Instead, agencies will now only have to take 
cost savings into consideration during public-private competitions 
since the requirement was removed from the bill language. This allows 
the agencies to outsource the work regardless of whether or not it 
saves the Federal taxpayers money--or costs the taxpayers more money.
    Another provision that was stripped from the Omnibus bill would 
have provided the Federal employees an independent and impartial venue 
to appeal an agency's contract award decision. Stripping this provision 
sends a clear message to Federal employees that the administration 
wants private contractors to retain their unfair advantage in public-
private competitions.
    The administration further weakened the Omnibus bill by limiting 
the guarantee that all Federal employees would have the opportunity to 
submit their own best bids. The altered bill language limits the right 
of employees to come up with their own cost-saving bid to those 
employees in only the agencies funded by the Transportation-Treasury 
bill. This means, for competitions in most agencies, contractors will 
still be able to submit their best bids while Federal employees will 
not be allowed to offer their best bid.
    NTEU strongly encourages the appropriator to include legislative 
language that will level the playing field for Federal employees who 
are expected to compete against private contractors. It is simply 
unfair to give private contractors an unfair advantage in public-
private competitions when Federal employees can do the same job with 
better and less costly results.

                               CONCLUSION

    On behalf of the dedicated Federal employees NTEU represents, I am 
proud to submit these views for the hearing record. I encourage the 
committee to make a strong investment in the Federal workforce by 
appropriating the 10 percent increase as requested by the IRS Oversight 
Board; preventing private tax collection; prohibiting the IRS from 
moving forward with the unnecessary RIFs; providing pay parity for 
Federal workers; and giving the Federal workers a level playing field 
when competing for their jobs with private contractors.
    Without a doubt, the frontline employees are committed to working 
with management and Congress to increase efficiency and customer 
satisfaction. NTEU is committed to striking a balance between taxpayer 
satisfaction, business results and employee satisfaction. I encourage 
Congress to join us in this commitment.
                                 ______
                                 
    Prepared Statement of the Air Traffic Control Association, Inc.

                INTRODUCTION--AVIATION AT THE CROSSROADS

    The Federal Aviation Administration is at a crossroads--and the 
future of U.S. aviation hangs in the balance.
    The administration has delivered to Congress a proposed fiscal year 
2005 budget that cuts $393 million (14 percent) from FAA's capital 
investment account, and provides less than current services funding for 
ATC system operations and maintenance. Funding for RE&D, already down 
to $117 million last year, is reduced another $2 million.
    The FAA and the new Air Traffic Organization (ATO) are attempting 
to respond to this new funding reality in the only way possible. The 
organization is getting leaner. The mantra is managing to the reduced 
level of resources, rather than responding to demand with increased 
service. Every modernization initiative must be justified by an 
immediate and measurable payback. Projects that deliver economies and 
efficiencies for the air traffic service provider will be favored over 
those that offer new, improved, and/or long-term customer benefits. And 
under the administration's proposal, long term investment in promising 
concepts and technologies is not receiving the ``mission drive focus'' 
required for what FAA is predicting to be an overall increase in 
passenger traffic of 4.3 percent per year (5.2 percent increase 
internationally) over the next 10 years. The ATO already has deferred 
to future years the digital programming and data link elements of 
NEXCOM, not waiting for future funding decisions by Congress. FAA was a 
leading, global proponent of this technology and yet we are deferring a 
solution that only a few short years ago was deemed vital to address 
the imminent dearth of available radio frequencies.
    On the other hand, Homeland Security requirements and the War on 
Terrorism are placing new burdens and requirements on an already 
stressed air transportation system. If past is prologue, the current 
downturn in passenger traffic is temporary and aviation demand will 
come roaring back. Most airports already are reporting passenger 
traffic increases, and many are again experiencing congestion and 
delay. Earlier this year, under DOT order two hub carriers American and 
United agreed to a 5 percent reduction in flight schedules in order to 
cut down on delays that reached the highest level ever recorded. 
Because these cuts did not improve delays enough, DOT last week ordered 
the airlines to reduce flights another 2.5 percent. This is not a long-
term solution to meeting passenger and airline demand for more capacity 
at one of the world's busiest airports, much less a panacea for the 
entire aviation system.
    The path U.S. aviation has been placed on with this proposed budget 
is clear: we will limp into the future with an air transportation 
system that is inefficient, at capacity, and unprepared for a tripling 
of demand in the future. The weight of increasing airline operations 
due to the greater usage of smaller regional jets, and the increasing 
burdens on aviation from the Department of Homeland Security will 
paralyze the aviation system.
    If instead we dare to envision a safe, secure, efficient, and 
capable air transportation system in the future, we must be bold in our 
approach, and we must act now. We cannot allow terrorists to scare us 
out of the skies. We must not so constrain ourselves that in seeking 
safety that we harness mobility. The answer is to be found in 
technology, investment, vigilance, and perseverance in the face of 
uncertainty--the very attributes that have carried aviation so far in 
its first century.

                   THE CHANGED FACE OF U.S. AVIATION

    The Nation has come to view aviation in a new light over the past 3 
years. No longer is air transportation predominantly about travel and 
tourism. Aircraft have been used as weapons against civilians, and we 
must do everything reasonably possible to prevent it from happening 
again. The Departments of Defense and Homeland Security rely on civil 
aviation facilities and agencies to perform their mission. Aviation is 
much more critical and important for United States and world commerce 
today. America's vision of a global economy is based on the ability of 
aviation to serve as the bridge connecting nations, cultures and 
people. This vision--that is inclusive of, but transcends security--
must be the guiding force in developing a fresh perspective, and new 
principles to guide Federal air traffic control investment policy and 
planning.
  --We demand more of the air transportation system than ever before.--
        The Nation's aviation infrastructure must meet National Defense 
        and Homeland Security needs while continuing to function as the 
        economic engine that drives the National economy. Many of the 
        requirements, or safety procedures dictated by the added 
        requirements are new, for example upgraded surveillance 
        systems; data collection, transmission, and sharing 
        capabilities; reliable high speed communications networks; and 
        extensive plans, procedures, and facilities for Homeland 
        Security and National Defense. This means developing and 
        implementing new and improved air traffic systems that deliver 
        operating benefits for users and efficiencies for FAA while 
        strengthening security. It also means building an air 
        transportation system for the future that allows passengers and 
        shippers to go anywhere, any time, and hassle free. All of this 
        is a tall order. But for the safety and security of the public, 
        and the viability of the National economy, we must not deliver 
        less.
  --Regular, robust investment in aviation infrastructure is a National 
        imperative.--The threat of terrorism has become an unfortunate 
        fact of life in the world today. Continual vigilance and 
        preparedness are a necessity. For aviation this means regular 
        investment in developing and implementing equipment and 
        technologies that can help counter ever changing, and 
        increasingly sophisticated dangers. Timely, continuous 
        investment in the public air transportation infrastructure is 
        no less important for civil aviation. FAA expects air traffic 
        demand to grow steadily over the next 10 years, with tower 
        operations to increase 28 percent, instrument operations to 
        increase 29 percent, and air route traffic control center 
        operations to increase 34 percent. We will not meet the 
        requirements of this capacity increase sufficiently under the 
        administration's current budget approach.

                         MEETING THE CHALLENGE

    The Nation's air transportation system simply cannot fulfill 
National Defense and Homeland Security requirements, and accommodate 
ever increasing civil aviation demand on a diet of continually 
diminishing resources. Even with the improvements and efficiencies 
anticipated from implementation of the new Air Traffic Organization, 
the administration's funding proposal for fiscal year 2005 is 
unrealistic. FAA's mission is growing, demand is growing, and the only 
thing shrinking is the budget to fund new technology and equipment to 
handle this growth. ATCA therefore urges Congress to act upon the 
following:
  --FAA's Facilities and Equipment account must be funded at the 
        authorized level.--ATCA urges the Congress to appropriate, at 
        minimum, the full, authorized amount of $2.993 billion for FAA 
        Facilities and Equipment (F&E) in fiscal year 2005.\1\ FAA must 
        equip the aviation system for the War on Terrorism and still 
        continue fielding needed air traffic system improvements. And 
        just as important, FAA must begin to lay the groundwork for a 
        capable future air transportation system. FAA already is behind 
        the power curve installing the modernized systems that deliver 
        on the promise of its Operational Evolution Plan--systems that 
        are the necessary foundation for improved functionality, safety 
        and efficiency. Promising projects and technologies such as 
        controller pilot data link communications (CPDLC), Next 
        Generation Communications System (NEXCOM), and the System Wide 
        Information Management system (SWIM) are being deferred. 
        Others, like the User Request Evaluation Tool (URET), the FAA 
        Telecommunications Infrastructure (FTI), ADS-B programs (Safe 
        Flight 21), and Terminal Doppler Weather Radar (TDWR) product 
        improvements could be completed and continue delivering cost 
        and efficiency benefits to FAA and users sooner if additional 
        funding were applied. All of these projects are necessary, and 
        will have to be completed eventually. Interrupting these 
        efforts over and over again only increases the ultimate cost, 
        and postpones benefits. The ATO also must have the resources to 
        continue a vigorous NAS System Architecture and systems 
        integration activity. Because the new organization is 
        structured according to lines of business, an overarching 
        planning function is necessary to assure that requirements 5 to 
        10 years hence are anticipated and provided for, and that new 
        elements being delivered into the system interface correctly 
        and work together. Otherwise, equipment must continually be 
        redesigned and retrofitted at great expense.
---------------------------------------------------------------------------
    \1\ Cutting funding for FAA F&E by 14 percent in fiscal year 2005 
as the administration proposes could have an unintended, fiscally 
disastrous consequence of invoking application of an enforcement 
provision in authorization law that prohibits funding for FAA 
Operations if Airport Grants and F&E appropriations are less than the 
authorized amount. Clearly, the administration's proposal is out of 
step with congressional intent that air transportation system 
modernization and improvement be a National Priority.
---------------------------------------------------------------------------
  --Aviation capabilities and resources of related agencies must be 
        protected and leveraged.--NASA's Aeronautics research 
        capability has become essential to FAA's mission, and must be 
        funded adequately. DOD's $69 billion research and development 
        activity must be consistently mined for concepts and core 
        technologies transferable to the civil sector. Synergy and 
        cooperation between Federal and civil research organizations in 
        the United States, and those of friendly governments around the 
        world should be investigated, enabled, and encouraged. The 
        world is a different place today than yesterday. The United 
        States should not be seen as ``going it alone.'' The ATC 
        organizations around the world have many ideas, programs, and 
        procedures that merit consideration and coordination in order 
        to ensure everyone's stated goal of global interoperability.
  --The Federal Government must prepare for large funding requirements 
        associated with core future technologies.--There is universal 
        agreement that some core capabilities are essential to meeting 
        future Homeland Security/National Defense requirements, and to 
        accommodate air transportation demand we know is coming. The 
        first of these key technologies is an aviation system-wide 
        information network, through which all stakeholders, including 
        the DOD, DHS, and law enforcement, can derive whatever data and 
        information needed for the National Defense, security, and 
        safe, efficient aircraft operations. The second is a capable, 
        reliable data communications system connecting aircraft to the 
        air traffic control system. The third is a sophisticated 
        toolset enabling collaborative decision making among 
        participants in the ATM system. All of these technologies are 
        crucial for Defense and Homeland security missions. All will 
        enhance aviation safety and security. And all can be used to 
        increase operating efficiency, and overall system efficiency 
        and capacity. But a clear direction to proceed with development 
        and implementation, and a healthy flow of resources must be 
        applied now, if these technologies are to be available to meet 
        current and future demand.
  --A Federal Government-wide, aviation community-supported air 
        transportation system future planning activity must be 
        supported and adequately resourced.--Secretary of 
        Transportation Mineta is leading an interagency effort 
        (including NASA, and the Departments of Defense and Homeland 
        Security) to design the Next Generation Air Transportation 
        System. This activity will be carried out through a Joint 
        Planning and Development Office (JPDO), with the advice of the 
        FAA Research and Advisory Committee. Secretary Mineta's 
        initiative should be supported, with the expectation that it 
        will be well managed, adequately resourced, and that it will 
        yield a product that can be the basis of community consensus 
        and capable of being implemented. It is recommended that this 
        effort be coordinated with other future design activities 
        around the world, with the object of assuring global 
        compatibility of ATM systems and a seamless future operating 
        environment. The future system plan should contain a realistic 
        roadmap for transforming current thinking and technology into 
        the future air transportation system, with recommendations for 
        policies and programs to facilitate the transition to a new 
        system and equipment for all aircraft operators. ATCA urges the 
        entire aviation community to support the activities of the 
        JPDO.
  --The Nation's aviation research and development capability must be 
        recreated and empowered.--Congress is urged to authorize and 
        appropriate $500 million per year for the foreseeable future to 
        establish and resource a bold, aggressive, well-managed Federal 
        aviation research and development activity. Critical National 
        Defense and Homeland Security needs require that FAA and NASA 
        continually be on the forefront in developing and implementing 
        cutting-edge surveillance, communications, and information 
        technologies. There is simply no question that break-through 
        concepts and technologies will be essential if we are to safely 
        and efficiently accommodate a tripling of civil air traffic by 
        the year 2020. Developments of this nature take 10 to 15 years 
        or more to bring to fruition, so major investments in R&D 
        capabilities--labs, equipment, people--must be made today.

                               CONCLUSION

    Global aviation is facing challenges of historic proportions. 
Terrorism is a constant threat. Depressed demand as a result of 9/11 
and economic recession have left governments and aviation enterprises 
financially debilitated, and reluctant or unable to make investments in 
infrastructure and capital equipment. The U.S. aviation system has 
survived and is now growing at a pace last seen pre-9/11, yet 
investment in the future is being cut. An increased investment in FAA 
Airport Improvement Program funding cannot be viewed as a complete 
solution to addressing future capacity when the users and passengers 
are measuring our system on a curb-to-curb basis.
    The success of the Nation's air transportation system depends on 
achieving a collective commitment to secure a reliable, robust funding 
stream for air transportation system modernization, the determination 
and focus to complete projects already underway, and a forward looking 
vision. The aviation system requires total commitment and full funding 
in order to meet tomorrow's demand, and this is a commitment we must 
make today in order to be successful.
    Again, we cannot allow the terrorists to scare us out of the skies 
or to divert our financial resources away from building the safest and 
most efficient air traffic control system to meet growing demand. 
Safety and security are inextricably linked, and overcrowded skies and 
airports cannot be the result of terrorist threats, or they have won 
and most assuredly we have lost.
    We must not so constrain ourselves that in seeking safety we 
harness mobility. The answer is to be found in technology, investment, 
vigilance, and perseverance in the face of uncertainty--the very 
attributes that have carried aviation so far in its first century.
                                 ______
                                 

  Prepared Statement of the California Government and Private Sector 
                   Coalition for Operation Clean Air

    Mr. Chairman and members of the subcommittee, on behalf of the 
California Government and Private Sector Coalition for Operation Clean 
Air's (OCA) Sustainable Incentive Program, we are pleased to submit 
this statement for the record in support of our fiscal year 2005 
funding request of $31,000,000 for OCA as part of a Federal match for 
the $180 million already contributed by California State and local 
agencies and the private sector for incentive programs. This request 
consists of $31,000,000 from the Department of Transportation (DOT) for 
alternative fuel vehicle funding.
    California's great San Joaquin Valley is in crisis. Home to over 
3.3 million people, its 25,000 square miles now has the unhealthiest 
air in the country. Even Los Angeles, long known as the smog capital of 
the Nation, can boast better air quality by certain standards. While 
peak concentrations of air pollutants are still greater in Los Angeles, 
for the past 4 years, the San Joaquin Valley has exceeded Los Angeles 
in violations of the ozone 8-hour Federal health standard.
    A combination of geography, topography, meteorology, tremendous 
population growth, urban sprawl and a NAFTA corridor of two major 
highways with over 5 million diesel truck miles per day, have collided 
to produce an air basin in which over 300,000 people, nearly 10 percent 
of the population, suffer from chronic breathing disorders. In Fresno 
County, at the heart of the San Joaquin Valley, more than 16 percent of 
all children suffer from asthma, a rate substantially higher than any 
other place in California. The extreme summertime heat creates smog 
even though smog-forming gases are less than half the amount in the Los 
Angeles basin. There is no prevailing wind to flush the natural 
geologic bathtub and, as a result, pollutants and particulates 
stagnate, accumulate and create unhealthy air.
    Degradation of human health is not the only consequence of poor 
quality air. In December 2003, the San Joaquin Valley Air Pollution 
Control District Board decided to become the first Air District in the 
Nation to voluntarily declare itself an ``extreme'' non-attainment 
area. This designation, if approved by USEPA, will defer until 2010 the 
date for attainment of Federal standards of air quality, but comes at a 
cost of imposing permitting on thousands of more businesses and even 
further discouraging business expansion or relocation. More Valley's 
businesses will be required to obtain permits and comply with 
increasingly burdensome regulations imposed by Federal and State law 
and the Air Pollution Control District, resulting in added cost in 
compliance, reporting and record keeping. At the same time, the area is 
burdened by chronic unemployment rates of nearly 20 percent. 
Encouraging business expansion in or relocation to the San Joaquin 
Valley to combat unemployment will be extremely difficult in the face 
of such regulatory burdens.
    The San Joaquin Valley is home to the most productive agricultural 
land in the world. Over 350 crops are produced commercially on 28,000 
farms encompassing more than 5 million irrigated acres. While the 
agricultural industry has made great strides at considerable expense to 
replace old diesel engines and manage fugitive dust and other 
emissions, farming does contribute to the problem. However, it is a $14 
billion industry that forms the backbone of the Valley's economy, and 
its vitality is crucial.
    Industry alone is not the source of the Valley's poor air quality. 
Population growth rates exceeding those in the rest of the State and 
most of the Nation, in an area without effective mass transit, where 
cheap land has led to a landscape of suburbia and sprawl, results in 
excessive over-reliance on the automobile. Trucking has increased 
dramatically with the increase in population, and Federal free trade 
policies. Other factors such as fireplace burning in the winter, open 
field agricultural burning because of lack of sufficient alternatives, 
and wild fires resulting from lack of controlled burning in the nearby 
foothills and mountains all contribute to the problem.
    Despite the challenges listed above, much progress has been made. 
The State has spent nearly $80 million on improvement and compliance 
programs. Local government and private industry have spent over $100 
million on technology and compliance. As specific examples, over one 
half of the diesel operated irrigation pumps used by agriculture have 
been replaced with cleaner engines. The City of Tulare has converted 
its entire fleet of vehicles to natural gas as have several other 
private fleet operators. A $45 million Federally financed comprehensive 
study of ozone and particulate matter is nearing completion. As a 
result, the number of 1-hour EPA health standard exceedences has been 
reduced by 40 percent since 1989.
    But much more needs to be done. The District estimates that daily 
emissions must be reduced by 300 tons to achieve attainment. There is 
no single or short-term quick fix. The entire Valley (an area the size 
of the State of Connecticut) is part of the problem and the entire 
Valley will need to be part of the solution.
    The Department of Transportation is an important partner in 
achieving air quality improvement. The Federal Clean Air Act requires 
that transportation plans be consistent with State Implementation 
Plans. Mobile sources are the single largest contributor to the San 
Joaquin Valley's air pollution problem. Depending upon the season, 
mobile sources contribute up to 60 percent of the emission inventory in 
the Valley. Heavy-duty vehicles make up half of these emissions.
    California and the San Joaquin Valley bear the emissions burden 
associated with the significant volume of goods that flow into and out 
of the country through vehicular traffic. It is estimated that 6 
million truck-miles a day are traveled in the Valley. The emissions 
associated with these activities are projected to grow significantly 
with port expansions and upcoming changes associated with the 
implementation of the North American Free Trade Agreement (NAFTA) that 
will allow, for the first time, foreign trucks with less rigorous 
emission controls to travel through the San Joaquin Valley.
    Finally, heavy-duty mobile source emissions reductions are some of 
the most cost-effective emission reduction programs currently 
available. The cost-effectiveness of emission reductions achieved 
through clean heavy-duty projects that are requested through the 
Department of Transportation is approximately $13,650/ton of emission 
reduced. In many cases this is one-half of the cost associated with 
similar emission reductions achieved through the regulation of 
industrial sources of pollution. If our request is fully funded, it 
will provide up to 11,000 tones of emissions reductions over the 12 
year life of the projects.
    Operation Clean Air is a coalition of business, government, health 
care, and environmental groups throughout the eight county San Joaquin 
Valley Air Pollution Control District. Its goal is to clean the 
Valley's air and increase its economic prosperity. The coalition seeks 
to catalogue efforts that have produced positive effects and identify 
those strategies that could produce even greater effects if supported 
by sufficient resources. At the heart of its efforts will be an array 
of sustainable, voluntary practices and activities that can and will be 
undertaken by all of the residents of the San Joaquin Valley, both 
public and private, to improve air quality.
    This unique public-private partnership has invested considerable 
resources in this project to date, and will continue to do so, but 
Federal funding is both imperative and justified to help address what 
is essentially an unfunded Federal mandate.
    For fiscal year 2004, our Coalition is seeking funding of 
$31,000,000 from the Department of Transportation (DOT) for alternative 
fuel vehicles throughout the San Joaquin Valley Air Basin. We are also 
seeking funding for alternative fuels infrastructure through other 
avenues, which will allow accelerated introduction of alternatively 
fueled vehicles in municipal fleets, public school fleets, and private 
fleets. The widespread use of lower-emitting motor vehicles will 
provide significant improvement to air quality in the San Joaquin 
Valley while furthering the goals of the Department of Transportation 
to reduce emissions from public fleets. Development of alternative fuel 
infrastructure will augment the low-emission vehicle program by 
providing much needed compressed natural gas (CNG) and liquefied 
natural gas (CNG) fueling facilities.
    Thank you very much your consideration of our requests.
                                 ______
                                 
 Prepared Statement of the California Industry and Government Central 
                California Ozone Study (CCOS) Coalition

    Mr. Chairman and members of the subcommittee, on behalf of the 
California Industry and Government Central California Ozone Study 
(CCOS) Coalition, we are pleased to submit this statement for the 
record in support of our fiscal year 2005 funding request of $500,000 
from the Department of Transportation (DOT) for CCOS as part of a 
Federal match for the $9.4 million already contributed by California 
State and local agencies and the private sector. We greatly appreciate 
your past support for this study ($250,000 in fiscal year 2004) as it 
is necessary in order for the State of California to address the very 
significant challenges it faces as it seeks to comply with air 
pollution requirements of the Federal Clean Air Act.
    Most of central California does not attain Federal health-based 
standards for ozone and particulate matter. The San Joaquin Valley has 
recently requested redesignation to extreme and is committed to 
updating their 1-hour ozone State Implementation Plan (SIP) in 2004, 
based on new technical data. In addition, the San Joaquin Valley, 
Sacramento Valley, and San Francisco Bay Area exceed the new Federal 8-
hour ozone standard. SIPs for the 8-hour standard will be due in the 
2007 timeframe--and must include an evaluation of the impact of 
transported air pollution on downwind areas such as the Mountain 
Counties. Photochemical air quality modeling will be necessary to 
prepare SIPs that are approvable by the U.S. Environmental Protection 
Agency.
    The Central California Ozone Study (CCOS) is designed to enable 
central California to meet Clean Air Act requirements for ozone SIPs as 
well as advance fundamental science for use nationwide. The CCOS field 
measurement program was conducted during the summer of 2000 in 
conjunction with the California Regional PM10/
PM2.5 Air Quality Study (CRPAQS), a major study of the 
origin, nature, and extent of excessive levels of fine particles in 
central California. This enabled leveraging of the efforts of the 
particulate matter study in that some equipment and personnel served 
dual functions to reduce the net cost. From a technical standpoint, 
carrying out both studies concurrently was a unique opportunity to 
address the integration of particulate matter and ozone control 
efforts. CCOS was also cost-effective since it builds on other 
successful efforts including the 1990 San Joaquin Valley Ozone Study.
    CCOS includes an ozone field study, data analysis, modeling 
performance evaluations, and a retrospective look at previous SIP 
modeling. The CCOS study area extends over central and most of northern 
California. The goal of the CCOS is to better understand the nature of 
the ozone problem across the region, providing a strong scientific 
foundation for preparing the next round of State and Federal attainment 
plans. The study includes five main components:
  --Designing the field study;
  --Conducting an intensive field monitoring study from June 1 to 
        September 30, 2000;
  --Developing an emission inventory to support modeling;
  --Developing and evaluating a photochemical model for the region; and
  --Evaluating emission control strategies for upcoming ozone 
        attainment plans.
    The CCOS is directed by Policy and Technical Committees consisting 
of representatives from Federal, State, and local governments, as well 
as private industry. These committees, which managed the San Joaquin 
Valley Ozone Study and are currently managing the California Regional 
PM10/PM2.5 Air Quality Study, are landmark 
examples of collaborative environmental management. The proven methods 
and established teamwork provide a solid foundation for CCOS. The 
sponsors of CCOS, representing State, local government, and industry, 
have contributed approximately $9.4 million for the field study. The 
Federal Government has contributed $4,874,000 to support some data 
analysis and modeling. In addition, CCOS sponsors are providing $2 
million of in-kind support. The Policy Committee is seeking Federal co-
funding of an additional $2.5 million to complete the remaining data 
analysis and modeling. California is an ideal natural laboratory for 
studies that address these issues, given the scale and diversity of the 
various ground surfaces in the region (crops, woodlands, forests, urban 
and suburban areas).
    There is a national need to address national data gaps and 
California should not bear the entire cost of addressing these gaps. 
National data gaps include issues relating to the integration of 
particulate matter and ozone control strategies. In addition, new 
national ambient air quality standards will require air quality 
assessments for time periods of greater duration, and the impact of 
weekend travel activities on air quality will play a part in the 
ability to simulate air quality for longer durations. That is why, 
concurrent with the CCOS air quality field study, a $600,000 traffic 
activity study was conducted for the purpose of gathering detailed, 
hourly travel activity patterns during the field study. It is also why 
the CCOS allocated an additional $250,000 to develop a link-based 
digital map of roadways throughout the domain (using state-of-science 
Geographic Information System, or GIS, software) that included the 
activity patterns from the traffic study on specific roadway segments. 
However, due to the scarcity of weekend data in the transportation 
community and travel demand models, these projects were not able to 
address the spatial change in travel patterns during a weekend. In 
addition to the weekend activity issue, developing mobile source 
emissions inputs for longer-term air quality modeling studies will 
require more efficient mobile source emissions processing, including 
better use of GIS software and technology.
    For fiscal year 2005, our Coalition is seeking funding of $500,000 
from DOT through highway research funds. The CCOS would use the 
$500,000 requested for fiscal year 2005, in conjunction with other 
funding, to study and integrate travel activity patterns into modeling 
inputs. The CCOS would also use a fiscal year 2005 earmark to develop 
more efficient mobile source emissions processing tools and improve the 
consistency and linkages between travel demand models used in the 
transportation community and emissions factor models used for 
conformity purposes in the air quality community. DOT is a key 
stakeholder because Federal law requires that transportation plans be 
in conformity with SIPs. The motor vehicle emission budgets established 
in SIPs must be met and be consistent with the emissions in 
transportation plans. Billions of dollars in Federal transportation 
funds are at risk if conformity is not demonstrated for new 
transportation plans. As a result, transportation and air agencies must 
be collaborative partners on SIPs and transportation plans. These plans 
are linked because motor vehicle emissions are a dominant element of 
SIPs in California as well as nationwide. Determining the emission and 
air quality impacts of motor vehicles is a major part of the CCOS 
effort.
    Thank you very much for your consideration of our request.
                                 ______
                                 
                   Prepared Statement of Easter Seals

    Chairman Shelby, Ranking Member Murray and members of the 
subcommittee, Easter Seals appreciates this opportunity to share the 
successes and needs of Easter Seals Project ACTION.

                        PROJECT ACTION OVERVIEW

    The Transportation appropriations process initiated Project ACTION 
in 1988 by providing funding to the Federal Transit Administration to 
undertake this effort with Easter Seals. We are indeed grateful for 
that initiative and the ongoing strong support of this subcommittee in 
subsequent years.
    Following its initial round of appropriations, Congress authorized 
assistance to Project ACTION in 1990 with the passage of ISTEA and 
reauthorized the project in 1997 as part of TEA21. The strong interest 
and support of all members of Congress has been greatly appreciated by 
Easter Seals as it has pursued project ACTION's goals and objectives.
    Since the project's inception, Easter Seals has administered the 
project through a cooperative agreement with the Federal Transit 
Administration. Through steadfast appropriations support, Easter Seals 
Project ACTION has become the Nation's leading resource on accessible 
public transportation for people with disabilities. The current project 
authorization level is $3 million, and Easter Seals is pleased to 
request the appropriation of that sum for fiscal 2005.
    The strength of Easter Seals Project ACTION is its continued 
effectiveness in meeting the congressional mandate to work with both 
the transit and disability communities to create solutions that improve 
access to transportation for people with disabilities of all ages and 
to assist transit providers in complying with transportation provisions 
in the Americans with Disabilities Act (ADA).
    The activities of the project are guided by input from a 19 member 
national steering committee that includes representatives from 
transportation and disability organizations. Easter Seals Project 
ACTION has worked effectively with the Department of Transportation 
under four Presidents, and numerous Department of Transportation (DOT) 
Secretaries and Federal Transit Administration (FTA) Administrators. 
Today, Project ACTION is working closely with Secretary Mineta and FTA 
Administrator Dorn and their teams. Secretary Mineta, who worked on the 
original authorization of Project ACTION, has worked closely with us 
since taking over DOT.
    Easter Seals Project ACTION was also heavily featured in the 
President's New Freedom Initiative Progress Report released in 2004. 
This demonstrates how closely the administration is working with 
Project ACTION to reach our shared goal of a safe, accessible, 
reliable, efficient and affordable transportation for and by citizens 
with disabilities at the local, State, regional and national levels 
throughout the United States.

                SUPPORT FOR EASTER SEALS PROJECT ACTION

    Easter Seals Project ACTION's successes are diverse and the value 
of the Project to both the transit and disability communities can be 
well documented. For instance, Barry Barker, Executive Director of the 
Transit Authority of River City (Louisville, KY) states that, ``Easter 
Seals Project ACTION's support has enhanced our ability to maximize the 
quality of service we provide to all of our customers. The project 
helps us provide our customers with the mobility necessary to fully 
participate in the community.''
    Maureen McCloskey, National Advocacy Director of the Paralyzed 
Veterans of America states that, ``The forum that Easter Seals Project 
ACTION has provided has created a dynamic dialogue between the 
disability and transit communities that has resulted in increased 
access to transportation for people with disabilities.''

       EASTER SEALS PROJECT ACTION WORKING AT THE COMMUNITY LEVEL

    Among the programs pursued by the project in the recent period have 
been efforts aimed at increasing community capacity to meet the 
transportation needs of people with disabilities. For instance, in 
2001, Easter Seals Project ACTION initiated the first Mobility Planning 
Services (MPS) Institute. The latest Institute took place in November 
of 2003 and approximately 25 communities took part in the 2-day event. 
This was the second group of communities to go through the MPS 
training. The first group of 20 communities remains active and working 
with Project ACTION to continue their work at the community level. To 
participate in the Institute, each community had to identify a 
leadership team to attend the training. The leadership team had to 
consist of representatives from transit providers, disability service 
providers and disability advocacy organizations. This team approach 
will assure that all stakeholders are involved in implementing MPS. The 
greatest success so far of the MPS concept has been that it provides 
the disability community and the transportation industry an opportunity 
to develop tools for working together where in the past there had often 
been a lack of communication and in some cases even animosity. By 
implementing MPS, communities do a better job of meeting the 
transportation needs of people with disabilities and therefore better 
meet the transportation needs of all residents. Communities that 
participate in MPS receive ongoing in-depth technical assistance from 
Project ACTION staff ranging from access to Project ACTION materials to 
on-site training and facilitation by Project ACTION staff.

         EASTER SEALS PROJECT ACTION WORKING AT THE STATE LEVEL

    Project ACTION is partnering with the FTA on several initiatives 
designed to increase the capacity of States to support accessible 
transportation for people with disabilities.
    The first initiative is a series of regional dialogues being held 
throughout the country. These dialogues built on the success of 2002's 
successful National Dialogue on Accessible Transportation. The goal of 
these events was to bring people with disabilities and transit 
providers together at the regional level to foster communication that 
will hopefully lead to jointly developed solutions to unique barriers 
to accessible transportation identified together in each region.
    Project ACTION is also working with FTA to support the success of 
the multi Federal Department ``United We Ride'' initiative. Project 
ACTION helped facilitate a national meeting in March of Governor 
appointed representatives from State Departments of Labor, 
Transportation, Education and Health and Human Services. Forty-six 
States and territories participated in this forum that was one of five 
elements of an FTA effort to bring together Federal and State agencies 
to help identify, plan and alleviate barriers to human service 
transportation coordination. Project ACTION is assisted in the 
dissemination of the FTA developed Framework for Action planning 
process guide to help States and communities build and operate 
coordinated transportation systems and has already begun to provide 
technical assistance on its use throughout the country.

       EASTER SEALS PROJECT ACTION WORKING AT THE NATIONAL LEVEL

    Easter Seals Project ACTION actively works with both the disability 
and transit communities to determine existing needs for products and 
training. Easter Seals Project ACTION also convenes special topic 
meetings to address concerns and identify strategies on issues 
identified by various stakeholders. This year's special topic meetings 
will focus on the development of a ``One System for All'', concept that 
emerged from the Project's National Dialogue conducted last Summer. The 
meeting will involve a small group of disability and transit advocates 
to further develop the concept and also begin to address the design and 
provision of technical assistance and other resources necessary to 
advance the availability of seamless community transportation systems 
for people with and without disabilities. Another special topic meeting 
will bring together travel trainers to develop a curriculum for the 
further training of these specialists that enhance the participation of 
people with disabilities using fixed route transportation. Convening 
special topic meetings enable Easter Seals Project ACTION the 
flexibility to address emerging issues as they arise.
    Some of the materials that Easter Seals Project ACTION has 
developed during the past year include:
  --A collection of ``success stories'' that share, in the own words of 
        people with disabilities, stories about their successful use of 
        transportation and the positive difference it made in their 
        lives;
  --New resources and guidance on good practices for conducting 
        physical functional assessments for determining paratransit 
        eligibility;
  --A collection of innovative practices in operating paratransit;
  --A redesigned resource called ``You Can Ride,'' a reference guide on 
        how to use public transportation for people who can't read; 
        and,
  --All resource materials available from Easter Seals Project ACTION 
        activities are available free of charge through the Project 
        ACTION catalog.
    As mentioned, Project ACTION staff also are involved in 
continuously providing technical assistance to transit providers, 
nonprofit human service organizations, people with disabilities, and 
the general public. The forms of technical assistance provided are 
provided based on the determination of what would be the most helpful 
in the situation being addressed. Assistance from Project ACTION ranges 
from the delivery of basic information in the form of brochures from 
our national clearinghouse to telephone, e-mail, participation in the 
training program and on single or ongoing on-site work.

            CONTINUING NEED FOR EASTER SEALS PROJECT ACTION

    Access to transportation is a vital issue for people with 
disabilities. For many people with disabilities, a lack of accessible, 
affordable pubic transportation is the primary barrier to employment, 
education and participation in community life. In his New Freedom 
Initiative, President Bush recognized the importance of accessible 
transportation for people with disabilities, and has proposed an 
increase in Federal support for promoting innovative and alternative 
transportation solutions for people with disabilities. As these 
proposals are implemented, it will become increasingly important that 
the resources and skills, relationships and knowledge that Easter Seals 
Project ACTION has fostered remain strong. Should the appropriations 
process support this New Freedom Initiative, Project ACTION is 
committed to working with DOT on implementation.
    There is a growing need for outreach by Project ACTION to specific 
populations. While Project ACTION has historically worked with rural 
communities to help address their transportation issues, the lack of 
access for rural residents with disabilities is still unacceptable. 
Easter Seals national headquarters and Project ACTION are working 
together to coordinate efforts to better serve rural residents with 
disabilities in a variety of service areas including transportation. 
Further, as the population ages, there is also a need to provide 
develop and provide additional specific resources and assistance to 
transit providers and older passengers. Since most people will 
experience some level of disability as they age and require accessible 
transportation, Project ACTION's resources will again be invaluable as 
transit providers struggle to meet the needs of this new wave of 
riders.

                          FISCAL 2005 REQUEST

    In order to continue the outstanding work of Easter Seals Project 
ACTION, Easter Seals national headquarters respectfully requests that 
$3 million be allocated in fiscal 2005 to the Department of 
Transportation for project activities.
    Mr. Chairman, thank you for the opportunity to present this 
testimony to the subcommittee. Your efforts have improved the 
accessibility of transportation for persons with disabilities and the 
ability of the transportation community to provide good service to all 
Americans. Easter Seals Project ACTION looks forward to continuing to 
work with you toward the pursuit of these objectives.
                                 ______
                                 
  Prepared Statement of the American Public Transportation Association

    Mr. Chairman and members of the subcommittee, on behalf of the 
American Public Transportation Association (APTA), thank you for the 
opportunity to provide written testimony on the need for investment in 
Federal Transit Administration (FTA) programs under the Transportation, 
Treasury and General Government Appropriations bill for fiscal year 
2005.

                               ABOUT APTA

    APTA's 1,500 public and private member organizations serve the 
public by providing safe, efficient, and economical public 
transportation service, and by working to ensure that those services 
and products support national economic, energy, environmental, and 
community goals.
    APTA member organizations include public transit systems and 
commuter railroads; design, construction and finance firms; product and 
service providers; academic institutions; and State associations and 
departments of transportation. More than 90 percent of the people who 
use public transportation in the United States and Canada are served by 
APTA member systems.

                                OVERVIEW

    Mr. Chairman, the fiscal year 2005 Transportation, Treasury and 
General Government appropriations bill provides an opportunity to 
advance key national goals through increased Federal investment in the 
Nation's surface transportation infrastructure, including public 
transportation. A study conducted by Wirthlin Worldwide in February 
2004, found that most Americans (80 percent) see quality of life 
benefits from increased investment in public transportation, and 76 
percent of those surveyed support public funding for the expansion and 
improvement of public transportation. Clearly, Americans support 
Federal policies that create good, high-paying jobs, especially U.S. 
jobs that cannot be exported. Investment in our national public 
transportation and highway systems creates jobs--47,500 per $1 billion 
of Federal investment. This investment does more than create jobs, it 
helps improve the economy by reducing congestion, promoting energy 
conservation, and providing transportation options to workers and tens 
of millions of other Americans.
    As a Nation, we need to maintain and improve the transportation 
system that has served this country so well. Congress has made a 
substantial investment in public transit systems around the country, 
and those systems serve tens of millions of customers each day; but 
much needs to be done to maintain and increase the return on that 
investment. With ridership at record levels, the American Association 
of State Highway and Transportation Officials (AASHTO) estimates that 
an annual capital investment of more than $44 billion is needed to 
adequately maintain, improve and expand public transportation across 
America.
    Demand for surface transportation options--including modern, safe, 
and efficient public transportation service--is at an all-time high. 
New transit service is being added in areas around the country, 
including Houston, Minneapolis, Phoenix, and Charlotte. More and more 
communities are voting for new and expanded transit service every year. 
Demand for transit options is a product of growing frustration with 
increased congestion that negatively affects our quality of life by 
wasting time and money, and a desire for mobility options. The Wirthlin 
Worldwide poll also demonstrates that voters support public 
transportation regardless of whether they live in urban, suburban, 
small urban or rural communities, and that they are more likely to vote 
for Congressional candidates who support such investment.
    Similarly, as the population ages, older Americans will need more 
and better transit service. As driving becomes less of an option for 
many older Americans, they as well as persons with disabilities are 
seeking good public transportation options so that they can continue to 
fully participate in society. Yet many older Americans and people with 
disabilities live in areas where public transportation services are 
limited or non-existent, despite the fact that access to good transit 
service can mean the difference between living independently and moving 
into assisted living. Nearly two-thirds of residents in urban, small 
urban and rural communities have few if any transportation options--41 
percent have no access to transit, another 25 percent live in areas 
with below-average transit services. Clearly, our Nation's small-town 
and rural areas have real and growing transportation needs.

                  FISCAL YEAR 2005 TRANSIT INVESTMENT

    APTA believes it is crucial to provide significant investment in 
the Nation's transit and highway infrastructure in the fiscal year 2005 
appropriations process. That investment advances key national goals by 
producing jobs, providing more mobility options to all Americans, 
improving the environment and reducing dependence on foreign oil, and 
by providing a solid return on the investment.
    APTA's recommendations for reauthorization of the Transportation 
Equity Act for the 21st Century (TEA21) propose to grow the transit 
Federal transit program to $14 billion by fiscal year 2009. The Senate 
has passed a TEA21 reauthorization bill that would authorize $8.65 
billion for transit in fiscal year 2005, and we urge the subcommittee 
to invest no less than that amount for the Federal transit program in 
fiscal year 2005.
    Mr. Chairman, in that regard we thank you for your outstanding 
leadership as chairman of the Senate Banking Committee in crafting the 
transit portion of that legislation, which addresses critical public 
transportation investment needs.

  PUBLIC TRANSPORTATION INVESTMENT CREATES JOBS AND GROWS THE ECONOMY

    Americans are growing increasingly concerned about jobs. An 
Associated Press poll taken March 19-21 showed that 35 percent of 
Americans view economic conditions as the most important factor on 
which they will vote. A Washington Post poll taken April 15-18 shows 
that the economy and jobs are the most important issues that 26 percent 
of voters want to hear about in the upcoming election, more than any 
other topic. Polls by Newsweek and Harris this year have produced 
similar results for the last several months. Jobs are the No. 1 concern 
of Americans.
    Policy makers know that increased investment in our Nation's 
transit and highway transportation infrastructure will help the economy 
and will produce jobs. The Department of Transportation has 
demonstrated that for every $1 billion in Federal highway and transit 
investment, 47,500 jobs are created or sustained. This view is shared 
by Senate Environment and Public Works Committee Chairman James Inhofe 
(R-OK), who stated upon passage of SAFETEA that the bill ``will create 
nearly 2.8 million job opportunities for the American people.'' He went 
on to call TEA21 reauthorization the ``biggest job creation bill of 
this Congress.''
    The jobs that investment in public transportation can create are 
high-paying, stable, and cannot be exported. The jobs created are not 
just those needed to operate new and expanded transit service, which 
are significant; but also in the private manufacturing sector, which 
supports and supplies the public transportation industry. For instance, 
transit buses are built in, among other places, Anniston, Alabama; 
Wichita, Kansas; Brownsville, Texas; Lamar, Colorado; St. Cloud, 
Minnesota; Hayward, California; Imlay City, Michigan; Pembina, North 
Dakota; and Oriskany, New York. Engines for those buses may be built in 
Detroit or Columbus, Indiana. Spending on transit also benefits 
hundreds of other private sector companies around the United States 
that build rail cars, fareboxes, vehicle parts and equipment or provide 
software, engineering, and construction services for the transit 
industry. According to a Cambridge Systematics Inc. study, for every 
$10 spent on transit capital projects, $30 in business sales is 
generated. Every $10 invested in transit operations results in $32 in 
private business sales.
    Mr. Chairman, public transportation serves another important 
economic purpose: alleviating highway congestion. According to the 
Texas Transportation Institute's ``2003 Urban Mobility Report'', 
congestion costs $69.5 billion annually--more than 3.6 billion hours of 
delay and 5.7 billion gallons of excess fuel consumed. The report says 
without public transportation, there would be 1 billion more hours (30 
percent) more delay. The average driver is losing more than 1\1/2\ 
weeks of work (62 hours) each year sitting in gridlock. The average 
cost of congestion per peak road traveler is $1,160 a year. All of that 
congestion holds up more than 64 percent of the Nation's freight that 
moves by truck on highways, which represents annual value to the 
economy of more than $5 trillion. As the Free Congress Foundation's 
Paul Weyrich and Bill Lind demonstrate in their study, ``How Transit 
Benefits People Who Do Not Ride It'', public transportation, by 
alleviating congestion, brings real benefits not just to those who use 
it, but also to those who do not use it.
    But public transportation does not just improve the economy by 
taking cars off the road--it provides transportation options to low-
income workers who cannot afford to drive to work. According to the 
Surface Transportation Policy Project, the proportion of household 
expenditures devoted to transportation has grown from 14 percent in 
1960 to almost 20 percent today. A recently published Bureau of 
Transportation Statistics Issue Brief found that Americans who commute 
by car or truck spent about $1,280 per year in 1999, while those who 
were able to use public transportation to get to and from work spent 
just $765 per year. Clearly public transportation provides real and 
needed savings for the many entry-level workers coming into the 
workforce who are so critical for the Nation's economy.

                   PUBLIC TRANSPORTATION IS IN DEMAND

    Last November voters in several communities, including Denver, 
Houston, Grand Rapids and Kansas City, approved by large margins new 
local taxes to provide new and expanded public transportation services. 
These were just a few of efforts across the country to increase funding 
for transportation infrastructure, and follows successful actions in 
other cities over the past 5 years to expand transit service, including 
Phoenix, Charlotte, Dallas and Minneapolis.
    That these referenda have been approved should come as no surprise. 
Polls have consistently shown that the American public not only 
supports increased public transportation services but also supports 
providing the resources to pay for it. As mentioned earlier, the recent 
Wirthlin Worldwide study showed that 80 percent of Americans surveyed 
see quality of life benefits from increased investment in public 
transportation; 76 percent support public funding for the expansion and 
improvement of public transportation; two-thirds support pro-public 
transportation Congressional candidates; and a majority (52 percent to 
41 percent) of Americans believe transportation investment is 
preferable to tax cuts to stimulate the economy. These findings hold 
true across areas of all sizes--urban, suburban, small town and rural. 
A poll taken in spring 2003 by APTA and the American Automobile 
Association (AAA) showed that 95 percent of those surveyed said traffic 
congestion, including commutes to and from work, had grown worse over 
the last 3 years, with 92 percent believing it was either very 
important (71 percent) or somewhat important (21 percent) for their 
community to have both good roads and viable alternatives to driving.
    The Wirthlin Worldwide poll demonstrates that support for public 
transportation has increased dramatically not only in our biggest 
cities, but in smaller urban communities and rural areas as well, where 
40 percent of America's rural residents have no access to public 
transportation, and another 28 percent have substandard access. It is 
estimated that rural America has 30 million non-drivers, including 
senior citizens, the disabled and low-income families, all of whom need 
transportation options. According to a survey of APTA members, bus 
trips in areas with populations less than 100,000 increased from 323 
million to 426 million in a recent 5-year span.
    While demand for new and expanded service is increasing, the 
resources required to simply maintain the present level of service are 
immense. A 2002 AASHTO report estimates that $44 billion is needed 
annually to meet current transit capital needs for new projects and 
improvements to existing systems as well to expand the availability of 
transit service to more Americans.

            PUBLIC TRANSPORTATION PROVIDES MOBILITY OPTIONS

    Public transportation provides mobility options to persons who 
choose not to, or cannot, drive because of age or a disability. For 
many in this population, public transportation may be the only option 
to living a fully independent and productive life. For many Americans, 
public transportation can be the difference between staying in their 
own homes or moving into an assisted living community.
    According to the AARP's Beyond 50.03: A Report to the Nation on 
Independent Living and Disability, released in August 2003, as people 
move from their 70's into their 80's, the percentage of licensed 
drivers falls to 50 percent from just over 90 percent. With the baby-
boom generation approaching retirement age, this means the population 
of elderly Americans who do not have a driver's license will soon grow 
significantly.
    Persons with disabilities face similar mobility problems. Many 
cannot drive or afford vehicles that are fitted to their needs. Public 
transportation can provide them the options they need to stay active 
and independent. However, according to AARP's report, 32 percent of 
people with disabilities over 65 report that inadequate transportation 
is a problem. The report states further that while public 
transportation is more economically efficient in areas with high 
population density, many older Americans with disabilities live 
``outside of central cities in communities where public transportation 
is found least often.'' This is becoming a growing problem, and it is 
clear that we need to begin to address the important transportation 
needs in these areas.

               PUBLIC TRANSPORTATION PROVIDES GOOD VALUE

    Unlike other modal transportation projects funded through the 
Department of Transportation, major capital transit projects funded by 
the FTA are subject to a rigorous Federal review process. A 
comprehensive alternatives analysis process is undergone, with various 
transportation alternatives weighed and considered. The overall review 
process typically involves 5 or more years of planning, environmental 
studies and technical analysis. The projects must be included both in 
State and local transportation programs and plans. To qualify for 
project approval and a full funding grant agreement, project sponsors 
must demonstrate not only financial capacity to construct the project 
but also to maintain and operate the service once put in place. Much of 
the process turns on ridership and project cost estimates. In that 
regard, we are pleased to note that ridership and project cost and 
benefit estimates for recent new start and bus rapid transit projects 
have been very accurate, and we will continue to work with the FTA and 
our members to make sure that forecasting is as accurate as possible. 
The result of this rigorous process is that the completed transit 
projects provide real value and an excellent return on the dollar, 
often in areas not typically recognized: increased value and income for 
property owners; expanded markets, rising productivity and increased 
revenues for business and commercial owners/occupants; and enhanced tax 
revenues for local governments--from rising land values, expanded 
development and an upsurge in business transactions. While we support 
this rigorous review process and the excellent projects that result 
from it, we remain concerned that it does not apply to other 
transportation projects under the jurisdiction of the Department of 
Transportation. We think it would be good public policy to have all 
major Federally funded transportation projects subject to similar 
Federal review processes.

                      PRESIDENT'S BUDGET PROPOSAL

    The President's fiscal year 2005 budget proposal proposes to freeze 
funding for Federal transit programs at the fiscal year 2004 level of 
$7.266 billion. In its proposal for a 6-year authorization bill, which 
was submitted to Congress 9 months earlier, the administration had 
proposed to fund Federal transit programs at $7.369 billion in fiscal 
year 2005, $103 million more than the amount for transit in the fiscal 
year 2005 budget proposal.
    Mr. Chairman, now is not the time to shortchange investment in 
public transportation! While the administration continues to advocate 
for policies that will support a healthy economy and produce more jobs, 
its budget proposal for transit does not adequately address the need to 
improve our Nation's transit systems, and create jobs in the process. 
We again emphasize the 47,500 jobs created by every $1 billion invested 
in the public transportation infrastructure or the $30 million in 
private business sales that are generated for every $10 million 
invested in transit.
    Mr. Chairman, we strongly believe that growth of the Federal 
investment in public transportation can help advance many of the 
Nation's key goals, and that freezing Federal funding for transit 
simply defers the growing backlog of unmet transit capital needs. We 
urge the subcommittee to fund the Federal transit program in fiscal 
year 2005 at no less than $8.65 billion, the amount provided in SAFETEA 
(S. 1072), the Senate-passed TEA21 reauthorization bill.

                               CONCLUSION

    Public transportation should and can play a key role in meeting the 
goals of the administration and Congress in providing jobs and economic 
development, energy independence, and mobility options for millions of 
American. Mr. Chairman, we look forward to working with the 
subcommittee as it takes up the fiscal year 2005 appropriations bills, 
and urge you to invest in surface transportation programs at the 
highest levels possible.
                                 ______
                                 
 Prepared Statement of the National Association of Railroad Passengers

    Thank you for the opportunity to submit this statement. We support 
the Amtrak request for $1.798 billion. We also support efforts to make 
the Federal Government a true funding partner with States to permit 
development of high speed rail corridors, for which many States already 
have well-advanced plans. Finally, we strongly favor Federal support 
for the CREATE/Chicago Project to modernize Chicago's railroad 
infrastructure, and we support continuing efforts to bring to fruition 
a North Station/South Station Rail Link in Boston.

              $900 MILLION IS A SHUTDOWN BUDGET FOR AMTRAK

    Secretary of Transportation Norman Y. Mineta has made clear his 
agreement that $900 million would be a shutdown budget. At his 
interest-group budget briefing on February 2, I asked him about a 
seeming disconnect between the administration's budget recommendation 
and Amtrak President & CEO David L. Gunn's statement last fall that 
$900 million is a shutdown budget that ``won't work.'' Mineta 
responded, ``Gunn is right on the numbers'' but we are sending a 
message about the importance of our reforms. The following table 
illustrates the problem with $900 million:

                        [In millions of dollars]
------------------------------------------------------------------------
                                                                  Amount
------------------------------------------------------------------------
Operating......................................................      570
Debt Service...................................................      262
Environmental..................................................       22
                                                                --------
      Total....................................................      854
------------------------------------------------------------------------
NOTE.--Amtrak has taken on no new commercial debt since David Gunn's
  May, 2002, arrival, and has no plans to. The cost of debt service
  peaks in Fiscal 2005 and declines thereafter. Most of the
  environmental portion of Amtrak's capital budget involves work that
  Amtrak is legally obligated to undertake, so could not be set aside in
  favor of fleet or infrastructure work that otherwise would be
  considered more vital to the system's continued, viable operation.

    Gunn in February said Amtrak has ``a strategy of moving resources 
from emergency repairs to programmed maintenance.'' This obviously 
makes for more reliable service, while maximizing revenues (fewer en-
route problems means satisfied customers) and reducing maintenance 
costs. However, much of the programmed maintenance is considered 
capital, so a maintenance budget at or close to zero forces either an 
immediate shutdown or an immediate downward spiral in service quality.
    But this means the system would collapse on zero capital, and 2,000 
employees would be let go. That's essentially what the administration's 
$900 million would require.

                        PASSENGER RAIL SECURITY

    We agree that rail security has been underfunded and join with 
those noting the huge gap between Federal spending on aviation security 
and on railroad security--$11 billion versus $115 million, according to 
one representative at today's House subcommittee hearing. We understand 
that the Bush Administration's Transportation Security Administration 
request for fiscal year 2005 is $5.3 billion, of which all but $147 
million is for air security.
    The most obvious needs in rail security relate to infrastructure--
especially bridges, tunnels, stations and yards--and training for 
front-line personnel.
    Infrastructure.--Issues in the Northeast Corridor are well-known. 
At major stations nationwide, items for consideration include: an 
increased police presence with K-9 units, video surveillance at key 
points of entry and exit, vapor detectors, coordinated plans for first 
responders in case of an event.
    Attention must also be paid, as Amtrak notes, to ``non-public 
locations, such as loading docks, adjacent yards and buildings.''
    Consider this recent news item regarding a major commuter railroad:

    ``Train yards in New Haven and Bridgeport have major security 
problems 2 months after Federal Homeland Security chief Tom Ridge asked 
rail operators to be on a heightened state of alert following the Spain 
train bombings that killed 191 people, WTNH-TV reported Thursday. A 
reporter and cameraman walked into the New Haven rail facility at 3 
a.m. on a recent day and found no security or police guarding the 
Metro-North trains that carry nearly 40,000 Connecticut commuters into 
New York each weekday.
    ``No one stopped the news team, which was able to walk around the 
rail yard for about two hours, the station reported. The reporter, Alan 
Cohn, climbed aboard one of the engines . . . The television station 
found a similar lack of security at the Bridgeport rail yard . . . It's 
the job of Metro-North and Metropolitan Transit Authority police to 
patrol [these] rail yards. Metro-North President Peter Cannito promised 
that changes would be made.''

    This report raises the obvious question: how secure are other rail 
yards?
    There is also a Federal interest in the security level of the 
Nation's vast, privately-owned railroad system which is important both 
to Amtrak's national network and to freight transportation. For 
example, loss of major Mississippi River bridges, especially south of 
Memphis where the number of crossings is small, could wreak havoc with 
freight commerce.
    Personnel.--Our understanding is that Israel, the U.K., and Germany 
are nations where training front line staff has actually deterred 
bombers and saved lives. This has been a sensitive issue in the United 
States. Their approach needs to be studied to see what aspects of this 
work could usefully be transferred. This does not mean ``pre-boarding'' 
interviews; that is not feasible for reasons discussed below. But 
Amtrak's on-board employees in many cases have several hours or more of 
intermittent contact with passengers and thus the possibility--with the 
right training--of identifying potential wrongdoers.
    What is not realistic.--Many Americans begin their thinking about 
rail passenger security by citing baggage (and shoe!) X-ray procedures 
they experience at airports but obviously not at train stations. Amtrak 
(and most commuter railroads) have two extremes: places like New York's 
Pennsylvania Station where passenger volumes and proximity to commuter 
trains would make anything approaching airline-style security both 
impractical and largely ineffective. Conversely, many small stations 
have such small passenger volumes as to make any security equipment 
seem wasteful. As Mesa Airlines CEO Jonathan Ornstein recently noted 
(in a March 9 Washington Post report about holes in security at small 
airports), ``When there are more TSA people than passengers, you have 
to ask yourself, does that make sense?''
    We note with approval that TSA seems to agree. For example, TSA 
Undersecretary Asa Hutchinson said that the device that sniffs for 
explosives and is in a month-long test at New Carrollton, Maryland, is 
not permanent but simply to gain knowledge for TSA ``so that in the 
event there is a specific threat or a specific need, we have the 
knowledge, the capability to put inspections in place in a particular 
threat environment.''

                    THE PUBLIC WANTS THE RAIL CHOICE

    Amtrak's ridership reports starting around May show strong 
increases--a further sign both that Gunn is succeeding in stabilizing 
the railroad, and that people want the service. For the first 5 months 
of fiscal year 2005 (October-February), ridership increases on the 
long-distance trains ranged from 6 percent to 34 percent, with only two 
routes below 10 percent. Short-distance route changes ranged from -3 
percent to +22 percent, with 7 of 16 routes showing double-digit 
percentage increases. (Actually, the New York-Pittsburgh route was up 
104 percent but this is not exactly an apples-to-apples comparison.) 
Two routes showed slight declines.
    In March, systemwide ridership was up 3.2 percent and revenues were 
up 5.8 percent versus 1 year ago.

                          THE NATIONAL NETWORK

    We reiterate our strong belief that funding Amtrak's national 
network is a Federal responsibility, and that implementation of any 
``reform'' which requires a multiplicity of States to provide operating 
grants is tantamount to shutting down the system. The suggestion--heard 
more than once from Secretary Mineta--that a train could run ``closed 
door'' through non-paying States is not workable because, almost 
without exception, revenues lost from skipping any State would far 
exceed the negligible cost savings. The Empire Builder in crossing the 
thin northern tip of Idaho might conceivably skip Sandpoint, Idaho, 
with minimal damage but it's hard to think of any other benign example.
    Similarly, we do not believe a ``route closing commission'' could 
shed any significant new light. The system is already so skeletal that 
deletion of any surviving route would mean wholesale elimination of 
service to major cities and States. Indeed, as we have testified 
previously, we favor an expansion of the network.
    Amtrak's Sunset Limited is often cited by Amtrak's critics as 
wasteful because it would be cheaper to fly passengers from Orlando to 
Los Angeles. However, relatively few passengers travel that entire 
distance. Other city-pairs the route serves do not have direct flights, 
or affordable flights, or in some cases any flights. In addition, some 
passengers are physically unable to fly. And elimination of the Sunset 
Ltd. would create a domino effect as the loss of connecting passengers 
and ability to share facility costs with the Sunset would unravel the 
economics of the Texas Eagle, City of New Orleans, and Crescent.
    The large subsidy-per-passenger figures sometimes cited for given 
Amtrak long-distance routes include ``fully allocated'' costs. These 
are misleading because they often are interpreted to mean that 
discontinuance of a given route would reduce Amtrak's operating grant 
requirement by the product of the number of passengers times the fully 
allocated loss per passenger. Using the Silver Star fiscal year 2002 
figures at page 471 of the House subcommittee's April 10, 2003, hearing 
record, the math would be $189 times 252,240.
    The product does not represent an avoidable cost, since many 
allocated costs will not disappear but simply get re-allocated to 
surviving routes. Obvious example: a share of the Amtrak president's 
salary. Also, a high proportion of long-distance-train passengers make 
connections with other trains, so discontinuing one train negatively 
impacts revenues on other trains.
    This helps explain why ``FRA-defined train contribution'' figures 
were developed, by Federal Railroad Administration working with Amtrak 
when they were implementing the agreements under which DOT approves 
funds before Amtrak gets them. In the case of the Silver Star, the FRA 
defined contribution is actually positive: $12 per passenger or 2 cents 
per passenger-mile. (Measures stated in terms of passenger-mile are 
normally used in intercity travel statistics because they take into 
account the dramatic variations in trip lengths.)
    Thank you for considering our views. Please let us know if we can 
provide further information that would be helpful to the committee's 
work.

             Prepared Statement of Signature Flight Support

             THE EFFECTS OF CLOSING DCA TO GENERAL AVIATION

    Ronald Reagan Washington National Airport was closed to general 
aviation (``GA'') on September 11, 2001 and has not reopened since. It 
is the only airport in the country that has been shut down to general 
aviation. Following the September 11 attacks, the FAA also closed the 
three small general aviation airports within 15 miles of Washington: 
Potomac Airfield, Washington Executive Airport and College Park Airport 
(``DC-3 airports''). Although the DC-3 airports have been allowed to 
re-open, they are subject to unique tight restrictions and cannot land 
any incoming traffic. No other airports in the country are subject to 
comparable restrictions.
    General aviation businesses that were operating at Reagan National 
and the smaller DC-3 airports have suffered substantial losses as a 
result of these closures and restrictions, which is entirely the result 
of government edicts. The use of their property has been ``taken'' by 
the Federal Government. They should be compensated for these losses.
    Prior to 9/11, as the sole provider of ground support services for 
general aviation at Reagan National, Signature Flight Support handled 
an average of 175 flights per day, and employed 55 aviation service 
professionals. Two employees now handle approximately 20 flights per 
month. During the last 6 months, virtually all of these flights have 
been government officials. The flights primarily are aircraft belonging 
to the Bureau of Immigration and Customs Enforcement, the Drug 
Enforcement Agency, the FBI, NASA, and miscellaneous dignitaries.
    Although Signature's rent has been abated by the Metropolitan 
Washington Airports Authority, Signature has suffered substantial 
losses to revenues and workforce. In the 2\1/2\ years since closure, 
Signature Flight Support alone has lost after tax profits, offset by 
modest gains at our Washington Dulles and Baltimore facilities, in 
excess of $10 million.

                 COMPENSATION IS NEEDED AND APPROPRIATE

    The Fifth Amendment to the Constitution provides that no ``private 
property shall be taken for public use without just compensation.'' The 
closure to general aviation and its effect on Signature is legally 
known as a regulatory taking. The general aviation shutdown has left 
Signature with a facility and a business that cannot possibly be used 
for any other purpose. Given this situation, the Federal Government 
should compensate Signature and other similarly affected business for 
the losses that have resulted. Compensation should be paid for the lost 
profits and actual losses incurred since the closure of Reagan National 
to general aviation.
    Congress immediately recognized the need for compensation in the 
wake of 9/11, when it passed the 2001 Emergency Supplemental, which 
included $40 million to the Metropolitan Washington Airports Authority 
to compensate its concessionaires for the temporary closure and reduced 
commercial flight schedule at Reagan National immediately after 9/11. 
However, this fund compensated businesses only for the period 
immediately following 9/11; no funds were made available to businesses 
that continued to suffer substantial losses at Washington area 
airports. These losses were uniquely suffered at these airports. This 
failure can and should be addressed this year. Funding for these losses 
has now been fully authorized.
    Last year, Congress recognized the importance of compensating 
businesses for the significant losses suffered post 9/11 as a result of 
the closure of general aviation. The FAA reauthorization bill, The 
Vision 100--Century of Aviation Reauthorization, provides for the 
reimbursement of losses incurred by general aviation entities. The bill 
was enacted last December.
    The compensation provision specifically states, ``the Secretary of 
Transportation may make grants to reimburse . . . general aviation 
entities for the security costs incurred and revenue foregone as a 
result of the restrictions imposed by the Federal Government following 
the terrorist attacks on the United States that occurred on September 
11, 2001.\1\ Item 1 is ``general aviation entities that operate at 
Ronald Reagan Washington National Airport.'' \2\ The statute authorizes 
that $100,000,000 to be appropriated for reimbursements to carry out 
the section. This year, Congress should follow through by making this 
authorization a reality, particularly for the highest priority 
category, which is the only category where general aviation has been 
totally banned since 9/11.
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    \1\ Public Law No. 108-176 (H. Res. 2115) (December 12, 2003).
    \2\ Public Law No. 108-176 (H. Res. 2115) (December 12, 2003).
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    A provision should be included in the Fiscal 2005 Transportation 
Appropriations legislation that compensates those businesses that have 
suffered losses as a result of the termination of general aviation 
activity at Reagan National Airport. This provision should provide for 
a minimum of $10 million, the approximate amount lost by Signature 
Flight Support since the closure of Reagan National on 9/11.
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