[Senate Hearing 109-]
[From the U.S. Government Publishing Office]



 
  DEPARTMENTS OF TRANSPORTATION, TREASURY, THE JUDICIARY, HOUSING AND 
URBAN DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 
                                  2006

                              ----------                              


                        THURSDAY, APRIL 21, 2005

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:34 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Christopher S. Bond, (chairman) 
presiding.
    Present: Senators Bond, Bennett, Stevens, Murray, and Kohl.

                   EXECUTIVE OFFICE OF THE PRESIDENT

                    Office of Management and Budget

STATEMENT OF JOSHUA B. BOLTEN, DIRECTOR

            OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Good morning. The Senate Appropriations 
Subcommittee on Transportation, Treasury, the Judiciary, 
Housing and Urban Development, and Related Agencies will come 
to order.
    We welcome Josh Bolten, Director, Office of Management and 
Budget. I look forward to your views, Director Bolten, on the 
President's overall budget request for 2006, as well as budget 
issues related to OMB's own needs.
    The President's budget request for 2006 calls for some $840 
billion in overall discretionary budget authority, including 
$419 billion for the Department of Defense and $32 billion for 
Homeland Security. For DOD, this would be an increase of $19 
billion, or 4.8 percent, over 2005. For Homeland Security, this 
would be an increase of $1 billion, or 3.1 percent, over 2005. 
Even with significant increases in security-related spending, 
the overall 2006 budget request would hold overall spending to 
a 2.1 percent growth, just below the rate of inflation.
    Consequently, the budget proposes that overall non-security 
discretionary spending would be reduced from the 2005 level by 
$3 billion, or 0.7 percent, for a total of $389 billion. 
Moreover, on non-defense discretionary spending, the budget 
proposes more than 150 reductions and eliminations in Federal 
programs to save $20 billion in budget authority in this coming 
fiscal year alone.
    I support the President's goal of cutting the deficit in 
half by 2008. However, reducing the deficit solely on the back 
of domestic discretionary spending is very troubling and, I 
believe, an ill-conceived strategy that could have disastrous 
results for many important, congressionally supported, as well 
as popularly supported domestic programs. To be clear, 
discretionary spending should be reduced where appropriate. We 
should not, however, reduce those programs solely to meet 
arbitrary deficit reduction numbers, especially when many of 
these programs are important to the health, safety, and quality 
of life of the citizens of our Nation.
    More importantly, mandatory spending must be reduced to 
achieve any true spending reform and deficit reduction. While I 
support the President's efforts to reform Social Security in 
order to avoid bankrupting the future of our children and our 
children's children, I am concerned that the budget proposes 
total mandatory spending of $1.6 trillion in 2006, an increase 
of $107 billion, or 7 percent, over fiscal year 2005. Mandatory 
spending currently accounts for some 63 percent of total 
Federal spending and by 2010 will grow to $2.1 trillion which 
would represent 68 percent of total spending. This is a total 
annual growth rate of some 6.3 percent, which towers over any 
savings expected to be achieved from domestic discretionary 
spending cuts.
    However, we are not here to discuss reforming mandatory 
programs, no matter how important. We are here to discuss the 
President's proposed budget for domestic discretionary 
spending, especially those programs within the jurisdiction of 
the Transportation, Treasury, and HUD Appropriations 
Subcommittee, or the THUD committee, as it is called.
    The House and Senate Appropriations and Budget Committees 
and OMB share responsibility for recommending a budget to 
Congress and the President that will ensure the continued 
effective running of the United States Government for each 
fiscal year. However, at the end of the day, we as 
appropriators must present to Congress and then the President a 
bill that is financially sound, responsible, and capable of 
maintaining the efficient running of government.
    As part of this process, OMB has an obligation to propose 
funding recommendations that are consistent with budget and 
program realities. The administration's budget should not be 
based on flawed data and budget assumptions and should not 
include recommendations that violate Congress' Budget and 
Impoundment Control Act of 1974.
    Unfortunately, I believe this budget request contains a 
number of flawed budget assumptions, as well as a number of 
ill-considered budget and policy recommendations. In many 
cases, Mr. Bolten, I believe you and the President have been 
ill-served by your staff, and it is especially problematic in a 
year of tight budget allocations.
    As you may know, I had the distinct honor previously of 
serving as chair of the VA/HUD Appropriations Subcommittee and 
now as the chair of this subcommittee. This has allowed me to 
develop some familiarity with $170 billion of domestic 
discretionary spending, or 50 percent of the President's budget 
for domestic discretionary spending. I will focus my comments 
and questions today and for the record primarily on programs of 
which I have a personal knowledge and interest. Nevertheless, I 
understand that my concerns with the fiscal year 2006 budget 
are similar to the concerns my colleagues are wrestling with in 
other appropriations subcommittees.
    First, let me express my sincere disappointment that the 
administration has proposed to eliminate the HUD Community 
Development Block Grant program, along with 17 other programs, 
and replace these with a block grant program in Commerce called 
Strengthening America's Communities Initiative.
    The administration proposes to fund this initiative only at 
$3.7 billion, which is an overall reduction for all these 
programs of almost $2 billion, or some 34 percent, from the 
2005 level.
    The proposed elimination and related reduction of funding 
for CDBG, as well as many of these other programs is, in my 
view, a tragedy. Communities across the Nation rely on CDBG to 
fund critical housing and community development programs, and 
without these funds, many local programs will falter and fail.
    Equally important, CDBG is a critical component of HUD's 
mission. CDBG helps to make HUD's housing mission successful. 
That is why they call it Housing and Urban Development. Without 
CDBG, it is the Department of Housing, and if your proposals go 
forward to block grant everything, housing would probably wind 
up as an office in the Secretary of Commerce's office that 
hands out block grant monies. As history tells us, successful 
community development relies on a comprehensive approach to 
housing and community development.
    Now, CDBG is not perfect. CDBG funds are not always used 
well or effectively. However, HUD, OMB, and select CDBG 
interest groups recently ratified a consensus document to 
address weaknesses in the CDBG program by creating an outcome 
measurement system to establish new benchmarks and better 
oversight. Since this document is designed to address OMB's 
concerns, I am puzzled by the administration's proposal to 
dismantle a program that has been redesigned to become more 
effective and successful as required by the administration.
    I have some more practical concerns, however. Even if we 
were to pass a new Commerce block grant this year--and I will 
have to say, talking with my colleagues, I find a minimum 
amount of high enthusiasm in the Congress for that--if you were 
successful to replace CDBG with a block grant, how is it 
possible for the Commerce Department to implement the program 
for 2006, including the issuing of regulations, the hiring and 
training of staff, and the education of communities in how 
these funds must be used? What happens to communities with 
existing projects that rely on CDBG funding, especially those 
projects with section 108 loan guarantees where the guarantees 
rely on a flow of future CDBG funding?
    I will also have additional questions with regard to the 
proposed consolidation of the Community Development Financial 
Institutions program, the Bank Enterprise Act program, and the 
Section 4 Capacity Building LISC/Enterprise program into the 
new proposed Commerce block grant. None of these activities 
would fit into a block grant scheme, and I think the Nation 
would be a loser for it.
    Another major funding area that OMB has not adequately 
supported--and we have talked about this before--is basic 
scientific research, primarily the physical sciences, which is 
mainly funded through the National Science Foundation. I no 
longer have responsibility in my committee for that, but let me 
reemphasize that NSF should play a critical role in the 
economic, scientific, and intellectual growth of the Nation. 
Our country's future resides in our ability to lead the world 
in science and technology, especially in the global 
marketplace. NSF should be one of our primary tools in meeting 
the goals of the 21st century by pushing the boundaries of 
scientific research and technology. This work of NSF will 
significantly build our economy and speed innovation.
    The lack of support of NSF and the physical sciences and 
the growing funding disparity between the life sciences and the 
physical sciences is jeopardizing our Nation's ability to lead 
the world in scientific innovation. We are jeopardizing the 
work of the National Institutes of Health because we are 
undermining the physical sciences which provide the 
underpinning for medical technological advances. Inadequate 
funding for NSF hurts our economy and the creation of good jobs 
which would help address the outcry of outsourcing jobs to 
other countries. The bottom line is that by underfunding NSF, 
we are shooting ourselves and our future generations in the 
foot.
    I know that this is not in this committee, but I believe 
that this is of such major concern that it ought to be 
addressed at the top policy levels in the administration. We 
have proposed and I have heard general plaudits for the goal of 
doubling the funding of NSF in 5 years, or a 14.7 percent 
increase annually, and I think the entire scientific community 
and anybody who looks at it would agree.
    But let us go back to the THUD committee. I am really 
puzzled and concerned over the administration's proposal to 
rescind $2.5 billion from HUD's Housing Certificate Fund. As 
you know, we have spent several years reforming the Section 8 
tenant-based voucher program to limit the growing costs, and we 
have required public housing authorities to implement a more 
responsible budget-based planning and funding system for the 
program. As a responsible part of these reforms, much of the 
funds that have been available normally for rescission from 
within HUD over the last few years are no longer available. In 
point of fact, when the HUD Secretary, Alphonso Jackson, came 
before us, we asked him to identify any account or source of 
funds at this time which could support a $2.5 billion 
rescission from within HUD. He was unable to do so, and I can 
understand his problem. But this is a question which needs 
concrete answers before we draft this bill and try to impose 
cuts in an area where nobody knows that rescissions can be 
made.
    To be blunt, everyone's expectation is that OMB and HUD 
will have a system for evaluating and verifying where 
rescission funds will come from with a reasonable level of 
certainty. In particular, I expect OMB to provide an assessment 
of where these rescissions will come from and the methodology 
that OMB and HUD used in determining the amount of the 
rescission.
    In addition, the administration is seeking to eliminate 
HOPE VI, as well as rescind the HOPE VI fiscal year 2005 
funding of $143 million. As you may know--you may not know, but 
I am here to advise you--I set the stage for HOPE VI by 
including a demonstration project in the 1990 National 
Affordable Housing Act that allowed the demolition and 
replacement of Pruitt-Igoe Public Housing in St. Louis with 
vouchers and new housing. This approach has revolutionized the 
way we reformed obsolete public housing by allowing for the 
demolition of obsolete housing and the creation of mixed income 
private and public housing. This program has resulted in 
leveraging new private investment and the revitalization of 
entire communities. If anybody has any doubts about it, I would 
invite them to come to St. Louis or the many other communities 
where HOPE VI has been extremely successful.
    I am concerned today also with the administration's 
penchant for rescinding 2005 funding programs that were 
supported by Congress and enacted by the President. There are 
other examples throughout the budget, including within this 
subcommittee. For example, the administration proposes a 
rescission of $74 million appropriated in 2005 for the Maritime 
Administration for the national defense tank vessel 
construction program. The rescission would eliminate the 
program. Both rescission requests raise possible violations of 
the Congressional Budget and Impoundment Control Act, as well 
as significant costs to the subcommittee, depending on our 
actions. If we do not rescind these funds from the enacted 2005 
appropriations, the subcommittee will have to make up some $212 
million that must come from offsets or cuts in other programs. 
If the rescissions do go forward, we think that there are other 
significant liabilities that will be incurred by the Federal 
Government, and it is an open question where those funds will 
come from.
    Another substantial concern in the 2006 budget is Amtrak 
funding. I have not been a cheerleader for Amtrak. I supported 
it as Governor. But as the people at OMB should know, there are 
many of my colleagues and supporters that will seek to backfill 
this funding shortfall. I think you can count probably 55 or 60 
votes on the Senate floor. That means we will have to cut other 
programs. These are program cuts and offsets that the 
administration has been unable or unwilling to identify. To be 
honest, I find the proposal for the Amtrak budget not 
responsible. I support the administration's efforts to initiate 
long overdue and fundamental reform of Amtrak's failed business 
model, but it is obvious that the $360 million the 
administration is proposing to support the dismantling of 
Amtrak is totally inadequate and could throw the entire 
passenger train industry into chaos, with bankruptcy and untold 
problems throughout the system, and for rail transportation 
generally. Clearly, whatever approach Congress takes, the 
funding for Amtrak will be far greater than proposed and will 
have to come from somewhere.
    I also support the Airport Improvement Program which 
provides Federal grants to airports for projects to enhance 
safety, capacity, security, and environmental concerns. Yet, 
the 2006 budget requests $3 billion for AIP, a reduction of 
nearly $500 million from the 2005 enacted level, and a $600 
million reduction from the amount authorized for 2006. This is 
a popular and important program that has broad support. The 
proposed funding will impact the funding available for primary 
and non-primary airports. Adequate funding is especially 
important in view of rising fuel costs.
    Another area of concern to me is the Federal Government's 
ability or lack thereof to procure and manage information 
technology systems. To be clear, this is a problem that has 
existed for many years through both Democratic and Republican 
administrations. The Federal Government spends over $60 billion 
on IT projects, but it appears that a large portion of these 
funds are not managed effectively. For example, the Internal 
Revenue Service's Business Systems Modernization has been 
fraught with cost overruns, missed deliverables, and is 
currently designated as high risk by the Government 
Accountability Office. I could go down a list of problematic IT 
systems, but that would require another hearing. I think it is 
imperative--and this is where I have a constructive suggestion 
for OMB--to do a better job protecting the taxpayers' interest 
in procuring and overseeing its multi-billion dollar portfolio. 
Perhaps OMB could develop a cadre of experts to assist 
individual agencies in the IT arena by helping to establish IT 
requirements, helping to negotiate IT contracts, and helping to 
ensure that contractors meet all the requirements, benchmarks, 
and time lines. I look forward to working with you on IT 
procurement and management and any plans the agency may have to 
address this issue.
    I do not think it is too much to ask the Federal Government 
to live within a budget. I did so as Governor of Missouri, and 
I believe in responsible spending. In conclusion, however, I do 
not believe that we should have to live within a budget that is 
based on flawed assumptions and is fiscally questionable, 
especially when proposed budget shortfalls must be offset from 
other programs and activities that the administration was 
unable to identify or propose. How can we make the budget work 
if OMB cannot?

                           PREPARED STATEMENT

    Mr. Director, I would like to work with you in particular 
on the Government's IT issues. We also need your help and 
assistance in developing a budget and an appropriations plan 
that will allow our subcommittee to produce a responsible bill.
    I look forward to working with you on these issues, and I 
now turn to my ranking member, Senator Murray. Senator.
    [The statement follows:]

           Prepared Statement of Senator Christopher S. Bond

    The Senate Appropriations Subcommittee on Transportation, Treasury, 
the Judiciary, Housing and Urban Development and Related Agencies will 
come to order. We welcome Josh Bolten, Director, Office of Management 
and Budget (OMB). I look forward to your views on the President's 
overall budget request for fiscal year 2006 as well as budget issues 
related to OMB's own needs.
    The President's budget request for fiscal year 2006 calls for some 
$840.3 billion in overall discretionary budget authority, including 
some $419.3 billion for the Department of Defense and $32 billion for 
Homeland Security. For DOD, this would be an increase of $19 billion or 
4.8 percent over fiscal year 2005. For Homeland Security, this would be 
an increase of $1 billion or 3.1 percent over fiscal year 2005. Even 
with significant increases in security-related spending, the overall 
fiscal year 2006 budget request would hold overall spending to a 2.1 
percent growth, just below the rate of inflation.
    Consequently, the budget proposes that overall non-security 
discretionary spending would be reduced from the fiscal year 2005 level 
by some $3 billion or 0.7 percent for a total of $389 billion. 
Moreover, as to non-defense discretionary spending, the budget proposes 
more than 150 reductions and eliminations in Federal programs which 
would save some $20 billion in budget authority in fiscal year 2006 
alone.
    I support the President's goal of cutting the deficit in half by 
fiscal year 2008. However, reducing the deficit almost solely on the 
back of domestic discretionary spending is very troubling and, I 
believe, an ill-conceived strategy that could have disastrous results 
for many important, congressionally-supported domestic programs. To be 
clear, discretionary spending should be reduced where appropriate. We 
should not, however, reduce these programs solely for sake of deficit 
reduction, especially when many of these programs are important to the 
health, safety and quality of life of our Nation's citizens.
    More importantly, mandatory spending must be reduced to achieve any 
true spending reform and deficit reduction. And while I support the 
President's efforts to reform Social Security in order to avoid 
bankrupting the future of our children and children's children, I 
remain very concerned that the budget proposes total mandatory spending 
of $1.6 trillion in fiscal year 2006, an increase of $107 billion or 7 
percent over fiscal year 2005. Mandatory spending currently accounts 
for some 63 percent of total Federal spending. By fiscal year 2010, 
mandatory spending will grow to $2.1 trillion and will represent some 
68 percent of total spending. This is a total annual growth rate of 
some 6.3 percent which towers over any savings expected to be achieved 
from domestic, discretionary spending.
    However, we are not here to discuss reforming mandatory programs, 
no matter how important. We are here to discuss the President's 
proposed budget for domestic, discretionary spending for fiscal year 
2006, especially those programs within the jurisdiction of the 
Transportation/Treasury Appropriations Subcommittee.
    The House and Senate Appropriations and Budget Committees and OMB 
share responsible for recommending a budget to the Congress and the 
President that will ensure the continued effective running of the 
United States Government for each fiscal year. However, at the end of 
the day, we, as appropriators, MUST present to the Congress and then 
the President a bill that is financially sound, responsible and capable 
of maintaining the efficient running of the government.
    As part of this process, OMB has an obligation to propose funding 
recommendations that are consistent with budget and program realities. 
The administration's budget request should not be based on flawed data 
and budget assumptions, and should not include recommendations that are 
a violation of the Congressional Budget and Impoundment Control Act of 
1974.
    Unfortunately, I believe this budget request contains a number of 
flawed budget assumptions as well as a number of ill-considered budget 
and policy recommendations. In many cases, Mr. Bolten, I believe that 
you and the President have been poorly served by your staff. This is 
especially problematic in a year of tight budget allocations.
    As you know, I have had the distinct honor of serving as the former 
chair of both the VA/HUD Appropriations Subcommittee and now as the 
chair of the Transportation/Treasury Appropriations Subcommittee. This 
has allowed me to develop familiarity with some $170 billion of 
domestic discretionary spending or some 50 percent or more of the 
President's budget for domestic, discretionary spending. As a result, I 
will focus my comments and questions today and for the record primarily 
on programs of which I have a personal knowledge and interest. 
Nevertheless, I understand that my concerns with the fiscal year 2006 
budget are similar to the concerns my colleagues are wrestling with in 
other appropriations subcommittees.
    First, I am very disappointed that the administration has proposed 
to eliminate the HUD Community Development Block Grant (CDBG) program 
along with some 17 other programs and replace these programs with a new 
block grant in the Department of Commerce called the Strengthening 
America's Communities initiative. The administration also is proposing 
to fund this new initiative at $3.7 billion which is an overall 
reduction for all these programs of almost $2 billion or some 34.2 
percent from the fiscal year 2005 level.
    The proposed elimination and related reduction of funding for CDBG 
as well as many of these other programs is a tragedy. Communities 
across the Nation rely on CDBG to fund critical housing and community 
development programs. Without these funds, many local programs will 
falter and even fail. Equally important, CDBG is a critical component 
of HUD's mission; CDBG helps to make HUD's housing mission successful. 
Moreover, the use of CDBG consolidated plans helps to ensure that 
communities tie together CDBG, housing funds and other Federal and 
State resources into a comprehensive approach to local housing and 
community development needs.
    Without CDBG, HUD's mission will be reduced to almost solely 
housing. As history tells us, successful community development relies 
on a comprehensive approach to housing and community development.
    CDBG is not a perfect program and CDBG funds are not always used 
well or effectively. However, HUD, OMB and select CDBG interested 
groups recently ratified a consensus document to address weaknesses in 
the CDBG program by creating an Outcome Measurement System to establish 
new benchmarks and better oversight. Since this document is designed to 
address OMB's concerns, I am puzzled by the administration's efforts to 
dismantle a program that has been redesigned to become more effective 
and successful according to administration requirements.
    I have more practical concerns, however. Even if we pass a new 
Commerce Block grant this year to replace CDBG, how is it possible for 
the Commerce Department to implement the program for fiscal year 2006, 
including the issuing of regulations, the hiring and training of staff, 
and the education of communities in how these funds must be used? What 
happens to communities with existing projects that rely on CDBG 
funding, especially those projects with section 108 loan guarantees 
where the guarantees rely on a flow of future CDBG funding?
    I also will have additional questions with regard to the proposed 
consolidation of the Community Development Financial Institutions 
program, the Bank Enterprise Act program and the Section 4 Capacity 
Building ``LISC/Enterprise'' program into the new proposed commerce 
block grant. None of these activities easily fit into a block grant 
scheme.
    Another major funding area that OMB has not adequately supported is 
basic scientific research--primarily, the physical sciences--which is 
mainly funded through the National Science Foundation. NSF plays a 
critical role in the economic, scientific and intellectual growth of 
this Nation. Our country's future resides in our ability to lead the 
world in science and technology, especially in the global marketplace. 
NSF is one of our primary tools in meeting the global challenges of the 
21st Century by pushing the boundaries of scientific research and 
technology. This work will grow our economy and speed innovation, 
improving the quality of life for all people.
    However, the lack of support for NSF and the physical sciences and 
the growing funding disparity between the life sciences and the 
physical sciences is jeopardizing our Nation's ability to lead the 
world in scientific innovation. Further, we are jeopardizing the work 
of the National Institutes of Health because we are undermining the 
physical sciences, which provide the underpinning for medical 
technological advances. Inadequate funding for NSF also hurts our 
economy and the creation of good jobs, which would help address the 
outcry of outsourcing jobs to other countries. The bottom-line is that 
by underfunding NSF, we are shooting ourselves and our future 
generations in the foot. I hope we can get NSF back on the path of 
doubling the budget as I have strongly advocated.
    I also am very puzzled and concerned over the administration's 
proposal to rescind some $2.5 billion from HUD's Housing Certificate 
Fund. As you know, we have spent several years reforming the section 8 
tenant-based voucher program to limit the growing costs and require 
PHAs to implement a more responsible budget-based planning and funding 
system for the voucher program. As a responsible part of these reforms, 
much of the funds that have been available normally for rescission from 
within HUD over the last few years are no longer available. In point of 
fact, HUD's Secretary, Alphonso Jackson, was unable to identify any 
account or source of funds at this time which could support a $2.5 
billion rescission from within HUD. This is a question which needs 
concrete answers before we draft this bill. To be blunt, everyone's 
expectation is that OMB and HUD have a system for evaluating and 
verifying where rescission funds will come from with a reasonable level 
of certainty. In particular, I expect OMB to be able to provide an 
assessment of where these rescissions will come from and the 
methodology that OMB and HUD used in determining the amount of the 
rescission.
    In addition, the administration is seeking to eliminate HOPE VI as 
well as rescind the HOPE VI fiscal year 2005 funding of $143 million. 
As you may know, I set the stage for HOPE VI by including a 
demonstration project in the 1990 National Affordable Housing Act that 
allowed the demolition and replacement of Pruitt-Igoe Public Housing in 
St. Louis with vouchers and new housing. This approach revolutionized 
the way we reformed obsolete public housing by allowing for the 
demolition of this obsolete housing and the creation of mixed income 
private and public housing. This program has resulted in leveraging new 
private investment and the revitalization of entire communities.
    While I am opposed to the elimination of the HOPE VI program, I am 
more concerned today with the administration's penchant for rescinding 
fiscal year 2005 funding from programs that were supported by the 
Congress and enacted by the President. There are other examples 
throughout the budget, including within the Transportation/Treasury 
Appropriations Subcommittee. For example, the administration also 
proposes a rescission of $74 million appropriated in fiscal year 2005 
for the Maritime Administration for the National Defense Tank Vessel 
Construction program. This rescission would eliminate this program. 
Both rescission requests raise possible violations of the Congressional 
Budget and Impoundment Control Act as well as significant costs to the 
subcommittee depending on our actions. If we do not rescind these funds 
from these fiscal year 2005 enacted appropriations, the subcommittee 
will have to make up some $212 million that must come from offsets or 
cuts in other programs.
    Another area of substantial concern in the fiscal year 2006 budget 
is Amtrak funding. I am not a fan of Amtrak but it appears, as OMB 
knows, that many of my colleagues are supporters and will seek to 
backfill this funding shortfall. This means we will have to cut other 
programs, and these are programs cuts and offsets that that the 
administration has been unable or unwilling to identify. I also find 
the Amtrak budget incredibly irresponsible. While I support the 
administration's efforts to initiate long overdue and fundamental 
reform of Amtrak's failed business model, it is obvious that the $360 
million that the administration is proposing to support the dismantling 
of Amtrak is totally inadequate and could throw the entire passenger 
train industry into chaos. Clearly, whatever approach the Congress 
takes, the funding for Amtrak will be far greater than proposed and 
will have to come from somewhere.
    I also support the Airport Improvement Program which provides 
Federal grants to airports for projects to enhance airport safety, 
capacity, security, and environmental concerns. Yet, the fiscal year 
2006 budget requests $3.0 billion for AIP, a reduction of nearly $500 
million from fiscal year 2005 enacted level and a $600 million 
reduction from the amount authorized for fiscal year 2006. This is a 
popular and important program that has broad support and the proposed 
funding will impact the funding available for primary and non-primary 
airports.
    Another area of concern to me is the Federal Government's ability, 
or lack thereof, to procure and manage information technology systems. 
To be clear, this is a problem that has existed for many years through 
both Democratic and Republican administrations. The Federal Government 
spends over $60 billion on IT projects but it appears that a large 
portion of those funds are not managed effectively. For example, the 
Internal Revenue Service's ``Business Systems Modernization'' has been 
fraught with cost overruns and missed deliverables and is currently 
designated as a ``high risk'' area by the Government Accountability 
Office. I could go down a laundry list of problematic IT systems but 
that would require another hearing. I believe it is imperative that the 
Federal Government, led by OMB, must do a better job of protecting the 
taxpayer's interest in procuring and overseeing its multibillion dollar 
portfolio. Perhaps, OMB could develop a cadre of experts that assist 
individual agencies in the IT arena by helping to establish agency IT 
requirements, helping to negotiate the IT contract, and helping to 
ensure the contractor meets all requirements, benchmarks and timelines. 
I look forward to hearing OMB's efforts in IT procurement and 
management and any plans the agency may have in addressing this serious 
issue.
    I don't think it is too much to ask the Federal Government to live 
within a budget. I did so as governor of Missouri and I believe in 
responsible spending. However, I do not believe that we should have to 
live within a budget that is based on flawed assumptions and is 
fiscally questionable, especially when proposed budget shortfalls must 
be offset from other programs and activities--programs and activities 
that the administration was unable to identify or propose. How are we 
expected to make the budget work if OMB cannot?
    Mr. Bolten, I would like to work with you in particular on the 
government's IT issues. However, we also need your help and assistance 
in developing a budget that allows our subcommittee to develop a 
responsible bill. I look forward to working with you on all these 
issues.
    I now turn to my Ranking Member, Senator Murray.

                   STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. Thank you very much, Mr. Chairman. I join 
with you in welcoming OMB Director Bolten here to our 
subcommittee this morning.
    It has been at least 3 years since the OMB Director has 
appeared before the subcommittee, so I am pleased that Director 
Bolten could be with us to discuss the budget request for his 
own office, as well as the larger budget request of the 
President for the coming fiscal year.
    Mr. Chairman, in addition to serving on the Appropriations 
Committee, I serve on the Budget Committee. Chairman Bond used 
to serve on the Budget Committee, but he has moved on to bigger 
and better things wisely.
    You did not need to hear what he just said.
    Over the past several weeks, the Budget Committee has been 
busy drafting a budget and moving it through committee markup 
and passing it to the Senate floor. I voted against that budget 
both in committee and on the floor because I believe it did not 
reflect the right priorities for our county, and it did not 
strike the right balance between taxes, deficit reduction, and 
the very real needs that are facing our communities.
    I actually have to say that participating in the budget 
debate over the past couple weeks has reminded me of a very 
lengthy and painful visit to the dentist's office, and the 
Muzak in the dentist's office played nothing but a repeating 
loop of that song we all know well, ``Don't Worry, Be Happy.''
    Don't worry about the drastic cuts, the unidentified 
rescissions, the user fees, and the problems we are pushing 
down the road. Don't worry about what is actually in the 
budget. We will deal with it later. It is kind of don't worry, 
be happy.
    Well, frankly, I am very worried because I can see what is 
going to happen to some of our country's most critical needs. 
We are setting ourselves up for a train wreck.
    The budget resolution that was presented in the committee 
accepted the President's proposed funding figure for non-
defense, non-homeland security discretionary spending. It was a 
real cut below last year's level. During debate on the budget, 
many amendments were offered to restore funding cuts that were 
proposed in the President's budget. We had amendments to 
restore funding for Amtrak, the Community Development Block 
Grant program, first responders, cops on the street, vocational 
education, and others. Almost all of those amendments were 
rejected, but still many Senators were telling us don't worry, 
be happy because when Congress gets around to the 
appropriations process later in the year, we are not going to 
enact those cuts anyway.
    Well, that does not make the problem go away. In fact, it 
actually makes it worse.
    For example, the Senate failed to adopt an amendment to 
restore $1.4 billion in spending so Amtrak could maintain rail 
service next year. Even though that amendment failed, I have 
heard a number of my colleagues in the Senate say, don't worry, 
be happy, we will find enough money in the appropriations 
process to keep Amtrak alive anyway.
    Similarly, an amendment was offered to restore funding for 
the Community Development Block Grant program. While that 
amendment failed, an amendment was later adopted that said we 
will somehow find the funding to restore the CDBG program 
through cuts in unidentified programs. Again, it is don't worry 
about what is actually in the budget, be happy.
    As the budget resolution now moves toward conference, I am 
having a very hard time convincing some of my colleagues to 
understand the math does not add up. If we are going to adopt a 
ceiling for domestic discretionary spending that comes close to 
the President's number, we are either going to have to accept 
many of the budget cuts or we are going to have to impose 
severe cuts in other programs.
    Amtrak and CDBG are just two of the President's proposals 
under this subcommittee's jurisdiction. The President's budget 
proposes an unallocated rescission of $2.5 billion to be 
derived from any program within the Department of Housing and 
Urban Development. The budget does not tell us where that $2.5 
billion would come from.
    And last week, HUD Secretary Jackson would not provide a 
guarantee to the subcommittee that those severe cuts would not 
come at the expense of programs serving the poor or even the 
homeless. Again, it is don't worry about the budget cuts, don't 
worry about the impact on the poor and homeless, just be happy.
    Similarly, within the subcommittee's jurisdiction, the 
President is proposing a large number of new user fees, fees 
that some say are just new taxes. These are fees that are not 
going to be adopted by the authorizing committees and therefore 
will require discretionary appropriations the President has not 
requested. In fact, if the past is any guide, it is not clear 
that the administration will ever get around to even submitting 
their user fee proposals to the authorizing committees.
    When I add together all of these funding holes, I see a 
shortfall of between $5 billion and $6 billion just for 
programs under the jurisdiction of this subcommittee.
    So I am one Senator who cannot buy into the ``don't worry, 
be happy'' attitude of some of my colleagues, and frankly, I am 
very worried. This subcommittee is facing a very tough road 
ahead and it will have a painful impact on our communities.
    Absent some recognition on the part of the conferees on the 
budget resolution of the very real holes in the President's 
budget proposal, I believe that some of my colleagues will be 
facing a very rude awakening when we get to the appropriations 
process later this summer.
    I would implore my colleagues to stop listening to the 
music and instead focus on the impossible choices we are 
setting ourselves up for if we stick to the President's 
proposed ceiling for domestic discretionary spending.
    Mr. Bolten, I also want to question you today about the 
President's dramatic cuts to the Hanford nuclear waste cleanup. 
The President's cuts may violate the Federal Government's legal 
obligations under the Tri-Party Agreement, and I am not going 
to remain quiet while this administration walks away from its 
responsibility to the people of the Tri-Cities in my State.
    I also want you to know that I am very concerned about the 
President's budget proposals relating to the Bonneville Power 
Administration. The White House plan will force higher 
electricity rates on Northwest residents and on our businesses. 
I know I do not need to remind you, Mr. Bolten, our region is 
still really feeling the effects of the Enron manipulation of 
the market at the same time we are experiencing extremely high 
gas prices. We have had enough pain when it comes to energy, 
and we do not need a White House plan that puts energy traders 
above Northwest citizens and businesses.
    Another White House proposal for BPA would cripple our 
ability to invest in our transmission and generation systems, 
which will leave our entire region vulnerable to blackouts and 
higher energy costs.

                           PREPARED STATEMENT

    So, Mr. Bolten, those are some of the things I want to 
explore with you during this hearing.
    Mr. Chairman, thank you so much for holding this, and I 
look forward to the discussion.
    [The statement follows:]

               Prepared Statement of Senator Patty Murray

    I want to welcome OMB Director Bolten to the subcommittee this 
morning. It's been at least 3 years since the OMB Director has appeared 
before the subcommittee, so I'm pleased that Director Bolten could be 
with us to discuss the budget request for his own office, as well as 
the larger budget request of the President for the coming fiscal year.
    In addition to serving on the Appropriations Committee, I serve on 
the Budget Committee. Chairman Bond also used to serve on the Budget 
Committee, but he has since moved on to bigger and better things.
    Over the past several weeks, the Budget Committee has been busy 
drafting a budget, moving it through committee mark-up, and passing it 
on the Senate Floor. I voted against that budget, both in committee and 
on the Floor, because I believe it did not reflect the right priorities 
for our country. It did not strike the right balance between taxes, 
deficit reduction, and the very real needs facing our communities.
    Participating in the budget debate over the past several weeks has 
reminded me of a very lengthy and painful visit to the dentist's 
office. And the muzak in this dentist's office played nothing but a 
repeating loop of that song, ``Don't Worry, Be Happy''.
    Don't worry about the drastic cuts, the unidentified rescissions, 
the user fees, and the problems we're pushing down the road. Don't 
worry about what's actually in the budget. We'll deal with it later. 
Don't worry. Be happy.
    Well frankly, I am worried, because I can see what's going to 
happen to some of our country's most critical needs. We are setting 
ourselves up for a train wreck.
    The Budget Resolution presented in committee accepted the 
President's proposed funding figure for non-Defense, non-Homeland 
Security discretionary spending. It was a real cut below last year's 
level. During debate on the budget, many amendments were offered to 
restore funding cuts that were proposed in the President's Budget. We 
had amendments to restore funding for Amtrak, the Community Development 
Block Grant Program, first responders, cops on the street, vocational 
education and others.
    Almost all of these amendments were rejected, but still many 
Senators are telling us: ``Don't worry. Be happy,'' because when 
Congress gets around to the Appropriations process later in the year, 
we aren't going to enact those cuts anyway.
    Well that doesn't make the problem go away. In fact, it makes it 
worse.
    For example, the Senate failed to adopt an amendment to restore 
$1.4 billion in spending so that Amtrak could maintain rail service 
next year. Even though that amendment failed, I have heard a number of 
my colleagues in the Senate say, ``Don't worry. Be happy.''; we will 
find enough money through the Appropriations process to keep Amtrak 
alive anyway.
    Similarly, an amendment was offered to restore funding for the 
Community Development Block Grant Program. While that amendment failed, 
an amendment was later adopted that said that we will somehow find the 
funding to restore the CBDG program through cuts in other unidentified 
programs. Again, it's don't worry about what's actually in the budget--
be happy.
    As the Budget Resolution moves toward conference, I am having a 
very hard time getting my colleagues to understand that the math just 
doesn't add up. If we are going to adopt a ceiling for domestic 
discretionary spending that comes close to the President's number, we 
are either going to have to accept many of his budget cuts, or we are 
going to have to impose severe cuts in other programs.
    Amtrak and CBDG are just two of the President's proposals under 
this subcommittee's jurisdiction. The President's budget proposes an 
unallocated rescission of $2.5 billion to be derived from any program 
within the Department of Housing and Urban Development.
    The budget doesn't tell us where that $2.5 billion would come from. 
Last week, HUD Secretary Jackson would not provide a guarantee to this 
subcommittee that these severe cuts would not come at the expense of 
programs serving the poor or even the homeless. Again, it's don't worry 
about the budget cuts. Don't worry about the impact on the poor or 
homeless. Be happy.
    Similarly, within the subcommittee's jurisdiction, the President is 
proposing a large number of new user fees--fees that some say are just 
new taxes.
    These are fees that are not going to be adopted by the authorizing 
committees and therefore, will require discretionary appropriations 
that the President has not requested.
    In fact, if the past is any guide, it is not clear that the 
administration will ever get around to even submitting their user fee 
proposals to the authorizing committees.
    When I add together all these funding holes, I see a shortfall of 
between $5 billion and $6 billion just for programs under the 
jurisdiction of this subcommittee.
    So, I am one Senator that can't buy into the ``don't worry, be 
happy'' attitude of some of my colleagues. Frankly, I am worried. This 
subcommittee is facing a very tough road ahead, and it will have a 
painful impact on our communities.
    Absent some recognition on the part of the conferees on the Budget 
Resolution of the very real holes in the President's budget proposal, I 
believe that some of my colleagues will be facing a very rude awakening 
when we get to the Appropriations process later this summer.
    I would implore my colleagues to stop listening to the music and 
instead focus on the impossible choices that we are setting ourselves 
up for if we stick to the President's proposed ceiling for domestic 
discretionary spending.

                        HANFORD NUCLEAR CLEANUP

    Mr. Bolten, I also want to question you about the President's 
dramatic cuts to the Hanford nuclear waste clean up. The President's 
cuts may violate the Federal Government's legal obligations under the 
Tri-Party agreement. I am not going to remain quiet while this 
administration walks away from its responsibility to the people of the 
Tri-Cities.

                                  BPA

    I also continue to be concerned by the President's budget proposals 
relating to the Bonneville Power Administration. The White House plan 
will force higher electricity rates on Northwest residents and 
businesses. I don't need to remind you, Mr. Bolten, that our region is 
still feeling the painful effects of Enron's manipulation of the market 
at the same time we're experiencing record gas prices. We've had enough 
pain when it comes to energy. We don't need a White House plan that 
puts energy traders above Northwest citizens and businesses.
    Another White House proposal for BPA would cripple our ability to 
invest in our transmission and generation systems, leaving our entire 
region vulnerable to blackouts and higher energy costs. Those are some 
of the things I want to explore with you during this hearing.

                           PREPARED STATEMENT

    Senator Bond. Thank you very much, Senator Murray. Senator 
Cochran has submitted a statement which will be included in the 
record as well.
    [The statement follows:]

               Prepared Statement of Senator Thad Cochran

    Mr. Director, thank you for being here today to discuss the 
President's budget request. It is a pleasure to work with you as we 
move forward through the appropriation process.
    The President's plan to cut the Federal deficit in half over the 
next 5 years is laudable and we will work with you to achieve this 
goal, and I am hopeful that the Senate and the House will agree soon 
upon a budget resolution that will be the framework for our work for 
the remainder of the year.
    We appreciate your leadership in defining priorities and thank you 
for the good work that you do as Director of the Office of Management 
and Budget.

                     STATEMENT OF JOSHUA B. BOLTEN

    Senator Bond. With that introduction, Director Bolten, we 
would be happy to have your views.
    Mr. Bolten. Thank you, Mr. Chairman and Senator Murray. 
Thank you for your warm welcome.
    I am, indeed, pleased to be here this morning to discuss 
the President's 2006 budget request for the Office of 
Management and Budget and also discuss the broader budget 
issues that each of you raised in your opening statements.
    I would like to begin with a brief review of the 
President's overall 2006 budget request. The 2006 budget funds 
efforts to defend the homeland from attack. We are transforming 
our military and supporting our troops, as they fight and win 
the global war on terror. We are helping to spread freedom 
throughout the world. We are promoting high standards in our 
schools, among many other priorities reflected in the 
President's budget.
    Those policies, especially tax relief, have helped create 
millions of new jobs, a rebound in business investment, and 
record home ownership rates. In order to keep our economy 
strong and achieve the President's goal of cutting the deficit 
in half by 2009, as you mentioned, Mr. Chairman, we need to 
continue the President's pro-growth policies and, importantly 
for this discussion, exercise even greater spending restraint 
than we have in recent years.
    During the first term, the President committed to spend 
what was needed on the war on terror and to protect the 
homeland, and he committed to enforce spending restraint 
elsewhere. Because of this focus, deficits are below what they 
otherwise would have been. With continuation of the President's 
pro-growth economic policies and responsible spending restraint 
now, we will remain on track to cut the deficit in half by 2009 
to a level that is well below the 40-year historical average 
deficit of 2.3 percent of GDP.
    The administration proposes to tighten spending further 
this year by limiting the growth in overall discretionary 
spending, even after significant increases in defense and 
homeland security, to 2.1 percent. Mr. Chairman, you 
highlighted that in your opening remarks, and you did note that 
that is less than the projected rate of inflation, I believe. 
If you did not note it, I note it now. So, Senator Murray, your 
comments, as well, are on target, which is to say that in those 
non-security areas, the President is proposing a spending level 
that is below inflation--so a real cut.
    In non-security discretionary accounts, the President's 
proposal would cut spending by nearly 1 percent, 0.7 percent, 
as you pointed out, Mr. Chairman. That is the tightest such 
restraint proposed since the Reagan administration.
    The budget also proposes more than 150 reductions and 
eliminations in non-defense discretionary programs, saving 
about $20 billion in 2006, and an additional set of reforms in 
mandatory programs, saving about $137 billion over the next 10 
years. So, Mr. Chairman, we are not focusing our efforts 
exclusively on the discretionary side of the budget. We also 
believe that it is important to begin the process of digging in 
on the mandatory side.
    To ensure the Federal Government spends taxpayer dollars 
most effectively, the administration continues to implement the 
President's Management Agenda (PMA). The PMA helps individual 
agencies and programs focus on and produce results. It promotes 
this goal through several key components: strategic management 
of human capital, competitive sourcing, improved performance 
and reporting standards, integration of budget policy with 
performance measures, and finally, Mr. Chairman, the one that 
you highlighted in your opening statement: electronic 
government, e-government, initiatives, and how we spend our IT 
money.
    OMB has successfully designed and implemented the Program 
Assessment Rating Tool, or PART, to help agencies measure the 
success of their programs, focus efforts to improve program 
performance, and set budget policy accordingly.
    Consistent with the President's overall 2006 budget 
proposal, the Office of Management and Budget has itself 
submitted a disciplined request. OMB's total budget request 
amounts to about $75 million, the same as was appropriated for 
the agency in the 2005 budget process.
    To achieve this spending restraint, OMB is pursuing cost 
savings wherever possible. As in the past, OMB is achieving 
cost savings largely through reductions in staffing. We are 
principally an agency of people and that is the only place we 
can really go to find the savings. Last year, OMB was 
appropriated $1.6 million less than the President's budget 
request. In addition, OMB, like other agencies, absorbed a pay 
raise of 3.7 percent. To accommodate these lower funding 
levels, we have reduced OMB staff from 527 positions in fiscal 
year 2001 to 510 positions in 2004 to 490 positions anticipated 
in 2005 and 2006.
    With these lower levels of resources and staffing, we 
believe OMB can continue to deliver high-quality performance 
and fulfill our many important core responsibilities. Our best 
known of these responsibilities is the preparation of the 
President's annual budget. In addition, our responsibilities 
include oversight of other budgetary matters, management 
issues, the administration's legislative proposals, regulatory 
reforms, procurement policies, and other important subjects. We 
assure that all such proposals are consistent with the relevant 
statutes and presidential objectives. In meeting these 
responsibilities, OMB is prepared to work within the 
constraints of a tight budgetary environment.
    I look forward to working with the Congress and with this 
committee in particular to develop a final budget that is 
consistent with our goals of spending discipline and focusing 
on priorities.

                           PREPARED STATEMENT

    Mr. Chairman, that concludes my prepared statement. I know 
you and Senator Murray have raised a number of issues in your 
opening statements. I would be happy to respond to any of them 
in questions.
    [The statement follows:]

                 Prepared Statement of Joshua B. Bolten

    Mr. Chairman, Senator Murray, members of the subcommittee, I am 
pleased to be here this morning to discuss the President's fiscal year 
2006 budget request for the Office of Management and Budget (OMB).

 WINNING THE WAR ON TERROR, PROTECTING THE HOMELAND AND STRENGTHENING 
                              THE ECONOMY

    I would like to begin with a brief review of the President's 
overall fiscal year 2006 budget. The 2006 budget funds efforts to 
defend the homeland from attack. We are transforming our military and 
supporting our troops as they fight and win the Global War on Terror. 
We are helping to spread freedom throughout the world. We are promoting 
high standards in our schools. The President's policies in this budget, 
especially tax relief, have helped create millions of new jobs, a 
rebound in business investment, and record homeownership rates. In 
order to keep our economy strong, and achieve the President's goal of 
cutting the deficit in half by 2009, we need to continue the 
President's pro-growth policies and exercise even greater spending 
restraint.
    During the first term the President committed to spend what was 
needed to win the War on Terror and protect the homeland--and he 
committed to enforce spending restraint elsewhere. Because of this 
focus, deficits are below what they otherwise would have been. With 
continuation of the President's pro-growth economic policies and 
responsible spending restraint, we will remain on track to cut the 
deficit in half by 2009, to a level that is well below the 40-year 
historical average deficit of 2.3 percent of GDP.
    The administration proposes to tighten spending further this year 
by limiting the growth in overall discretionary spending, even after 
significant increases in defense and homeland security, to 2.1 
percent--less than the projected rate of inflation. In other words, 
under the President's 2006 budget, overall discretionary spending will 
see a reduction in real terms. In non-security discretionary accounts, 
the President proposes to cut spending by nearly 1 percent--the 
tightest such restraint proposed since the Reagan Administration.
    The budget also proposes more than 150 reductions and eliminations 
in non-defense discretionary programs, saving about $20 billion in 
2006, and an additional set of reforms in mandatory programs, saving 
about $137 billion over the next 10 years.

                           DELIVERING RESULTS

    To ensure the Federal Government spends taxpayer dollars most 
effectively, the administration continues to implement the President's 
Management Agenda (PMA). The PMA helps individual agencies and programs 
focus on and produce results, and promotes this goal through several 
key components: strategic management of human capital; competitive 
sourcing; improved financial performance and reporting standards; 
electronic government (e-gov) initiatives; and integration of budget 
policy with performance measures.
    OMB has successfully designed and implemented the Program 
Assessment Rating Tool, or PART, to help agencies measure the success 
of their programs, focus efforts to improve program performance, and 
set budgetary policy accordingly.

                              OMB'S BUDGET

    Consistent with the President's overall fiscal year 2006 budget 
proposal, the Office of Management and Budget has submitted a 
disciplined request. OMB's total budget request amounts to $75.1 
million--the same as was appropriated for the agency in the 2005 budget 
process.
    To achieve this spending restraint, OMB is pursuing cost savings 
wherever possible. As in the past, OMB is achieving cost savings 
largely through reductions in staffing. Last year, OMB was appropriated 
$1.6 million less than the President's budgetary request. In addition, 
OMB--like other agencies--absorbed a pay raise of 3.7 percent. To 
accommodate lower funding levels, we have reduced OMB staff from 527 
positions in fiscal year 2001, to 510 positions in 2004, to the 490 
positions anticipated for 2005 and 2006.
    With these lower levels of resources and staffing, we believe OMB 
can continue to deliver high-quality performance and fulfill our many 
important core responsibilities. Our best known of these 
responsibilities is the preparation of the President's annual budget. 
In addition, our responsibilities include oversight of budgetary 
matters, management issues, the administration's legislative proposals, 
regulatory reforms, procurement policies and other important subjects. 
We assure that all such proposals are consistent with relevant statutes 
and Presidential objectives. In meeting these responsibilities, OMB is 
prepared to work within the constraints of a tight budgetary 
environment.
    I look forward to working with the Congress to develop a final 
budget that is consistent with our goals of spending discipline and 
focusing on priorities.

    Senator Bond. Thank you very much, Mr. Director. We look 
forward to working within that constrained budget for OMB, but 
I would like to go back to some of the questions I raised in my 
opening statement.
    Please give me your rationale for eliminating CDBG. You 
just went through a drill with the interested parties to figure 
out how to make CDBG work better. It has had tremendous impact 
in many communities, a favorable impact. The joint HUD/OMB 
Grantee Outcome Measurement Working Group came up with these. 
We have got communities with existing projects relying on CDBG 
funding, especially with section 108 loan guarantees. Why did 
you decide to cut off this program?

                   COMMUNITY DEVELOPMENT BLOCK GRANT

    Mr. Bolten. Mr. Chairman, the judgment about the 
consolidation of these programs, not their total elimination, 
but the consolidation of these programs into one single place 
had a lot to do with how we best target our resources. The 
administration's judgment about how to rationalize the many 
economic development programs that exist today in government 
was focused on trying to make sure that we make the best use of 
the limited resources we have available. We are, indeed, 
proposing reducing those resources overall, but also targeting 
those resources on the areas most in need.
    Right now, through the CDBG program and the CSBG program, 
we have a lot of money going out to the States and localities 
largely on a formula basis with the Federal Government not 
really able to tell what it is getting for its money. It has 
become almost an entitlement, if you will, on the State revenue 
sharing side of the ledger.
    What we are trying to do with this proposal is make sure 
that we are applying the money that we do have most effectively 
to meet economic development goals. Right now a lot of CDBG 
money and CDBG money goes toward worthy goals, many of them 
duplicated in other Federal programs. What we would like to see 
this money do is not simply support a variety of local safety 
nets that are provided for those most in need in our country, 
but ensure that what we are doing with the money is promoting 
economic development in the community that will make the social 
safety net less necessary.
    Senator Bond. Community development, from my experience, is 
significantly different than general economic development, what 
the Commerce Department does. That is why they set up the 
Department of Housing and Urban Development. From my personal 
experience, I can tell you that there is a very vital role for 
communities to play in the community development which develops 
strong communities in relation to housing.
    Essentially you are saying you do not want a Housing and 
Urban Development Department. You do not want that function. I 
would think that you would have a proposal to continue the 
reforms that you have worked out with respect to CDBG to make 
sure that that program works, unless you honestly believe that 
community development is not a worthwhile goal. Are you saying 
that?
    Mr. Bolten. No, sir, Mr. Chairman. The administration does 
strongly believe in community development as a worthwhile goal. 
The question is what to do with our available Federal dollars. 
As Secretary Jackson testified before you, he said that he 
thought the CDBG formula approach has become less targeted than 
it ought to be on those communities with real development 
needs. The consolidation of all these programs in the Commerce 
Department, which has the best experience with creating public/
private partnerships to promote economic development, is the 
approach that the administration has chosen to try to target 
those needs.
    A lot of communities, we believe under the proposal we have 
put before you, will actually end up with more money than they 
do under the existing formulas. What we are trying to do is 
make sure that those communities most in need and those most 
likely to make good use of Federal dollars in promoting an 
environment where there are jobs, where there is housing, that 
is where we are trying to put the money, and that was the 
purpose of the proposal that the President put before you.
    Senator Bond. I just think that is flat wrong.
    Let me ask you about the practical problems. HUD staff has 
experience and expertise, local relationships. How do you 
expect the Commerce program to implement the program in 2006? 
You have left the salaries and expenses in CDBG for 
administering the program. Do you expect to take the CDBG staff 
into Commerce? How are the communities which use section 108 
loan guarantees going to be made whole? These are some real 
practical problems I see.
    Mr. Bolten. There are some important practical problems, 
Mr. Chairman. It has been our contemplation to move some of, at 
least, the core staff over to the Commerce Department. Should 
the Congress in its wisdom decide to support the President's 
proposal, I can assure you, we will work very closely with you 
and other interested members to make sure that the transition 
is smooth and not disadvantageous to any of the programs 
involved.
    Senator Bond. Thank you, Director.
    Senator Murray.

                                 AMTRAK

    Senator Murray. Mr. Bolten, for some time now, I have been 
trying to figure out who really speaks for the administration 
when it comes to your budget and policies for Amtrak. As you 
know, your budget requests zero for Amtrak, and the President's 
budget states explicitly--and I want to read it. It says, 
``With no subsidies, Amtrak would quickly enter bankruptcy 
which would likely lead to the elimination of inefficient 
operations and the reorganization of the railroad through 
bankruptcy procedures. Ultimately, a more rational passenger 
rail system would emerge.''
    Now, I have heard it on good authority that your 
administration's stated expectation to put Amtrak into 
bankruptcy was not crafted by anyone at the Department of 
Transportation but was, rather, crafted in your office. 
Secretary Mineta has been crossing the country making speeches 
and telling the press that it is not the administration's goal 
to put Amtrak into bankruptcy.
    Can you tell me this morning, is this language in the 
President's budget correct, or is Secretary Mineta correct?
    Mr. Bolten. Well, I think, Senator Murray, they are both 
correct. All of our proposals, are prepared in close 
coordination between the relevant agencies and OMB. It is not 
the objective of the administration to put Amtrak into 
bankruptcy, but having failed for several years now to achieve 
the kinds of necessary reforms in the Amtrak system, we felt 
that at this point we have no alternative but to propose a 
budget that may, indeed, have that effect in order to get the 
kind of action and reform that we need.
    I thought Secretary Mineta put it very well in a New York 
Times op-ed that he published about 2 months ago. He said, 
``there are some who have suggested that our reforms are aimed 
at killing Amtrak. Not true. If we wanted to kill Amtrak, we 
would not have to lift a finger. We cannot save intercity 
passenger rail service by burying our heads in the sand and 
simply shoveling more money into a system that cannot help but 
fail.''
    Senator Murray. Well, can you answer me, does the 
administration want to reorganize Amtrak in bankruptcy or keep 
it out of bankruptcy? Which one?
    Mr. Bolten. We would actually be happier to do it without a 
bankruptcy, but our proposals to do it in that fashion have so 
far----
    Senator Murray. So you intend to have it in bankruptcy to 
reorganize it.
    Mr. Bolten. We believe it needs to be reorganized one way 
or the other. If bankruptcy is the only option, then we believe 
that if we are to be responsible with the taxpayers' dollars, 
that is the only way to do it.
    Senator Murray. Earlier last month, Secretary Mineta had an 
interview with National Public Radio on the administration's 
plan for Amtrak, and the NPR reporter pointed out that the 
President's budget requests zero for Amtrak, and then he asked, 
what is the real figure that the administration is willing to 
spend on Amtrak? Secretary Mineta answered, probably in the 
area of about $1.5 billion to $2 billion, and then he went on 
to point out that Amtrak was woefully behind in maintaining 
tunnels and other infrastructure under its control.
    Do you concur with Secretary Mineta's remarks that the 
administration is willing to spend between $1.5 billion and $2 
billion on Amtrak next year?
    Mr. Bolten. I do not want to put a specific figure on it at 
this point, but the administration is, indeed, prepared to 
spend more money on Amtrak in the future if we get a 
rationalized system that does, as Secretary Mineta was 
suggesting in his remark, suggest on making sure that the 
infrastructure is in place for the continuing effective 
operation of those portions of Amtrak that can be commercially 
competitive. But what that requires is a complete 
reorganization and restructuring of Amtrak so that we do focus 
our resources on those portions that can, in fact, be 
commercially competitive. That is a lot less than what is 
currently out there and which has been persistently subsidized 
with taxpayer dollars without any prospect realistically at 
this point of ultimately achieving what was the original 
objective of Amtrak, which was putting this rail system on a 
commercially sound basis.
    Senator Murray. Well, earlier this year, I was very 
critical of Amtrak's board of directors. For the first time, 
that board to failed to articulate a budget request to Congress 
at the beginning of the year as it is called to do in the Rail 
Passenger Service Act. It appeared to me that since every one 
of the Amtrak board members are now Bush appointees, they did 
not want to articulate a budget that was different from the 
President's.
    Today, however, in the Russell Senate Office Building 
across the street from us, the Amtrak board is revealing its 
own reform plan for the railroad to the Senate Commerce 
Committee. The Amtrak board chairman is testifying that the 
board is requesting the Appropriations Committee provide $1.82 
billion for the railroad for next year. That is more than a 50 
percent increase over the current level of funding. The board 
will argue that reforming Amtrak costs money and that the 
railroad simply cannot survive on its current level of 
spending.
    In fact, the DOT Inspector General is going to testify this 
morning as well that simply maintaining the current Amtrak 
system will require an increase of between $200 million and 
$300 million above the current funding level.
    Mr. Bolten, now that the board of directors, made up 
entirely of the President's appointees, has articulated a 
funding request to Congress, is OMB prepared to submit to us a 
funding request to Congress for Amtrak?
    Mr. Bolten. Senator Murray, we have submitted the 
President's funding request for Amtrak to the committee.
    Senator Murray. For zero.
    Mr. Bolten. We have included about $300 million for the 
maintenance of some intercity rail in that category.
    While I have not had a chance to review what the board is 
presenting, I am told that they do have some important steps 
forward in reform. We obviously do not agree with them on the 
amount of money they want to put in, but there are enormous 
anomalies in this system that need, I think at this point, 
urgently to be corrected----
    Senator Murray. So you will not endorse the $1.2 billion 
that they are asking for?
    Mr. Bolten. No, I will not, Senator.
    Senator Murray. Well, our committee is going to mark up the 
appropriations bill likely in July. Can we expect you to submit 
a budget request for Amtrak by the July 4th recess?
    Mr. Bolten. Senator, you have our request before you.
    Senator Murray. Which is zero.
    Mr. Bolten. For those portions of Amtrak not related to 
intercity rail, yes.
    Senator Murray. Well, that is going to make it very 
difficult, Mr. Chairman.
    Senator Bond. Thank you, Senator Murray. That is the 
question I was prepared to ask. When are we going to see a 
responsible proposal for reform from the administration? This 
proposal to push Amtrak into bankruptcy could cause tremendous 
disruption. They have mortgaged Penn Station. This is a 
disaster. I would be willing to work with you on a responsible 
reform program, but to zero it out, the costs are going to be 
significant. The Acela trains are out of operation now. That is 
20 percent of the revenue. We have got a disaster on our hands, 
and throwing $364 million at intercity service, when you have 
the tremendous costs that the bankruptcy of Amtrak is going to 
cause, without any responsible plan for reform, just is not 
credible.
    I hope that with the Commerce Committee and the 
administration's recommendations, we will get some kind of 
realistic proposal prior to our marking up in July because I do 
not know what we can do with the request that you presented. It 
is designed to fail. So anyhow, you made your point, but I tell 
you that this is a disaster that is going to focus right on OMB 
and the person who controls it.
    Let me move to other block grant issues. The Capacity 
Building LISC/Enterprise program and CDFI are very important. 
The Bank Enterprise Act gets banks into underserved areas where 
there are no traditional financial institutions. LISC provides 
significant funds to provide nationwide leadership for 
developing and training existing nonprofits. This gives them an 
opportunity to compete for block grant funds.
    Why are you backing away from these programs and why do you 
think it is time to cut off funding for these elements that are 
essential in underserved areas?
    Mr. Bolten. Mr. Chairman, I am not in a good position to 
speak to all of the individual details of those, but I know 
that the judgment of those who put this program together was 
that we could best serve all of those needs through one 
consolidated program. I believe a lot of those needs and 
desires can still be met through the consolidated program we 
have proposed at the Commerce Department. I would like to give 
you more information, if I may, for the record.
    [The information follows:]

                  Strengthening America's Communities

    The President's Budget supports the Federal Government's role in 
economic and community development. The current Federal approach is not 
optimally designed to achieve results for our communities. During 2004, 
the administration reviewed the effectiveness and structure of Federal 
economic and community development efforts and found several weaknesses 
in the current design of these programs. The Strengthening America's 
Communities Initiative (SACI) proposes to consolidate 18 programs into 
a unified grant program. The new program, within the Department of 
Commerce, will clarify the purpose of Federal development assistance, 
simplify the grant process, target funds to those communities most in 
need of assistance, and hold grantees accountable for results in 
exchange for flexible use of the funds.
    While some individual programs or projects within our communities 
have been successful, the delivery of such resources is often 
duplicative and overly complex. The administration believes there is a 
better way. If one were starting from scratch, no one would design a 
Federal assistance system that has 18 grant programs spread across five 
cabinet agencies. The administration believes local flexibility is more 
effective than Federal control. Economic and community development 
activities such as those provided by the LISC/Enterprise and CDFI 
programs, which you mentioned, will remain eligible activities under 
SACI. In exchange for this flexibility, SACI will include 
accountability measures that require communities to demonstrate 
progress toward locally-selected goals for development. The 
administration also believes that eligibility and funding criteria 
should target communities that are most in need of assistance.
    We look forward to continuing to work with the Congress to 
determine ways to improve the Federal approach to economic and 
community development to ensure that taxpayer resources are spent not 
on wealthy communities, but on the distressed. In the end, these 
investments should generate measurable results for low-income persons 
and economically distressed areas.

    Senator Bond. Well, I do not see how that is going to work.
    This is a good one: where are you going to get the $2.5 
billion from the housing certificate fund, Section 8? I assume 
that you have some rationale. Where are these rescissions going 
to come from? Where is that money?
    Mr. Bolten. Mr. Chairman, the figure we proposed for 
rescissions is, I believe, consistent with the historical range 
of rescissions that have been available each year.
    Senator Bond. That is before we reformed the program. Mr. 
Director, we reformed the program because there were these 
problems. We reformed it so that we would not have these huge 
rescissions. And now you are assuming that the program operates 
as it has in the past, but we worked with HUD and reformed the 
program. And I do not know where you are going to find them. 
Historically they were there. Now they are not there.
    Mr. Bolten. Well, we believe, Senator, that they are still 
there, that there still will be substantial unobligated 
balances. Whether the exact figure ends up being $2.5 billion 
or not may be open to discussion, but we believe that even with 
the reforms in place, there will be substantial balances 
available----
    Senator Bond. Well, I will be most anxious, and I am sure 
by July 1 you and HUD will be able to tell us where that money 
is.
    Mr. Bolten. I expect we will know quite a bit more by July.
    Senator Bond. If you would give us the methodology for the 
record. I would like to know how you are coming up with it 
because I do not believe it is there.
    [The information follows:]
                             HUD Rescission
    Each year, since 1998, large rescissions have been taken from this 
account--an average of $2 billion per year. These funds represent 
recoveries of amounts previously appropriated and obligated that are in 
excess of current needs.

                        [In millions of dollars]
------------------------------------------------------------------------
                                             BA (Pre-
               Fiscal Year                  Rescission)     Rescission
------------------------------------------------------------------------
Fiscal year 2001........................          13,941         (1,947)
Fiscal year 2002........................          15,641         (1,589)
Fiscal year 2003........................          17,112         (1,600)
Fiscal year 2004........................          19,257         (2,844)
Fiscal year 2005........................          20,064         (1,557)
Fiscal year 2006 proposed...............          20,917         (2,500)
------------------------------------------------------------------------

    As is the case each year, HUD may have a general idea ahead of 
time, but they will not determine which funds from which accounts will 
be used to satisfy the rescission until June or July of 2006.
    While the estimate of excess funds available for rescission may 
change, there is every reason to believe based on past experience that 
sufficient funds will be available for rescission.
    In addition, the final appropriations language has been 
sufficiently broad, and the President's Budget requests similar 
language again for fiscal year 2006, to enable the Department to look 
to other sources of funds to rescind within the Department should there 
be insufficient funds within this account. In 2003, for example, 
Congress enacted a rescission of $1.6 billion which was satisfied with 
$1.17 billion in unobligated balances in the Section 8 account and $426 
million in unobligated balances from other accounts.

                              AIP PROGRAM

    Senator Bond. Let me ask you, before I turn it over, about 
the AIP program. This cuts the entitlement for primary airports 
to be cut in half. The Alaska airport supplemental is reduced 
by 50 percent. Why did you decide to cut this program?
    Mr. Bolten. Mr. Chairman, let me give you a response on 
that for the record.
    [The information follows:]

                        AK Airport (AIP Program)

    The 2006 Budget provides $3.0 billion for the Airport Improvement 
Program (AIP). These resources are sufficient to fund construction of 
all planned new runways and tarmacs, and remain high compared to 
historical levels (as recently as fiscal year 2000, the AIP program was 
funded at $1.9 billion). The Budget also includes language that should 
alleviate your concerns about the entitlement for primary airports and 
the Alaska airport supplemental. Under the approach included in the 
Budget, the basic structure of the entitlement formulas are preserved 
with airports experiencing very modest reductions (less than 10 
percent) in entitlement amounts. The Alaska supplemental would fare 
even better, with no loss of funding.

    Senator Bond. All right.
    I see that Senator Bennett has joined us, but I will go on 
to Senator Murray for the next question, and then turn to 
Senator Bennett.
    Senator Bennett. Thank you.
    Senator Murray. Thank you, Mr. Chairman. Let me just echo 
the chairman's remarks. I look forward to seeing the list from 
you and Secretary Jackson on where those rescissions are going 
to be before our markup. I simply do not see how we can do that 
without your request in.
    But I want to go back to one thing on Amtrak before I move 
on. The $360 million that you were talking about in the budget 
is by law just for mass transit systems--I know you understand 
that--operating over Amtrak property. It is not for Amtrak 
trains. So the issue we are concerned about is what the board 
is testifying before Commerce today and those needs.
    Let me ask you one other question on Amtrak. It is my 
understanding that the brake problems that have been discovered 
with the Acela trains that we are hearing so much about is not 
going to be reparable very quickly. In fact, the Acela trains 
may stay parked, we hear now, for some months, and Amtrak may 
lose as much as $60 million in net revenue as a result. That 
additional $60 million loss may eat up almost every dollar of 
working cash that the railroad can generate prior to the 
beginning of next fiscal year. I wanted to find out if your 
agency was monitoring that situation and the revenue impact on 
Amtrak.
    Mr. Bolten. We are monitoring it. We do know that they have 
some working capital available carried over. I had heard even a 
slightly larger figure than $60 million was possible. I know 
they are carrying over some working capital in that range, but 
Senator, we will keep an eye on that situation.
    Senator Murray. It is my understanding Secretary Mineta is 
saying he does not want to put Amtrak into bankruptcy. So is it 
possible that you are considering a supplemental appropriation 
to deal with this dramatic loss of revenue?
    Mr. Bolten. We are not considering one at this time, but we 
are monitoring the situation.

                              HANFORD SITE

    Senator Murray. Okay. I appreciate that.
    I wanted to turn to a different topic for a minute and ask 
you, while you are here, about the budget for the cleanup of 
Hanford nuclear reservation. You may know that in the past 
month we have had over 1,200 workers at Hanford who have 
received their layoff notice, and some of those are 
attributable to seismic issues at the waste treatment plant. 
Others are attributable to the fact that funding shortfalls are 
expected in fiscal year 2006.
    This year the budget you sent over cuts funding for 
environmental management programs by $548 million nationwide. 
Hanford alone makes up $297 million, about 54 percent of that 
cut in funding. And we want to know why in my State you are 
proposing cuts that are falling so disproportionately on 
Hanford compared to other sites in the Nation?
    Mr. Bolten. Senator, let me come back to you with a more 
detailed response, but my recollection about that situation was 
that that was a judgment about how much could reasonably be 
spent in the coming year, that there has been, I believe, over 
the several recent years an acceleration in spending on the 
Hanford cleanup, and that the folks who have worked with the 
spending flow on this believe that this was a reasonable amount 
to be spending in this year and still keep us on track to 
getting the cleanup done on time.
    [The information follows:]

                                Hanford

    The budget requests funding to meet the administration's 
commitments for cleanup at nuclear sites, recognizing that 
uncertainties can limit cleanup activities. The President's request for 
fiscal year 2006 for Hanford is $1.8 billion, a 20 percent increase 
above the fiscal year 2001 enacted level. At Hanford, there are legal 
uncertainties associated with tank closures brought on by Washington 
State Initiative 297 and related lawsuits, which have introduced 
uncertainties in the areas of waste importation, permitting, and waste 
retrieval and disposal activities. Additionally, since the State of 
Washington was not included in section 3116 of the Ronald W. Reagan 
National Defense Authorization Act for fiscal year 2005, which resolved 
radioactive waste classification issues in Idaho and South Carolina, 
the administration is evaluating how to proceed.
    The 2006 budget request takes into account these legal 
uncertainties. It also reflects completed work associated with the 
waste tanks, including removing liquids from the single-shell tanks.

    Senator Murray. Well, I do not understand how the Federal 
Government is going to meet its legal requirements under the 
Tri-Party Agreement with funding cuts of that size. I assume 
you are aware of the Tri-Party Agreement.
    Mr. Bolten. I am.
    Senator Murray. The DOE's contract for a waste treatment 
plant calls for Bechtel to receive $690 million each year, and 
that steady multi-year stream of $690 million per year was 
chosen to avoid a situation where there would be huge year-to-
year swings in the funding that is required to complete the 
plant. But for fiscal year 2006, the administration wants to 
provide $64 million less than the contracted amount. So the 
President's budget really appears to be guaranteeing a delay in 
the start of the waste treatment plant, and that is in 
violation of the Tri-Party Agreement.
    Can you guarantee me that the administration will request 
funding above the $690 million level in future years so we 
avoid a delay of the waste treatment plant and keep its word 
with the Tri-Party Agreement?
    Mr. Bolten. I am not in a position to guarantee you what 
specific funding levels will be in any particular year, but I 
would like to come back to you and show you and your staff the 
spending stream that the Department of Energy has proposed to 
ensure that we do get the Hanford site cleaned up within the 
scheduled----
    Senator Murray. Okay. Well, I would very much like to meet 
with you and go through that because I do not see how on earth 
we are going to meet the legal requirements of the Tri-Party 
Agreement with these funding deficits. So I would appreciate 
that.
    Senator Bond. Thank you, Senator Murray.
    Now we turn to Senator Bennett. Since we have had a couple 
of rounds, if you would like to take two rounds, we will give 
you the opportunity to explore your areas of interest with the 
Director.
    Senator Bennett. Thank you very much, Mr. Chairman.
    Mr. Director, you know, but we acknowledge, you have one of 
the toughest jobs in Washington, and it is always easy to be a 
politician when there is a surplus because you can meet 
everybody's needs and be a hero. When you are fighting a 
deficit, it is always difficult, and to use the label of an old 
movie, you become Dr. No. That is a tough position to be in. I 
sympathize with you.
    You have been around town long enough to know that you are 
being set up when I make those kinds of kind comments in 
advance of where I am going.
    Mr. Bolten. Senator, you missed the earlier part of the 
hearing in which Senators Bond and Murray where kind enough to 
skip those comments.
    They moved directly to what follows.

            STRENGTHENING AMERICA'S COMMUNITIES INITIATIVES

    Senator Bennett. They moved directly to it. All right.
    I am chairman of the Agriculture Appropriations 
Subcommittee. The President's budget requests no funds at all 
for the Rural Business Opportunity grant program, Rural 
Business Enterprise grant program, Rural Empowerment Zones, and 
Enterprise Community grant program, all of which are 
administered by the Rural Development at USDA.
    The budget does propose a newer and smaller community 
development grant program to combine these programs with others 
to be administered by the Department of Commerce. I wonder what 
expertise the Department of Commerce has with respect to rural 
community development that causes you to take this out of USDA 
and put it in Commerce because the pressure, obviously, is on 
me to find those funds, to take care of it in agriculture. Have 
you proposed an increase in Commerce to make up for the fact 
that this money is all taken away from USDA, or am I getting 
into the weeds and something you are not personally familiar 
with?
    Mr. Bolten. No, sir. I am not intimately familiar with the 
individual programs, but overall we have proposed a 
consolidation of many programs, about 18 programs, spread 
across at different agencies, including the Agriculture 
Department, but primarily from HUD, into the Commerce 
Department. One of the reasons why we have chosen to implement 
a consolidation in the Commerce Department is that that is 
where there is, we believe, the best expertise on economic 
development overall, whether it be rural or urban, and also 
that it is an agency that is accustomed to promoting public/
private partnerships, which we believe are part of the answer 
toward achieving economic development in areas that have lagged 
so far.
    Senator Bennett. All right. I suppose you are not the 
person for me to ask this, but before I can be comfortable in 
straight-arming everybody who has typically come to the 
Agriculture Subcommittee for this kind of support, I think I 
need to have some reassurance from the Department of Commerce 
that they do know what they are doing and they are not just 
going to cut this off willy-nilly and say, okay, you are out 
because we have consolidated and then we are going to take what 
money we have and it is less money overall and give it to the 
programs we are familiar with, and because rural America is the 
stepchild, we are just going to say you are out and injured.
    You are not the one to direct the Commerce Department to 
come talk to me, but I think I will use your answer as a reason 
to say to them, you ought to be talking to our subcommittee and 
telling us what you are going to be doing in these areas 
because cutting them out entirely from the President's budget, 
without the kind of explanation you have given us here, has 
caused great angst, as I am sure you can understand.
    Mr. Bolten. Senator, I think it is a legitimate question 
and I will take the opportunity to ask Secretary Gutierrez to 
be sure that you are fully briefed on how they would intend to 
deal with the situation, in which we acknowledge we are 
consolidating programs with less money available, but what we 
will be trying to do is target Federal monies where it is, (A), 
likely to be most effective and, (B), to areas of the most 
need.

                              CDBG FUNDING

    Senator Bennett. That leads us to what I assume may have 
been raised before I got here. This is CDBG money with respect 
to HUD. Can you tell us in what way CDBG has been considered 
ineffective? I understand that word has been used to describe 
it. If I am covering ground that has already been covered----
    Senator Bond. We have asked the question and have not 
gotten any answers.
    Senator Bennett. There is no such thing as repetition in 
the Senate.
    So I would like to hear your rationale.
    Mr. Bolten. Senator, the question has not been asked in 
quite that way.
    I believe the formal rating of the CDBG program from our 
assessment system was ``results not demonstrated'' because what 
goes on with a lot of the CDBG money is that it goes out by 
formula to localities, and the Federal Government then has no 
particular way to track what happens to it and, most important, 
what sort of results are being achieved with the Federal money. 
It has become essentially a Federal revenue sharing program.
    What we are trying to do with the President's proposal of 
consolidating these various programs, including CDBG, into the 
Commerce Department is ensure that we focus our resources where 
we believe they can be most effective, where the Federal 
Government can track results, and insist on accountability for 
the use of the money rather than just sprinkling around funds 
to what, in many cases I am sure, are laudable goals but not 
necessarily the top Federal priority nor in a way that permits 
the Federal Government to tell the taxpayers how the money is 
being spent.
    Senator Bennett. Again, that sounds very logical, and once 
again, there is great angst on the part of people involved in 
the program--they are not only laudable, but in many cases 
absolutely essential, particularly in housing--that somehow the 
Commerce Department is not the place where they feel 
comfortable going with their concerns.
    I am perfectly willing to support something that says just 
because inertia has kept it one place, does not mean it needs 
to stay here. I know how damaging inertia can be. I tell people 
the problem with inertia is not inertia at rest, which is the 
accusation that is usually made about civil servants. It is 
inertia at motion, that a body in motion tends to stay in 
motion and in the same direction, long after the direction 
ceased to make sense. So I am very sympathetic with the general 
position you have just outlined.
    But that having been said, there are a lot of folks who are 
very, very concerned that the Commerce Department has no 
sympathy or no understanding or no expertise with which to deal 
with housing problems.
    I am as anxious to make sure that we get our financial 
house in order in a macro sense as anybody, but I see the 
specifics of the people who are living on the edge and 
literally from year to year in terms of their Section 8 funds, 
their affordable housing. It is frustrating that we cannot give 
them any sense of permanence. And these are not people who are 
living well by your standards or mine. They are living very 
much on the edge, and every year the Congress has to rescue the 
housing funds that tell them you can stay in your home for 1 
more year before this program is going to be challenged again 
and show up in the budget thing. And they show up in my office 
in Salt Lake with ``am I going to be able to keep my house? And 
if I cannot, I have no idea where I am going.'' These are 
people in their 70's and 80's who are hanging on, as I say, 
from month to month. Every year I say, well, I will talk to 
Chairman Bond, and every year Chairman Bond comes through. So I 
am a hero in Utah because of the work he does here.
    What reassurance can we give these people in this kind of 
situation that Commerce has the expertise, has the 
understanding, has the concern that these programs represent?
    Mr. Bolten. Well, first of all, I think the kinds of 
concerns you identified should be addressed through the housing 
programs that are specifically directed toward that. But beyond 
that----
    Senator Bennett. Yes, but they need the money and the money 
gets chopped off every year or cut back every year. And we have 
to restore it in this committee.
    Mr. Bolten. But I believe that is an issue separate from 
the CDBG issue where the money is going out to community 
development organizations. I will ask Secretary Gutierrez to 
address it with you when he speaks about the agriculture side, 
but I think Secretary Gutierrez can give good comfort about how 
they would handle the community development needs that are 
intended to be addressed by CDBG.
    Senator Bond. Thank you very much.
    Senator Bennett. Thank you, Mr. Chairman.
    Senator Bond. Senator Stevens.

                         ESSENTIAL AIR SERVICE

    Senator Stevens. Thank you very much.
    Mr. Director, it is nice to be with you today.
    I too have some problems, but each of them requires a 
little recitation of history. The first is Essential Air 
Service. When we decided that we were going to terminate the 
old Civil Aeronautics Board, which directed that every place 
that wanted air service would get it, and it got it at a 
substantial cost to the Federal Government indirectly, we 
created this program to assure that the small areas, which 
would lose air service because they were not economical, would 
have at least a minimum amount of service.
    In my State, as you know, 78 percent of the travel between 
cities is by air because there are no roads. Congress made a 
decision a long time ago not to build roads, particularly after 
about one-third of our State was withdrawn for wild and scenic 
rivers and parks and wildlife refuges, et cetera. It would be 
very difficult to get through them, and the roads would have to 
go around those things.
    This has been a very meaningful program in my State and, as 
a matter of fact, is the only lifeline for many people who live 
in the villages, of which we have 231 now. The difficulty is 
this. We also tied together the Postal Service delivery of mail 
to those places by creating the bypass mail system which 
requires that the postal cargo go to hubs and from those hubs, 
they fly out the mail to villages. We tie the two together so 
we have passenger seats and cargo going at least three times a 
week to these villages. That is their total lifeline.
    Some of them were supported for many years by riverboats or 
boats that went up and down the coast, which as you know, is 
half the coastline of the United States. There was one boat 
that went up one time and came back called the North Star.
    Now, it looks like it is an expensive program, but if you 
do away with it, the costs are going to be extremely higher. We 
still have the responsibility to deal with those places, and 
most of the travel through that area is somehow or other 
federally supported anyway through BIA, the Indian Health 
Service, and others. Unless you want to buy some airplanes and 
fly BIA around or fly the Indian Health Service around, the 
cheapest way to do it is through combining both the mail and 
cargo and passenger service. It cannot work unless you have the 
Essential Air Service contribution.
    Now, you have a proposal that requires matching funds and 
the assistance depends upon the distance to the nearest large 
or medium airport. Well, we are, as you know, one-fifth the 
size of the United States. Some of those villages are 500 miles 
from the nearest real airport and a couple of them even further 
than that.
    I would urge you to look at this. I understand your concept 
of having in some areas, where they have a capability of 
contributing local matching funds, that it might be possible. 
But in areas such as ours where the principal beneficiaries of 
these are the native villages, the application of your new 
principle will just increase Federal costs. You will be 
chartering airplanes if you do not buy them. I would urge you 
to take a look at that.
    Only about 35 of the communities actually benefit from the 
program but they are communities that are tied into the bypass 
mail system too. There is a joint subsidy to maintaining this 
traffic. And I will not ask for an answer to that because I 
just think you ought to take a look at it and study it.
    Mr. Bolten. We will take a look at that.

                                  EDA

    Senator Stevens. Now, next is the EDA. As the State that is 
coming into the 21st century after everybody else, we just came 
on board with EDA in recent years. It really does not even have 
an office in the State. It came to us from either San Francisco 
or Seattle, and those people came up at fishing time and they 
looked around and put a few bucks around the place, but they 
really did not plan how to bring these communities into the 
21st century.
    Some time ago, I negotiated with the Department and we 
agreed to an obligation that they would put $15 million in 
funding for development projects for Alaska over a period of 
years. This is the last year of that. But we got that deal 
because we showed them that we had been totally left out. 
Either we are going to have some economic development that 
helps these people come into the private sector and be 
contributors, or they are going to continue to be one of the 
faucets we have to turn on and off in terms of Federal 
assistance forever.
    Again, I urge you to take a look at the problem of 
elimination of the EDA in terms of our area. It is just unfair. 
Hawaii and Alaska became a State in 1959. A lot of the Federal 
officials did not even discover us until 1969, and that is when 
a brash, young lawyer came to the Senate.
    Senator Bond. They have been paying attention ever since.
    Senator Stevens. They have been paying a little bit of 
attention, but it took them 20 years to wake up.

                RURAL COMMUNITY ADVANCED PROGRAM (RCAP)

    Thirdly, the elimination of the rural community advanced 
programs, the RCAP, within the agriculture bill. Here again, we 
have two monstrous areas that are capable of agriculture 
production. We finally have one agriculture county station in 
Alaska. We have one and they get limited assistance. But we 
have been using the rural community development grants and some 
of these others to reach out to the villages and provide them 
with basic sanitation, basic clean water, and basic concepts of 
maintaining health. The result: we have reduced the cost to the 
Indian Health Service. We have increased the performance of 
these children in school. And now, along comes the concept that 
this is going to be done away with.
    There is one in particular, the high cost energy grant. We 
have places that are paying $5 a gallon for fuel. They are 
paying 28 cents probably in the rest of the States. We have 
been trying to construct local power plants using local fuels 
to try and see if they can get away from buying and having fuel 
transported. All that is transported in there is at government 
expense. So again, by eliminating this program, we are 
eliminating the inching that we are doing, inching away from 
total Federal dependency on their lives.
    I would like for you to sit down and talk to some of your 
people sometime.
    By the way, most people do not know it, but some of the 
outer islands of Hawaii have problems very similar to ours. 
That is why the four of us are with each other all the time 
because we have similar problems. Actually Hawaii is larger 
than Alaska, if you fill in the water in between the islands. 
You know what I mean?
    They have problems out there in the periphery that are as 
bad as ours along the coasts and in the interior and up along 
the Arctic coast.
    Those two offshore States need this program. We need a way 
to try to find a way to discuss it with your people because, 
not meaning to be offensive, but your recommendations are one-
size-fits-all.
    Senator Bond. Mr. Director, I would suggest that this is an 
opportunity for you to schedule a meeting with Senator Stevens, 
Senator Murkowski, Senator Inouye, Senator Akaka. I think it 
would be a very informative session for you. I wish I could be 
a fly on the wall to watch, but I would urge you to have that.
    Senator Kohl.
    Senator Stevens. Just so you know, Josh is a close friend, 
as a matter of fact, and I hesitate to make these suggestions 
to him in public. I probably could have made them in private, 
but I want them on the record anyway, Josh.
    Senator Bond. As they say in the business, harsh letter to 
follow.
    Mr. Bolten. I always look forward to an opportunity to 
engage with Chairman Stevens.
    Senator Bond. Director Bolten is a good friend. You ought 
to see how we treat our enemies.
    Senator Kohl.

               MANUFACTURING EXTENSION PARTNERSHIP (MEP)

    Senator Kohl. Thank you, Mr. Chairman. Mr. Bolten, over the 
past several years, the administration has attempted to slash 
funding for the Manufacturing Extension Partnership program, 
which is a program that helps small and mid-sized American 
manufacturers to modernize in order to compete in the global 
marketplace. MEP has a proven track record I think that you are 
aware of. They have consistently demonstrated their ability to 
create jobs and improve profits of these companies. I have 
visited many of them around my own State, but there are 
indications that are very clear that they replicate this kind 
of success all over the country. I do not understand why that 
program, which has been so successful, is really a program 
that, for the most part, the administration has indicated they 
want to terminate.
    The funding for the program has been just at over $100 
million over the last several years. It is also funded at the 
State and local levels. It is also paid for, in small part, by 
those companies that use it. So it is a good program and it is 
not a really expensive Federal program, but it does have good 
dividend returns.
    Maybe you could make a comment on it. We are still trying, 
as you know, in this budget this year to restore the funding. 
It was cut down to something like $39 million or $38 million, 
which spread across 50 States really is not sufficient. We want 
to get that restored to where it was, $112 million. Can we hope 
that you will support this effort, which is relatively modest, 
but I think it is significant in terms of protecting 
manufacturing jobs in this country and growing that part of our 
economy?
    Mr. Bolten. Senator, the MEP program is one that I have had 
a number of very strong anecdotal reports about, about success 
stories there. In many respects, it is the kind of program in 
an unconstrained budget environment you might like to continue. 
But the program was originally intended, as it was originally 
set up, ultimately to be self-sustaining through fees paid by 
those that take advantage of its services. The administration 
would still like to move it to that basis.
    It was funded this past year, I believe, at just over $100 
million. The year before that, the Congress funded at about $40 
million, which is the request that the administration is making 
this year. We are not proposing total termination this year. We 
have proposed a substantially reduced funding level in part 
because of the many strains that you have seen exhibited even 
here at just this one hearing, the many strains in the budget, 
where we need to set priorities and allocate our Federal 
dollars, our taxpayer dollars, where we think they can make the 
most good and where they are the most needed.
    The MEP program has good anecdotes, produces some good 
results, but I think it is also a program that can meet the 
needs of its constituency hopefully ultimately on a self-
sustaining basis, which is why we have proposed that for this 
year, it be cut back to the level that it was funded at year-
before-last.
    Senator Kohl. Well, ultimately it is a judgment and you all 
submit a budget that represents your best judgments, and I do 
respect that. As you know, you can be right and you can be 
wrong. I have given a lot of attention to the program, and I am 
utterly convinced as a businessman that it really returns 
dividends for the money that is spent, and that the money that 
we are spending at the Federal level is relatively modest. To 
signal that the government is going to get out of that business 
and either it will be self-sustaining or funded at the State 
and local level or it will go out, which is what that judgment 
means, I do not think is the correct decision to be making. I 
wish I could convince you that the program really deserves to 
be supported at its modest levels and not jettisoned. I will 
just continue to work on that and I hope that we can have some 
success.
    The anecdotal evidence that you point to is really more 
than anecdotal. There is solid evidence that the program is 
effective and works. Solid evidence. It is not just anecdotal. 
So in that light and considering the fact that we are working 
so hard to maintain our job base in that part of our economy, I 
guess I do not fully understand why you all decide that you 
want to basically get to a termination of Federal support for 
that program, except that you are saying--and I have heard this 
from others who have preceded you in defending your decision--
that is just our decision. You say we have heard evidence that 
it works. We have heard evidence that it is a good program. 
Nevertheless, we want to get to the point where we defund it. 
And it is the manufacturing sector. I do not quite understand.
    Mr. Bolten. Well, Senator, it is really a question of 
priorities, that we believe that this program can be self-
sustaining, that it does get resources from States and 
localities, that our Federal dollars are better spent on other 
priorities.
    One of the priorities of this administration is, indeed, to 
make sure that our manufacturing sector, especially those 
involved in exports, remains strong. Secretary Gutierrez I know 
is devoting a lot of time and energy to that, and he has a new 
Assistant Secretary who focuses on those issues.
    One of the important initiatives that we are undertaking 
right now at OMB is we have taken in a review of regulations 
that are regarded by the manufacturing community as impeding 
their competitiveness, especially internationally, and we are 
reviewing those for ways in which we can, without undermining 
other health and safety objectives and environmental 
objectives, free up our manufacturing community to be more 
effective and competitive. We hope to get your support in that 
undertaking as well.
    Senator Kohl. I thank you, and Mr. Chairman, I thank you.

                              PART PROGRAM

    Senator Bond. Thank you very much, Senator Kohl.
    Mr. Bolten, I commend you for your emphasis on the PART 
program. I think it is very important that you determine what 
programs are effective. I note that the National Science 
Foundation, which I said earlier is extremely important in our 
ability to lead the world in science and technology, has the 
future of the U.S. job market and economy in its 
responsibility. We are seeing India, China, and Japan quickly 
outpacing the United States with developing scientists and 
engineers and the skills that go along with them. And the 
Program Assessment Rating Tool, the PART, has found NSF to have 
one of the strongest report cards. Parenthetically I would note 
that OMB has one of the weakest report cards.
    Could you explain to me why you have chosen, when you are 
supposedly establishing priorities, not to put any priority on 
this institution which holds the future growth and development 
of our country in its grasp?
    Mr. Bolten. Mr. Chairman, let me begin by associating 
myself with the remarks that you made in your opening statement 
about the importance of the physical sciences to our economy, 
to the future competitiveness of our economy. What we did in 
this budget was we did increase NSF funding by 2.4 percent 
overall.
    Senator Bond. Whoopee.
    Mr. Bolten. I note, Mr. Chairman, that you said whoopee to 
that.
    Senator Bond. We will strike that from the record.
    Mr. Bolten. I would like to request that it remain in the 
record, because in the current budget context, whoopee for 2.4 
percent is actually appropriate. We are in a budget context 
where we are cutting the non-security elements by a real 1 
percent, a nominal 1 percent, a real cut larger than that, when 
you factor in inflation. So when we are growing an agency by a 
substantial part of the budget by 2.4 percent, I think in this 
context that is an expression of support.
    In an unconstrained budgetary environment, would we like to 
see more money going into those programs that PART so well as 
NSF does? I personally would. I appreciate your comments about 
the PART system and how we are trying to use it to inform 
budgetary decisions so that we focus our dollars on programs 
that are working. NSF appears to be working. And I would like 
to see us in a situation where we are able to give them the 
resources they need going forward.

                           FEDERAL IT PROGRAM

    Senator Bond. I am from the Show Me State, Mr. Director, 
and I would like to see that in the budget recommendations and 
not just in our discussions.
    I mentioned the Federal IT programs. I am sorry we are 
missing the OMB hearing in the Committee on Government Reform 
on the House side on whether OMB is properly managing the $65 
billion in IT spending. The committee says OMB did not develop 
a single aggregate list identifying projects and the weakness. 
OMB has not developed a structured, consistent process for 
deciding how to follow up on corrective actions that it has 
asked agencies to take. And the GAO is going to be giving a 
report.
    Can you give us a brief idea of what you expect to do in 
this IT area? It is a significant challenge. What do you intend 
to do on it?
    Mr. Bolten. Thank you, Mr. Chairman. I have not had a 
chance to review, I think it is, a GAO report that is being 
discussed over on the House side. I will review it and we will 
take its recommendations seriously and factor them into our 
process going forward.
    I will say that this administration has put a great deal of 
focus on the management of IT, which is a huge part of our 
budget, as you mentioned in your remarks, and one that has been 
seriously challenged for many years. It is not a problem that 
can be fixed overnight.
    But the President felt that it was an important enough part 
of good management of the government that he made it one of the 
five areas that we rate in our President's Management Agenda. 
We use those scorecards now, the ones that you referenced in 
your previous question. We use those scorecards to keep track 
of how agencies are doing and we try very hard to instill in 
the agencies both an appreciation of the importance of good 
management of IT, which to most managers seems like a very 
technical thing that somebody else ought to take care of, No. 
1, and No. 2, that they need to do that with a focus on results 
so that we do not have fiascoes like we have had at several 
agencies.
    Senator Bond. We will look forward to working with you on 
that.
    I was going to ask you a question on highway funding. I 
think $284 billion is not adequate for our highway needs, but I 
can assure you that we are looking forward to giving you a 
highway bill that does not increase the deficit but maybe does 
a little better job in meeting our basic infrastructure needs.
    I would ask my last question. We are drastically cutting 
many programs that are important to the quality of life of 
Americans to our economic future on the discretionary side. We 
are seeing mandatory spending going up $107 billion in 2006. I 
would ask you the rhetorical question, are you going to do 
something about limiting the explosive costs of mandatory 
spending, and when can we see some real results?
    Mr. Bolten. Absolutely, Mr. Chairman, and the mandatory 
problem is one that dwarfs the challenges we face in our 
discretionary budget. It has three major components in 
entitlement spending: Social Security, Medicare, and Medicaid. 
On the last, the President has put forward proposals included 
in his budget and now, I know, being debated in the context of 
the budget resolution, to begin to get control of some of the 
explosive cost growth in the Medicaid program. We have put 
forward, I think, some very responsible proposals that just 
begin to ensure that we are spending our dollars there 
responsibly. There has been a great outcry about the supposed 
cuts the administration has proposed in Medicaid. What is 
actually going on is that instead of the current trajectory on 
auto pilot of Medicaid spending increasing out over the next 10 
years at 7.4 percent growth, the administration is proposing 
that that growth be reduced to 7.2 percent. Obviously, there is 
a lot more that needs to be done.
    Medicare, which is the biggest part of the problem, is an 
issue with a wide variety of elements that contribute to the 
problem. The biggest one is overall health care costs. I know 
the time is expired, so I will not go into any detail on 
initiatives to control health care costs. But that is crucial. 
At some point I believe we will also need to take another look 
at the Medicare system, which you have just legislated on, to 
ensure that we are getting the taxpayers value.
    The third element is Social Security. The President, as you 
know, has an initiative----
    Senator Bond. I know the President has made a 
recommendation. I look forward to supporting plans there, and I 
hope you will do something. When we thought we were getting a 
$400 billion Medicare increase, that was wrong by almost 
double. That is really disappointing.
    That is my final question. I will turn to Senator Murray 
for such questions as she may wish to ask.
    Senator Murray. I have a couple other areas, Mr. Chairman, 
so I appreciate that. One of them is regarding air passengers.
    In the Homeland Security budget, the administration 
proposed to increase the security fee paid by passengers by 120 
percent next year from $2.50 to $5.50 per segment. As you 
probably are well aware, the airlines are complaining bitterly, 
and I think correctly, that this is a $1.5 billion tax increase 
which further undermines their ability to recover economically.
    In Secretary Mineta's formal testimony before us, he 
justified a half billion dollar cut in airport investments by 
arguing that several airports are not yet charging the full 
allowable passenger facility charge that they are allowed under 
law. Secretary Mineta's testimony implied that the proper way 
to invest in airports is through another $350 million in fees 
instead of from appropriations from the Airport and Airway 
Trust Fund.
    So in addition to all these other problems, as you well 
know, the price of oil between $50 and $60 a barrel is not 
helping either.
    I am curious whether the administration has any sympathy 
for the airlines, first of all, and the challenges that they 
are facing with this, and really why, if you understood that 
you were giving us a double whammy with two proposals, one to 
increase the airport facility fees by $350 million and also 
requiring $1.5 billion in higher fees at the same time.
    Mr. Bolten. Senator, we recognize that the airline industry 
is challenged, as is the rail industry, as are our highways, as 
are virtually all modes of transportation especially by high 
oil prices. But we also know that we have a responsibility to 
be prudent with the taxpayers' dollar.
    Now, the increase in the fees that you referenced, I think 
it is, from about $3 per segment up to about $5 a segment is 
what we are talking about, an authorized increase in the fee 
that goes on an airline ticket. What we are trying to do is 
bring us closer to making it possible for those fees to fully 
fund the cost of the airport screening that has now been 
implemented since 9/11.
    The Federal Government has to pay those costs, or the 
taxpayer has to pay those costs. The question is who is going 
to bear it. We have two choices. We can try to impose that cost 
on those who are using the airline services or we can impose 
them on the general taxpayer. I believe that given that choice, 
the former answer is almost always the right answer, that you 
want those who are taking advantage of a service to bear the 
cost.
    Senator Murray. Well, it is except if you will recall, when 
the airlines went down after September 11, the economic impact 
was devastating. We certainly felt it in my end of the world. 
So I think we have to be very careful what kind of economic 
impact we put on the airlines.
    Mr. Bolten. That is understood.
    Senator Murray. I wanted to bring up another topic with you 
that I am deeply concerned about. I have served on this 
Appropriations Committee for 13 years, and throughout that time 
I have had the pleasure of working on a bipartisan basis with 
several different chairmen, including Senator Shelby and 
Senator Bond. I believe that despite my policy differences with 
the administration, I have always been very careful to leave my 
door open to any member of the administration to talk about 
policies of importance to my State or to the country. I have 
worked closely with the Bush administration on trade and 
commerce issues and port security, and those are all important 
to me.
    I say that because I have been really disappointed to learn 
over the past few weeks that the Executive Office of the 
President has been promoting a funding proposal that they want 
included in the pending supplemental that is before us right 
now. But as far as I can tell, this proposal has only been 
floated to majority members of the subcommittee and the 
majority staff. I wanted to ask you if you believe that the 
Executive Office of the President has the responsibility to 
come to Congress and justify its budget like every other agency 
in the Government.
    Mr. Bolten. I believe we do, yes.

                   EXOP/OFFICE OF POLICY DEVELOPMENT

    Senator Murray. Well, I do too and I believe that partisan 
differences should never enter into the considerations of this 
subcommittee when it comes to the financial needs of the 
Executive Office.
    So I want to know if you can tell me why the administration 
is floating a proposal to eliminate the Office of Policy 
Development in the White House and merge it with the larger 
White House salaries and expenses account, and really more 
importantly, why has this proposal not been formally 
transmitted as a budget amendment through OMB.
    Mr. Bolten. Senator, I cannot tell you why it has exactly 
been approached this way. I know we would be happy to engage 
with you on the proposal, and I am happy to discuss it with 
you. Probably this hearing is not----
    Senator Murray. Can you just tell us why none of the 
minority staff on the Appropriations Committee has been talked 
to about this?
    Mr. Bolten. I do not know who has been contacted and who 
has not been contacted.
    Senator Murray. I can tell you that none of them have. We 
just know about it.
    Mr. Bolten. Well, as I say, we would be happy to engage 
with you on the issue. It is something with which I have a 
little bit of familiarity and I know it would be an important 
and very useful piece of flexibility for the management of the 
White House in a situation where in the last 2005 budget the 
Office of Policy Development was drastically cut. I think that 
to enable the chief of staff in the White House to properly 
manage the White House resources--I think what they are 
suggesting is simply an ability to merge some of the accounts 
to make it easier to deal with that kind of situation.
    Senator Murray. I think you may remember that during the 
Transportation/Treasury conference last year we adopted 
reprogramming guidelines for the Executive Office of the 
President which were most generous and most flexible. It is 
just disconcerting that this proposal is being floated on a 
plain white piece of paper to Republican members only. I just 
would suggest to you that you work with all of us on this 
committee and we would appreciate that consideration.
    Mr. Bolten. We would be happy to engage with you, Senator, 
and I will make sure that does happen.
    Senator Murray. I know my time is up and I know the 
chairman is ready to go.

                 BONNEVILLE POWER ADMINISTRATION (BPA)

    I would just say I do have a question on Bonneville Power 
Administration. I think it is a topic you and I have gone 
through a number of times. We are very concerned about the 
President's proposals for power marketing administrations to go 
to market-based rates. Congress has spoken on that. I think you 
know that that is not going to fly on this end of the road.
    But the other one is the proposal in the budget that would 
limit BPA's use of third party financing. I am not sure if you 
are closely familiar with it, but it is by accounting financing 
arrangements against BPA's borrowing authority limits. I wanted 
to ask you if you think BPA's investments and using third party 
financing are liabilities of the U.S. Treasury or they are 
liabilities of the Northwest ratepayers.
    Mr. Bolten. Senator, if I may, I would like to respond on 
this issue in general to you for the record, with the 
chairman's permission.
    [The information follows:]
                 Bonneville Power Administration (BPA)
    BPA currently pays its obligations using power revenues from its 
ratepayers. Therefore, its liabilities accrue immediately to its 
ratepayers. Given that BPA is a wholly-Federal entity within the 
Department of Energy, the administration is committed to ensuring that 
BPA has the resources necessary to honor its liabilities.
    The legislation the administration transmitted on June 1, 2005 to 
count BPA and TVA debt-like transactions against their debt caps is 
intended to accurately reflect these agencies' liabilities for the 
benefit of their ratepayers and other stakeholders, including 
taxpayers. Third party financing in which the non-Federal partner bears 
substantial risk would not be counted toward their debt caps, and this 
is the kind of partnering the administration has urged these agencies 
to explore. In addition, the Budget proposes to increase BPA's debt cap 
by $200 million, which exceeds the amount of third-party financing BPA 
informed us it would like to pursue over the next 5 years, so our 
proposal should not have any programmatic effect on BPA's operations.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Bond. Okay. I really appreciate that because it has 
extreme consequences, and we have entered into a number of 
agreements believing that it is Northwest ratepayers, and if 
there is a difference of opinion, we need to know that.
    Senator Murray. Thank you, Mr. Chairman. I appreciate it.
    Senator Bond. Thank you very much, Senator Murray.
    [The following questions were not asked at the hearing, but 
were submitted to the Office for response subsequent to the 
hearing:]

              Questions Submitted by Senator Patty Murray

         IMPACT OF HUD'S UNALLOCATED RESCISSION OF $2.5 BILLION

    Question. Mr. Bolten, last week, our subcommittee held a hearing 
with HUD Secretary Alphonso Jackson. Your administration has singled 
out the Department of Housing and Urban Development for the largest 
cuts of any major Federal agency. I find this to be particularly tragic 
given the agency's mission to house the poor and seek to redevelop the 
Nation's most troubled communities.
    Your budget for HUD seeks authority to rescind $2.5 billion in 
unobligated balances from any program within HUD. In response to my 
questions, Secretary Jackson could not commit to me that this 
rescission would not come at the expense of existing levels of funding 
to house the poor. He could not even guarantee that this funding cut 
would not come at the expense of programs serving the homeless. It was 
clear that this proposal to impose a $2.5 billion rescission against 
the agency was not something that was concocted at HUD.
    Mr. Bolten, since this proposal appears to have been developed and 
supported at your agency, can you guarantee me that if we adopt your 
proposal to rescind $2.5 billion from any program at HUD, that these 
funds will not work a hardship on any of the low-income communities 
that are served by HUD? Can you provide me with a guarantee that this 
rescission will not end up coming at the expense of programs serving 
the disabled, or the homeless, or people living with HIV/AIDS?
    Secretary Jackson told us that he would be trying to develop a list 
as to where this $2.5 billion would come from over the course of the 
next several weeks. Can you guarantee us that we are going to get this 
list prior to the time that this subcommittee marks up?
    Answer. While the estimate of excess funds available for rescission 
may change, there is every reason to believe, based on past experience 
that a large recovery will occur. Each year, since 1998, large amounts 
have been available for rescission from the Section 8 account--an 
average of $2 billion in rescissions per year. These funds proposed for 
rescission in the fiscal year 2006 budget represent recoveries of 
amounts in the Section 8 programs or other HUD programs previously 
appropriated and obligated that are in excess of current needs.
    The President's 2006 Budget does allow the Department to look to 
other sources of funds within the Department should there be 
insufficient funds within this account. However, this would not affect 
new funds in any program account. The funds proposed for rescission 
will not be needed to meet current obligations.
    In 2003, for example, Congress enacted a rescission of $1.6 billion 
which was satisfied with $1.174 billion in unobligated balances in the 
Section 8 account and $426 million in unobligated balances from other 
accounts including the Flexible Subsidy account ($306 million) and 
small amounts from seven other accounts, with no programmatic effects.
    As is the case each year, HUD may have a general idea ahead of 
time, but will not determine which funds from which accounts will be 
used to satisfy the rescission until June or July of 2006. While the 
estimate of excess funds available for rescission may change, based on 
past experience sufficient funds will be available within the Section 8 
programs.

                  PART--PROGRAM ASSESSMENT RATING TOOL

    Question. Mr. Bolten, I understand that your Program Assessment 
Rating Tool--or ``PART'' is the administration's tool to rate the 
effectiveness of Federal programs and help inform your budget 
decisions. As I review the President's Budget, it appears that several 
programs are slated for funding cuts despite receiving a positive PART 
rating. For example, the airport grant program and the Fair Housing 
Assistance Program are rated ``moderately effective'', yet their 
budgets are cut. The Education Department's college prep program--
``GEAR-UP''--is rated as ``adequate.'' Yet your budget is proposing 
that all funding for that program be eliminated.
    It appears that, for all the effort and expense that the agencies 
and OMB are going through to execute the PART process, it is not 
informing your budget decisions. Why not?
    Why would an agency have an incentive to improve a program and 
achieve a better PART score if OMB is just going to turn around and cut 
or eliminate the program anyway?
    Answer. As the administration prepared its list of proposed major 
reforms and budget savings, we were guided by three major criteria:
  --Does the program meet the Nation's priorities? The budget increases 
        funding to strengthen our Armed Forces, improve our homeland 
        defenses, promote economic opportunity, and foster compassion.
  --Does the program meet the President's principles for appropriate 
        use of taxpayer resources? If an appropriate Federal role could 
        not be identified in a program's mission, the budget generally 
        proposes to reduce or eliminate its funding.
  --Does the program produce the intended results? The Bush 
        Administration is measuring the effectiveness of the 
        government's programs--and the results are helping us make 
        budgeting decisions.
    Just as a low PART rating does not automatically result in a 
funding decrease, a high PART rating does not automatically result in a 
funding increase. A PART assessment is an important factor, but not the 
only factor, in funding decisions. For example, while the GEAR UP 
program was rated ``adequate,'' it is among a number of narrow-purpose 
programs proposed for consolidation into the High School Intervention 
program. Activities supported by the GEAR UP program would be allowable 
under the new program if they can lead to improved student achievement.
    The administration wants all Federal programs to work better. 
Because agencies are committed to improving their programs, they have 
defined specific steps that address PART findings for all programs, 
even highly rated ones or those proposed for termination.

            NEW PRIVACY AND CIVIL LIBERTIES OVERSIGHT BOARD

    Question. As the Nation goes to new and greater lengths to fight 
terrorism, there is a simultaneous and growing concern over the 
protection of the civil liberties of our citizens. The Intelligence 
Bill that the President signed into law in December sought to address 
this issue by creating a Board that would be responsible for ensuring 
that privacy and civil liberty concerns are appropriately considered in 
all Executive Branch policies and practices across the entire Federal 
Government. My subcommittee colleague, Senator Durbin, was instrumental 
in authorizing the provision in law that requires the establishment of 
the new Privacy and Civil Liberties Oversight Board. That Board is to 
be composed of five members and staff to support it. Yet, the Executive 
Office of the President is only requesting $750,000 to support two FTEs 
for the new Board.
    How effective can this Board be with only two FTEs?
    How did you decide, with a Federal workforce of 4.1 million 
military and civilian Federal employees, that the protection of civil 
liberties only requires two employees?
    What are your long-term staffing plans for the Board?
    The legislation that created this Board is the same legislation 
that created the National Director of Intelligence, and his nomination 
is currently pending in the Senate. Where are the nominees for this 
Board? When should we expect to see nominations submitted to the 
Senate?
    Answer. The President is committed to protecting the legal rights 
of all Americans, including freedoms, civil liberties, and information 
privacy guaranteed by Federal law, in the effective performance of 
national security and homeland security functions. In his Executive 
Order of August 27, 2004, the President created a Presidential board of 
senior agency officials to advance this commitment and to advise him on 
new and ongoing efforts to safeguard these legal rights. The Privacy 
and Civil Liberties Board subsequently established by the Intelligence 
Reform and Terrorism Prevention Act of 2004 (Act) will build on this 
important effort.
    The administration's proposal for funding the Privacy and Civil 
Liberties Board established by the Act envisions a Board whose members 
carry out their functions for the government on a part-time basis, with 
a full-time Executive Director. In addition, the Act authorizes the use 
of agency detailees on a non-reimbursable basis. A Board composed of 
part-time members was envisioned by the Act--which authorized the Chair 
of the Board to serve on either a full-or part-time basis, but 
specified that remaining Board members would serve part-time. Thus, 
with part-time members, the equivalent number of FTEs for the board is 
two.
    This arrangement will help ensure that the Board is staffed with 
people with the right type of expertise because it permits members to 
be appointed who will not have to leave their jobs in order to carry 
out this important function. In addition, if the administration draws 
on the staff of various agencies, the Board's activities would be 
augmented without adding to the cost of its function, promoting 
efficiencies within a tight budget climate. Agency staff would carry 
out the day-to-day activities and research for the Board, while leaving 
the results of that research, and advising and counseling on 
development and implementation of policy, to Board members.
    Finally, the funding level in the administration's proposal is very 
similar to that provided historically for the President's Foreign 
Intelligence Advisory Board, which operates with a modest budget and 
whose members serve without compensation.
    The administration believes that this arrangement will be most 
beneficial to the Federal Government--drawing on the right type of 
expertise, and promoting efficient use of existing government 
resources. Once the Board is up and running, its progress and 
performance will be examined to determine whether this model continues 
to be appropriate.
    On June 10, 2005, the President announced his intent to nominate 
Carol E. Dinkins to be the Chairman of the Board, and Alan Charles Raul 
to be the Vice Chairman. Additionally, the President appointed Lanny J. 
Davis, Theodore B. Olson and Francis X. Taylor as members of the Board.

                        A RECORD NUMBER OF FEES?

    Question. Your budget this year includes a very large number of new 
user fees. It can be argued that, with the exception of National 
Defense, there are designated ``users'' for just about every government 
service. For example, the government could require that the cost of 
wheat subsidies only be paid by people that buy bread and cereal. The 
government could require that only small businesses pay the costs of 
the Small Business Administration.
    How does this administration decide which services should be paid 
for through general revenues versus user fees? Does the administration 
concede that there is any limit to the number of new user fees you 
should propose?
    Many have criticized the administration's user fee proposals as 
just more taxes.
    Would you agree that there should be some relationship between the 
fees that are charged and actual cost of providing the government 
service?
    I am concerned about one area new user fees; namely, the fees you 
want to impose on small wineries in Washington State. In one small 
agency alone in this bill--the Alcohol, Tobacco Tax and Trade Bureau--
five new or increased fees are being proposed equaling 31 percent of 
the TTB fiscal year 2006 budget request. I am told that there is no 
relationship between the actual services the wineries receive from TTB 
and the fees you now want to impose.
    How did you decide that an industry that already pays nearly $550 
million in Federal excise taxes needs to pay new fees?
    Why is there no correlation between the fees you want to propose 
and the services these wineries receive?
    Answer. In general, the administration uses Circular A-25 on User 
Charges, to develop its user fee proposals. Circular A-25 provides as a 
general policy that user charges should be designed to recover the full 
cost of Federal activities that provide special benefits beyond those 
received by the general public. Under current law, the Federal 
Government already recovers the full cost for the activities of 
agencies such as the Federal Energy Regulatory Commission, the 
Securities Exchange Commission, and the Patent and Trademark Office.
    In the case of the Alcohol and Tobacco Tax and Trade Bureau (TTB), 
the proposed user fees reflect the agency's best current estimates of 
the charges necessary to transfer full costs to the direct 
beneficiaries of the agency's services and to limit use of those 
services when not required. The services provided by TTB ultimately 
protect the public against misleading labels, adulterated alcohol, 
protect against dishonest persons entering the alcohol business, and 
promote fair competition among industry members. TTB's regulatory 
efforts provide value to the industry and the industry should pay for 
the benefits it receives from these efforts.
    For small wineries, at least four of the following five user fees 
would apply depending on the activity:
  --New Permit Applications.--$500 minimum fee. Applies to all 
        wineries, as well as other businesses. TTB must review and 
        investigate the qualifications of the applicant, including the 
        applicant's criminal background and whether he or she is likely 
        to operate in conformity with Federal law.
  --Certificates of Label Approval/Certificates of Exemption.--$100 
        minimum fee for paper filing, $50 minimum fee for electronic 
        filing. Applies to all alcohol beverage products. A key feature 
        of the user fee proposal is to encourage businesses to file 
        their applications electronically.
  --Formula Review with No Laboratory Analysis.--$200 minimum fee. 
        Wineries must submit formulas only if product evaluation is 
        required by regulation (e.g., for flavored wine). Formula 
        review is necessary to ensure the proper labeling 
        classification of products.
  --Formula Review with Laboratory Analysis.--$600 minimum fee. If a 
        winery wants a label approved without the sulfite declaration, 
        a lab analysis and report is required, which would be covered 
        by the proposed user fee. However, the lab analysis need not be 
        conducted by the TTB lab.
  --American Viticultural Area Petitions.--$3,000 minimum fee. This fee 
        applies only on petitions that wineries choose to submit for 
        recognition of new viticultural areas, and covers the cost of 
        reviewing the petition and submitting it for formal rulemaking.

             COMPETITIVE SOURCING--DISABLED AND HEALTH CARE

    Question. In 2001, President Bush announced his New Freedom 
Initiative, which involves ``tearing down the remaining barriers to 
equality'' that face Americans with disabilities. At the time, he noted 
that the unemployment rate for Americans with disabilities is about 70 
percent. The President says he cares about the disabled, but the 
disabled can lose their Federal jobs if those jobs are subjected to 
competitive sourcing.
    In February of this year, OMB reportedly prepared draft guidance 
for the 2005 competitive sourcing inventories. This draft guidance was 
never released. It advised agencies that, as part of the competitive 
sourcing process, they could ``set aside FTEs for the employment of 
physically- and/or mentally-challenged individuals.''
    Why wasn't this memo finalized and sent out to all Federal 
agencies? Is it possible that certain disabled individuals have already 
lost their Federal job as a result of OMB's failure to disseminate this 
guidance?
    The administration has stated numerous times that they are 
concerned about the number of Americans that are without health 
insurance. Yet, your competitive sourcing rules penalize Federal 
employees that want to compete to keep their jobs because they have a 
responsible employer that provides health insurance. The cost of their 
Federal health insurance often works to their disadvantage when they 
compete against private vendors that do not offer it.
    Is this policy consistent with the administration's stated concern 
for the uninsured? Why aren't you requiring all contractors to provide 
insurance commensurate with the Federal benefits? Why aren't you at 
least requiring all contractors to provide some minimal level of health 
insurance?
    Currently, the DOD Appropriations Bill requires you to ignore the 
added costs of Federal health insurance when conducting a competition 
between private vendors and Federal employees that are trying to keep 
their jobs at DOD.
    Do you believe it makes sense to have this policy only for 
competitions within the Defense Department but not the other Federal 
agencies? Why?
    Answer. On May 23, 2005, OMB issued government-wide guidance to 
help agencies prepare their inventories of commercial inventories (see 
OMB Memorandum M-05-12, available on www.omb.gov). The guidance 
includes an example of the rationale an agency could use to justify 
exempting positions held by individuals with disabilities from 
competition. The example explains that an agency may set aside 
positions for the larger governmental purpose of providing gainful 
employment for those individuals who, as a result of their disability, 
have limited employment options in the private sector. The guidance, 
which addresses a wide range of issues to improve the accuracy and 
overall quality of inventories, was subject to a lengthy agency review 
and comment process. The sample rationale described in the final 
guidance reflects a best practice that is already being used by 
agencies to exempt individuals with disabilities from competition--
i.e., the guidance neither creates a new requirement nor allows for an 
exclusion that had formerly been prohibited.
    We do not believe that Federal employees are disadvantaged in 
public-private competitions. Just as we would not penalize a private 
entity specifically if they offered better health benefits to their 
employees than the Federal entity, neither do we penalize Federal 
agencies that offer health benefits that a private competitor does not 
offer. In fact, Federal employees are generally given a 10 percent 
price advantage over their private sector counterparts. For work to be 
converted from public to private sector performance, a contractor must 
propose to perform at a cost which is at least 10 percent lower than 
that proposed by the in-house offeror. Federal employees have performed 
well in public-private competitions. They have been selected as the 
best value provider to perform work representing approximately 90 
percent of the positions competed in fiscal years 2003 and 2004 and, 
thanks to competition, they have developed more efficient and cost-
effective methods to serve our taxpayers.
    The administration believes that Section 8014 of the fiscal year 
2005 Defense Appropriations Act unnecessarily subjects private sector 
bidders to intrusive data requirements concerning the provision of 
health benefits to their employees. While well intentioned, this 
provision ultimately undermines the efficiencies in private health 
plans and provides another disincentive for the private sector to 
participate in DOD's competitions. Further, by discouraging private 
sector interest in competitive sourcing, this provision places at risk 
significant savings--estimated to be $6 billion from fiscal year 2001 
to 2006--generated by the Competitive Sourcing initiative of the 
President's Management Agenda. Small business participation in 
competitions will be severely undermined since this provision makes it 
particularly burdensome to assemble competitive offers.

                          COMPETITIVE SOURCING

    Question. Director Bolten, in your answers to post-confirmation 
hearing questions, you told the Congress, ``If confirmed, I will ask 
the Administrator for Federal Procurement to recommend ways to improve 
opportunities for federal employees to compete for new work and for 
work currently performed by contractors.'' Please provide the committee 
with a list of those recommendations and please identify specific 
instances in specific agencies in which Federal employees have been 
allowed to compete for new work and contractor work.
    Please provide a list of specific instances in which OMB has given 
credit to agencies towards the achievement of the goals included in 
their ``competitive sourcing'' plans for using alternatives to public-
private competition for the generation of efficiencies in the delivery 
of services.
    The Administrator of the Office of Federal Procurement Policy, in 
his responses to pre-confirmation hearing questions last year, said 
that he, ``would encourage in-house service providers to develop most 
efficient organizations as a matter of routine, including for 
streamlined competitions.'' Why has OMB strenuously opposed any 
legislation that would ensure that in-house service providers are 
always allowed to develop most efficient organizations as part of any 
public-private competitions?
    Further, the Administrator of the Office of Federal Procurement 
Policy, in his responses to pre-confirmation hearing questions said 
that he, ``would not object to removing the five-year recompetition 
provision from the Circular and relying on agencies to determine 
appropriate performance periods based on the nature and risk associated 
with the services to be provided.'' Has this change been made? If not, 
why?
    According to a May 30, 2003, posting on GovExec.com, ``In a late 
April interview with Government Executive, Angela Styles, the director 
of the Office of Federal Procurement Policy, said curbing direct 
conversions was part of OMB's effort to prove that competitive sourcing 
is about competition, and not shifting contracts to private firms. 
`People have criticized us for this being an outsourcing initiative and 
I've been trying to tell them that it's really not, that what we want 
is competition and the best value for the taxpayer at the lowest cost. 
I think this adds a little more meat to what we're saying,' Styles 
said. On Wednesday, an OMB official said the idea of banning direct 
conversions was `presented to OMB by federal employee organizations and 
their members, and we listened to them. Direct conversions for under 10 
[full-time equivalent] employees are now a thing of the past. We 
believe that fiscal responsibility demands that decisions be made by 
facts, and the new streamlined approach requires knowledge of the costs 
and agency accountability.' '' However, the Administrator of the Office 
of Federal Procurement Policy, in an article posted on GovExec.com on 
January 14, 2005, said he was considering allowing agencies to shift 
work to contractors without competition, a practice known as direct 
conversion. Please indicate why OMB's thinking may have changed, 
providing any relevant research, and provide an update as to OMB's 
intentions with regard to its support for reviving the practice of 
direct conversion.
    Answer. The OFPP Administrator has reviewed the A-76 Circular's 
provisions for Federal employee performance of new work and contracted 
work and concluded that these provisions are fair and reasonable. The 
circular permits agencies to consider in-sourcing or performing new 
work by demonstrating through competition that this action will achieve 
the best value for the taxpayer.
    Agencies that have developed highly efficient internal operations 
and have the capacity to handle common support functions for multiple 
agencies will soon have the opportunity to compete for this work from 
other agencies, beginning with financial management and human 
resources, as part of OMB's efforts to reduce duplication in lines of 
business through cost-effective migration and consolidation. If a 
private sector source wins a competition, the government providers will 
have another opportunity to compete when the work comes up for 
recompetition.
    Regarding alternatives for public-private competition, agencies are 
always encouraged to find efficiencies and better ways to perform their 
mission. However, credit in the competitive sourcing scorecard is 
directly tied to those management efforts involving the use of 
competition since the initiative focuses on how well agencies use 
competition as a management tool to reduce costs, increase 
efficiencies, and eliminate waste.
    OMB recognizes that public-private competition is just one of a 
number of management tools, and not all commercial activities are 
suitable for competition (e.g., perhaps because there is no private 
sector interest in the work or the activity is core to the mission and 
potential conversions to the private sector would subject the mission 
to undue risk). OFPP will continue to work with agencies' Competitive 
Sourcing Officials (CSOs) on guidance to determine how agencies might 
develop ``high performing organizations'' where competition isn't 
appropriate.
    OMB has opposed calling for the development of most efficient 
organizations (MEOs) because they have typically has been coupled with 
objectionable provisions, such as requirements that agencies choose the 
cheapest provider rather than the one that offers the best value to the 
taxpayer. In addition, statutory language is unnecessary because 
Circular A-76 already provides a strong foundation for the development 
of MEOs: the Circular requires MEOs for all standard competitions and 
encourages MEOs for all streamlined competitions. Fiscal year 2004 data 
from the agencies shows a trend towards greater use of standard 
competitions and streamlined competitions with MEOs.
    With regard to the 5-year recompetition provision in Circular A-76, 
a change has been made. In April 2004, OMB issued a memorandum to 
advise agency heads that the 5-year performance limitation no longer 
applies. The memorandum vests agencies with the discretion to determine 
an appropriate performance period considering the nature and risk of 
the service.
    Generally, we will expect agencies to continue using public-private 
competitions that take cost into careful consideration when deciding 
whether work should be converted from public to private sector 
performance. At the same time, there may be cases where direct 
conversions of small numbers of positions may make sense (e.g., clearly 
commercial, non-core work) where such conversions may help the agency 
expeditiously redirect its workforce to mission critical activities 
that are not suitable for private sector performance.

                          SUBCOMMITTEE RECESS

    Senator Bond. Thank you, Director Bolten. It has certainly 
been an interesting exercise. We appreciate your coming before 
us. We have many things that we look forward to working with 
you on.
    This hearing is recessed.
    [Whereupon, at 11:15 a.m., Thursday, April 21, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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