[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 
                                  2007

                              ----------                              

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

    MATERIAL SUBMITTED BY AGENCIES NOT APPEARING FOR FORMAL HEARINGS

    [Clerk's Note.--The following agencies of the Subcommittee 
on Departments of Transportation, Treasury, the Judiciary, 
Housing and Urban Development, and Related Agencies did not 
appear before the subcommittee this year. Chairman Bond 
requested these agencies to submit testimony in support of 
their fiscal year 2007 budget request. Those statements 
submitted by the chairman follow:]
 Prepared Statement of Honorable Julia S. Gibbons, Chair, Committee on 
        the Budget, the Judicial Conference of the United States

                              INTRODUCTION

    Chairman Bond, Senator Murray and members of the subcommittee, I am 
Judge Julia Gibbons of the Sixth Circuit Court of Appeals. Our court 
sits in Cincinnati, Ohio, and my resident chambers are in Memphis, 
Tennessee. As the Chair of the Judicial Conference Committee on the 
Budget, I present the following testimony on the judiciary's fiscal 
year 2007 appropriations requirements. In doing so, I will also apprise 
you of some of the challenges facing the Federal courts.
    At the outset I want to note that we have enjoyed a productive 
relationship with the subcommittee and its staff from the time the 
judiciary was placed within your jurisdiction last year. We are 
extremely appreciative that you made us a funding priority in the 
fiscal year 2006 appropriations process.

                      DIRECTOR MECHAM'S RETIREMENT

    Also submitting testimony today is Leonidas Ralph Mecham, Director 
of the Administrative Office of the United States Courts. This will be 
Director Mecham's final testimony before this subcommittee. After 21 
years at the helm of the Administrative Office, he is taking a well-
deserved retirement. He is the longest-serving director of the 
Administrative Office and is only the sixth person to head that unique 
organization, which was established in 1939.
    Director Mecham led the Administrative Office during two decades of 
unprecedented change in the Federal courts. In 1985, when Director 
Mecham began his tenure, the Federal courts still relied on electric 
typewriters. The operating budgets for the nearly 400 court units 
across the 94 judicial districts were largely managed from Washington, 
DC Federal court facilities were in poor shape due to decades of 
neglect and deferred maintenance. And the Administrative Office itself 
was scattered in multiple locations across Washington, DC.
    Twenty years later, the picture is quite different. The use of 
information technology has fundamentally changed the way the courts 
operate. Today we have a judiciary-wide data communications network 
that provides a secure infrastructure for numerous systems and 
applications. The judiciary's case management/electronic case files 
system has been implemented in nearly all district and bankruptcy 
courts and is now moving into our appellate courts. Electronic 
courtroom technologies such as electronic presentation of evidence, 
digital court reporting, and videoconferencing are now routinely used.
    Today, under the judiciary's budget decentralization policy, courts 
have the flexibility to address their unique needs and priorities at 
the local level. Yet they are also accountable for managing these funds 
wisely.
    Under Director Mecham's leadership, 90 court building projects have 
been approved, providing space needed by the courts to house judges and 
support staff required to manage the judiciary's growing workload 
needs. The Administrative Office finally consolidated its scattered 
offices when it received its own building in 1992--the Thurgood 
Marshall Federal Judiciary Building--which, in addition to the 
Administrative Office, houses the Federal Judicial Center, and the 
United States Sentencing Commission.
    Director Mecham's superb leadership and vision have contributed 
significantly to the Federal judiciary's management progress. We in the 
Third Branch will miss his dedicated service to the courts.

            IMPROVED FISCAL YEAR 2006 OUTLOOK FOR THE COURTS

    As you may recall, last year at this time the courts were reeling 
from the steady downsizing of probation and clerks' office staff in the 
18-month period between October 2003 and March 2005, during which on-
board court staffing levels declined by 1,800 positions, or 8 percent. 
The need to fund must-pay expenses such as judges' salaries and GSA 
rent, within the constrained appropriations provided to the judiciary 
in fiscal years 2004 and 2005, resulted in essentially flat funding for 
the courts in those years. In fiscal year 2004, the courts lost 1,350 
staff and in fiscal year 2005 additional positions were left vacant due 
to the delay and uncertainty surrounding the fiscal year 2006 
congressional budget. These funding constraints forced courts to fire 
and furlough staff, offer early retirements, and leave vacant positions 
unfilled in order to pay basic operating costs like telephone and 
electric bills. Unfortunately, these staffing reductions came at a time 
when the courts, especially those along the southwest border, were 
experiencing historically high workload levels.
    Now, a year later, I am happy to report that the financial outlook 
for the courts has improved. I raised our budget concerns with the 
subcommittee last year, and you responded by making the judiciary a 
high priority. We recognize that many agencies in your bill received 
little or no growth in fiscal year 2006, and yet you provided the 
courts' operating account with a 4.5 percent increase in appropriations 
for fiscal year 2006, after applying the government-wide 1 percent 
across-the-board rescission and excluding supplemental funding. This 
increase is consistent with those received in fiscal years 2004 and 
2005 of 4.7 percent and 4.3 percent, respectively, and approximates the 
minimum amount we required to maintain on-board staffing levels in 
fiscal year 2006.
    Fortunately, in addition to the appropriations provided by 
Congress, several other unanticipated factors made more funds available 
for the courts in fiscal year 2006. Actions outside the judiciary's 
control (e.g., fewer than anticipated judgeship confirmations), along 
with cost containment initiatives, such as the effort in New York to 
identify and recover GSA rental overcharges--which I will discuss in 
more detail later in my testimony--resulted in higher than anticipated 
carryover from fiscal year 2005 and reductions in fiscal year 2006 
must-pay requirements. These unanticipated, and likely one-time, 
factors resulted in the courts receiving an overall 6.9 percent 
increase in their funding allotments in fiscal year 2006, the first 
above-inflation increase for the courts since fiscal year 2002. This 
puts the courts in a position to backfill nearly half of the 1,500 
probation and clerks' office staff lost over the last 2 years.
    The favorable outlook for fiscal year 2006 requires some 
perspective and a word of caution, however. After several years of 
operating under extremely tight funding levels, an increase in fiscal 
year 2006 funding for the courts in real terms (above inflation) is 
considered a significant achievement. While the courts are in better 
shape financially than in recent years, court staffing is still well 
below the level needed to address all workload requirements imposed on 
the courts. In fact, even with the enhanced funding provided to the 
courts in fiscal year 2006, we still anticipate end-of-year staffing 
levels in probation and clerks' offices to be more than 800 positions 
below the benchmark of 22,372 staff that were on-board in October 2003, 
the level just prior to the courts having to downsize due to budget 
constraints. The emphasis placed on increased immigration enforcement 
efforts as well as other factors caused overall workload to increase 8 
percent during this same period.

            COURT STAFFING LEVELS LAG BEHIND WORKLOAD GROWTH

    Although caseload in the Federal courts has begun to stabilize, it 
nonetheless remains at historic highs in most categories. While 
caseload has grown sharply in recent years, not only have court 
staffing levels failed to keep pace with that workload growth, but the 
courts have, in fact, been falling farther behind. As illustrated in 
the following chart, from fiscal year 2001 to fiscal year 2005 the 
courts' aggregate workload increased 21 percent while on-board court 
staffing levels declined by a net 5 percent. The judiciary has made 
extensive use of electronic case management and case filing systems to 
make clerks' offices more efficient, but reduced staffing levels and 
budget constraints have resulted in 30 percent of our district and 
bankruptcy clerks' offices having to reduce the office hours they are 
open to the public.



    Reduced staffing levels have also changed the way probation 
officers do their work. Probation officers have had to prioritize their 
supervision caseload to focus on higher-risk supervision cases and 
reduce the amount of supervision they provide to lower-risk offenders. 
This may be impacting public safety, as evidenced by a recent review of 
national data which revealed that the number of removals from 
supervision due to new criminal conduct increased by 9.4 percent in 
fiscal year 2005 over the number in fiscal year 2004. We are very 
concerned that any continued decline in court staffing may harm the 
public.
    In evaluating our need for staff to accommodate workload growth, we 
have requested only the number of staff that can realistically be hired 
over the course of the year, not the number of staff that our workload 
statistics say we need. This is because we recognize that it takes more 
time to add staff than to reduce staff. Eliminating staff, while 
traumatic for managers and employees alike, can be done in a relatively 
short amount of time. Early retirement and buyout offers attract 
sizeable numbers of volunteers willing to leave the court rolls. 
Unfortunately, often these individuals are the most experienced and 
seasoned court employees. In other more difficult instances, staff have 
to be laid off due to funding constraints. For courts that are 
downsizing, staff need to be off the payroll early in the fiscal year 
in order to maximize budget savings. On the other hand, backfilling 
these positions takes much longer. With continuing resolutions and the 
hiring freezes that may accompany them, coupled with the lead-time it 
takes to advertise, interview, and make a selection, it can take 
months--and well into the fiscal year--to fill a vacancy. Candidates 
for probation officer positions require extensive background security 
checks and can take up to a year to bring on board.
    The judiciary's budget request includes funding for 464 new 
probation and clerks' office staff to address the immediate workload 
needs of the courts. A request based on the full requirements 
identified by our staffing formulas would have resulted in an increase 
of more than 2,000 staff in fiscal year 2007.
    It is vital that Congress understand that, while the courts require 
additional staff in order to perform their statutory duties, many have 
been reluctant to hire those staff for fear they will have to fire them 
almost immediately in fiscal year 2007. What the court community needs 
now is a clear message that, at the very least, funds will be available 
in fiscal year 2007 to maintain fiscal year 2006 year-end staffing 
levels and ultimately to address the recent workload growth that was 
not matched with additional staffing resources.

                         WORKLOAD IN THE COURTS

    As I just mentioned, after years of steady growth the workload in 
the courts has begun to stabilize. I would like to highlight some areas 
of the judiciary's workload for the subcommittee, but before I do so, I 
would like to discuss how judiciary work plays an indispensable role in 
our Nation's homeland security efforts.

The Judiciary's Role in Homeland Security
    Actions taken by the Department of Homeland Security and the 
Department of Justice have a direct and immediate impact on the Federal 
courts. Whether it is costly high-profile terrorist cases or soaring 
increases in immigration cases and related appeals, this workload all 
ends up on court dockets, and sufficient resources are required in 
order to respond to it. In recent years, Congress and the 
administration have significantly increased spending for homeland 
security. Non-defense homeland security spending has more than tripled 
since 2001. In sharp contrast, appropriations for the courts' operating 
budget have increased by 29 percent and on-board court staffing levels 
have declined by 5 percent. Increased spending on homeland security is 
expected to continue, as evidenced by the President's fiscal year 2007 
budget, which includes an 8 percent increase in non-defense homeland 
security spending. The judiciary cannot absorb the additional workload 
generated by homeland security initiatives within current staffing and 
resource levels.

Immigration Enforcement
    Funding for border security and immigration enforcement has nearly 
doubled since 2001, and we have seen a direct impact on our workload as 
a result. Since the September 11, 2001 terrorist attacks, nearly 1,200 
additional border patrol agents have been hired, and Congress recently 
funded an additional 1,500 agents. Furthermore, the President proposes 
to add 1,500 border patrol agents in fiscal year 2007 for a potential 
increase of more than 4,000 new agents since September 2001. This large 
influx of new border patrol agents has and will continue to generate 
considerable additional workload for judges and probation and clerks' 
offices, especially in the five judicial districts along the southwest 
border with Mexico. Costs in our Federal defender services program will 
increase as well. These southwest border courts currently account for 
nearly one-third of all criminal cases nationwide, up from 27 percent 
in 2001, and criminal immigration cases in these courts have increased 
by 68 percent since 2001.
    The immigration-related workload also affects other areas of the 
judiciary. Criminal appeals involving immigration issues increased 64 
percent from 2004 to 2005. Over this same period, nearly 12,000 appeals 
from decisions by the Department of Justice's Board of Immigration 
Appeals were filed in Federal courts of appeals, a 19 percent increase. 
Furthermore, these immigration appeals are up nearly 600 percent since 
2001. The President's fiscal year 2007 budget includes funding for the 
Department of Justice to increase the number of immigration judges and 
immigration appeal attorneys in order to adjudicate a larger percentage 
of detained immigrant cases and appeals. If funded, this will further 
increase the number of immigration appeals that will end up in the 
Federal courts.

Bankruptcy Filings
    Passage of the Bankruptcy Abuse Prevention and Consumer Protection 
Act of 2005 resulted in a massive workload increase for bankruptcy 
courts as individuals rushed to file before the mid-October 2005 
effective date of the legislation. Fiscal year 2005 bankruptcy filings 
totaled 1,782,643, an all-time record and a 10 percent increase over 
fiscal year 2004. In October 2005 alone, more than 600,000 bankruptcy 
cases were filed nationwide; by comparison, filings in October 2004 
totaled 130,679. Managing this unprecedented level of filings required 
a truly Herculean effort on behalf of bankruptcy clerks offices around 
the country. There are countless examples of clerks' office staff 
working nearly around the clock to ensure that those wishing to file 
for bankruptcy before the new law took effect could do so.
    Given the landmark nature of this legislation, it is difficult to 
predict what filing patterns will emerge in 2006 and 2007. Bankruptcy 
filings are expected to decrease in the short-term, but the decline in 
filings will likely be due, in part, to the large number of people who 
filed just prior to the effective date of the new bankruptcy law. 
Filings are expected to return in significant numbers as attorneys and 
debtors become more familiar with the requirements of the new law. In 
addition, the new legislation creates additional duties for the 
bankruptcy courts. New duties were added in many areas including credit 
counseling, means testing, financial management, tax returns, 
reaffirmations, lease payments, and automatic discharges. Many of these 
areas have required the creation of new processes and operations in the 
clerks' offices. In addition, clerks' offices are experiencing a surge 
in motions and related activity and inquiries from the bar and public. 
As a result of the new demands imposed by the law on clerks' offices, 
it is unclear at this time whether reductions in bankruptcy filings 
will translate into reductions in workload and staff. Given these 
uncertainties, the fiscal year 2007 budget request does not include any 
change in bankruptcy clerks' office staffing levels.

Booker/Fanfan--Sentencing Guidelines
    The judiciary is also facing the effect of the U.S. Supreme Court's 
decision in the consolidated cases, United States v. Booker and United 
States v. Fanfan. In fact, the courts began receiving increased filings 
almost 6 months before Booker was decided--immediately after the 
earlier Supreme Court decision in Washington v. Blakely. Since that 
decision in June 2004, the courts have received over 14,500 cases 
affected by issues raised in the Booker case, about 7,500 of these in 
the courts of appeals and the remaining 7,000 in the district courts, 
and the effects are not yet over. Habeas corpus petitions raising 
Booker issues filed between October 1, 2005 and January 12, 2006, when 
the statute of limitation for filing these petitions expired, are not 
yet reflected in the statistics. Nor do they include most Booker-
related petitions that the Federal courts may receive from prisoners 
sentenced in the State courts, as those prisoners must first exhaust 
all options in the State courts before they can bring their cases to 
the Federal courts. The Federal courts will likely continue to receive 
an increased level of State habeas corpus petitions for the next 3 or 
more years.

                    FISCAL YEAR 2007 BUDGET REQUEST

    The Federal judiciary is approaching a crossroads in fiscal year 
2007 and Congress will determine which direction the courts take. It is 
imperative that Congress provide the courts with appropriations 
sufficient to build on the gains achieved in fiscal year 2006. It would 
be unfortunate to re-create the funding problems that the judiciary and 
Congress have worked so hard to remedy. We greatly appreciate that 
Congress made the Federal courts a high priority in fiscal year 2006 
and respectfully request that you continue to do so. An appropriations 
increase of 4 to 5 percent in fiscal year 2007--although consistent 
with recent increases--will not achieve that goal. In fact, such an 
increase will not provide for a current services operating level in 
fiscal year 2007 and would likely require the courts to return to their 
downsizing ways of the last 2 years. The reason for this is reflected 
in the following chart and discussion.


    The high carryforward balances utilized in the fiscal year 2006 
financial plan were, in part, the result of rent credits from GSA and 
other one-time windfalls outside the judiciary's control that will 
likely not be available to finance fiscal year 2007 requirements. A 
lower amount of non-appropriated sources of funding, from $401 million 
to a projected $286 million, means that the courts' Salaries and 
Expenses account requires a higher appropriation increase in fiscal 
year 2007 just to stay even--about 7.7 percent over fiscal year 2006 to 
maintain current services--and an increase of 8.3 percent to fund our 
full request.
    While the courts' Salaries and Expenses account requires an 8.3 
percent increase for fiscal year 2007, the judiciary is requesting a 
9.4 percent overall increase above fiscal year 2006 available 
appropriations. A summary table detailing fiscal year 2007 requirements 
by account is included at Appendix A. We believe this level of funding 
represents the minimum amount required to meet our constitutional and 
statutory responsibilities. While this may appear high in relation to 
the overall budget request put forth by the administration, the 
judiciary does not have the flexibility to eliminate or cut programs as 
the executive branch does to achieve budget savings. The judiciary's 
funding requirements essentially reflect basic operating costs which 
are predominantly for personnel and space requirements. Of the $540 
million increase being requested for fiscal year 2007:
  --$160 million of the requested increase is needed just to pay for 
        standard pay and benefit increases for judges and staff. This 
        does not pay for any new judges or staff but rather covers the 
        annual pay adjustment and benefit increases (e.g., health 
        benefits) for currently funded judiciary employees. The amount 
        budgeted for the cost-of-living adjustment is 2.2 percent for 
        2007.
  --$6 million is associated with increases in the number of active and 
        senior Article III judges.
  --$140 million is a technical adjustment to cover the projected loss 
        in non-appropriated sources of funding ($115 million of which 
        is for the courts' salaries and expenses account). In addition 
        to appropriations, the judiciary receives revenue from fees and 
        other items that can be used to offset appropriation needs in 
        the next fiscal year. Revenue not needed during the year 
        collected may be carried over. As I mentioned, the high 
        carryforward balance from fiscal year 2005 and the rent credits 
        from GSA will likely not be available as financing sources in 
        fiscal year 2007, so the judiciary requires appropriated funds 
        to replace them. The projected 20 percent decline in filing fee 
        revenue in fiscal year 2007 due to fewer projected bankruptcy 
        filings is also reflected in this requested increase. We will 
        keep the subcommittee apprised of any changes to these fee or 
        carryforward projections as we move through fiscal year 2006.
  --$50 million is needed for space rental increases, including 
        inflationary adjustments and new space delivery, and for court 
        security costs associated with new space. An additional $7 
        million is needed to pay for Federal Protective Service 
        security equipment and building-specific surcharges for court 
        facilities.
  --$43 million is required to support, maintain, and continue 
        development of the judiciary's information technology program, 
        which has allowed the courts to ``do more with less'' in 
        absorbing workload increases while having to downsize staff.
  --$18 million is required to cover mandatory increases in 
        contributions to the judiciary trust funds that finance benefit 
        payments to retired bankruptcy, magistrate, and Court of 
        Federal Claims judges, and spouses and dependent children of 
        deceased judicial officers.
  --$14 million is necessary to pay costs associated with Criminal 
        Justice Act representations. The Sixth Amendment to the 
        Constitution guarantees that all criminal defendants have the 
        right to counsel. The Criminal Justice Act provides that the 
        courts shall appoint counsel for those persons who are 
        financially unable to pay for their defense. The number of 
        representations is expected to increase by 5,500 in fiscal year 
        2007, as the number of defendants for whom appointed counsel is 
        required increases. An additional $12 million will fund 
        deferred panel attorney payments and shortfalls in fiscal year 
        2006 requirements.
  --$12 million of the increase will provide for several smaller base 
        adjustments such as continued investments in the Supreme Court 
        building modernization program and general inflationary 
        increases for judiciary programs.
    The increases described above total $462 million, or 86 percent of 
the requested increase, and represent must-pay items for which little 
to no flexibility exists. This leaves a much smaller increase of $78 
million to address workload increases and for other program 
enhancements. Of this amount:
  --$24 million is requested for additional staff and associated 
        expenses. The bulk of this increase (464 positions) would fund 
        the most critical and immediate workload needs of the courts, 
        which as I previously noted, is primarily immigration-related 
        workload along the southwest border where those five district 
        courts currently account for nearly one-third of criminal cases 
        nationwide. The judiciary uses statistically-based formulas to 
        determine the number of positions needed to address adequately 
        the workload of the courts. In an effort to hold down the 
        required increase in staffing, the judiciary's cost-containment 
        measures included a reduction to the formula-driven staffing 
        levels. As a result of these efforts, the judiciary's 
        calculations for full staffing requirements were lowered by 
        nearly 900 positions, or 4 percent. Even after this adjustment, 
        based on the courts' projected workload, the staffing formulas 
        indicate more than 2,000 additional positions are needed in 
        probation and clerks' offices over the level funded in fiscal 
        year 2006. Recognizing that the courts would have great 
        difficulty hiring that many new staff in a single year, the 
        judiciary has reduced its staffing request to reflect a number 
        that can realistically be hired in fiscal year 2007 (464) in 
        order to address the most critical workload needs of the 
        courts.
  --$24 million to increase the non-capital panel attorney rate to $113 
        per hour. I will discuss this requested increase in more detail 
        in a moment.
  --$23 million would provide for critical security-related 
        requirements.
  --Of the remaining $7 million, $1.2 million would provide for three 
        additional magistrate judges and associated staff, $2 million 
        would fund information technology enhancements, and the 
        remaining $3 million is for smaller requirements in other 
        judiciary accounts.
    Appendix B includes an account-by-account description for accounts 
under the Courts of Appeals, District Courts and Other Judicial 
Services heading which includes Salaries and Expenses, Defender 
Services, Fees of Jurors, and Court Security.

              INCREASE IN NON-CAPITAL PANEL ATTORNEY RATES

    We believe that one program enhancement in our budget request 
deserves strong consideration in order to ensure effective 
representation for indigent criminal defendants. We are requesting $24 
million to increase the non-capital panel attorney rate to $113 per 
hour effective January 2007. A panel attorney is a private attorney who 
serves on a panel of attorneys maintained by the district or appellate 
court and is assigned by the court to represent financially-eligible 
defendants in Federal court. These attorneys are compensated at an 
hourly rate of $92 for non-capital cases and up to $163 for capital 
cases.
    The judiciary requests annual cost-of-living adjustments--similar 
to the annual adjustments provided to Federal employees--for two 
reasons. First, cost-of-living adjustments allow the compensation paid 
to panel attorneys to keep pace with inflation and maintain its 
purchasing power and, in turn, enables the courts to attract and retain 
qualified attorneys to serve on their CJA panels. Second, regular 
annual adjustments eliminate the need to request large ``catch-up'' 
increases in order to account for several years with no rate 
adjustments. The subcommittee has recognized the importance of annual 
cost-of-living adjustments by providing one to panel attorneys in 
fiscal year 2006, and we are very grateful for your help.
    Our request to increase the non-capital hourly rate amounts to a 
catch-up increase, which, as I just mentioned, we would prefer to 
avoid. The non-capital rate was increased to $90 in May 2002 (from $75 
per in-court hour and $55 per out-of-court hour in most districts) but 
no adjustments were made to that rate until this past January, when it 
was raised from $90 to $92. In comparison, since May 1, 2002, the 
Department of Justice has been paying $200 per hour to retain private 
attorneys with at least 5 years of experience to represent current or 
former Federal employees in civil, congressional, or criminal 
proceedings. There is a substantiated need for our requested increase 
for panel attorneys. In a 2004 survey of Federal judges, over half of 
them indicated that their courts were currently experiencing difficulty 
identifying enough qualified and experienced panel attorneys. In the 
first statistically valid, nationwide survey conducted of individual 
CJA panel attorneys in March 2005, a significant percentage (38 
percent) of the over 600 attorneys surveyed reported that since the 
hourly compensation rate had increased to $90 per hour in May 2002, 
they had nevertheless declined to accept a non-capital CJA appointment. 
The surveys also confirmed that panel attorneys are reluctant to accept 
appointments in complex, high-cost representations at the $90 rate.\1\ 
Strikingly, after covering overhead costs for the predominantly solo 
and small-firm lawyers who take CJA cases, their net pre-tax income for 
non-capital CJA representations amounted to only about $26 per 
compensated hour. A large proportion (70 percent) of the CJA attorneys 
surveyed in March 2005 reported that an increase to the $90 hourly rate 
is needed for them to accept more non-capital cases.
---------------------------------------------------------------------------
    \1\ Although rates have been raised to $92 per hour since the 
survey was taken, this $2 per hour increase would not have materially 
affected the survey responses.
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    The requested increase to $113 per hour reflects the amount the 
Judicial Conference believes is needed to attract qualified panel 
attorneys to provide the legal representation guaranteed by the Sixth 
Amendment. Indeed, $113 is the level that the judiciary was seeking in 
2002 when Congress increased the rate to $90. Recognizing fiscal 
realities, the $113 rate being requested is well below the $131 rate 
that a full catch-up increase would permit. I urge you to give this 
rate increase strong consideration.

                       SECURITY OF FEDERAL JUDGES

    Mr. Chairman, I would like to update you on an issue in which I 
know the subcommittee shares a strong interest: the security of Federal 
judges and their families. As you recall, in February 2005 a Federal 
district judge's husband and mother were killed in their Chicago home 
by a disappointed civil litigant. A month later, a judge, court 
reporter, and deputy were killed in the Fulton County, Georgia 
courthouse by a defendant in a criminal case. In response to this 
violence, Congress acted quickly and provided $11.9 million in fiscal 
year 2005 supplemental appropriations to the United States Marshals 
Service (USMS) for the installation of an intrusion detection system in 
the homes of all 2,200 Federal judges, and for additional positions in 
the USMS's Office of Protective Intelligence to improve the process of 
assessing potential threats against judges. Over 1,700 judges have 
indicated that they wish to participate in the Home Intrusion Detection 
System Program.
    In September 2005, Congress approved the USMS's financial plan for 
spending the $11.9 million, and in December 2005 the USMS awarded a 
contract to ADT to begin system installations. Subsequently, Congress 
approved an amended financial plan in which the USMS agreed to assume 
responsibility for the post-installation maintenance and monitoring of 
these systems. We are very appreciative of the efforts of John F. 
Clark, Director of the USMS, in moving this critically important 
project forward.

                      THE JUDICIARY'S RENT BURDEN

    I now turn to an issue that has been a concern of the Judicial 
Conference for over 15 years: the rent that the judiciary pays to GSA. 
Before I do so, I would like to take a moment on behalf of our courts 
along the Gulf Coast to thank GSA for its prompt action in helping 
those courts to recover from last year's hurricanes. The courts and GSA 
worked well together, and GSA's help was essential.
    While we appreciate GSA's hard work on our behalf, we do have 
serious concerns about its rental pricing policies for courthouses. 
Courthouses serve a critical role in our Nation's system of 
jurisprudence. They enable the Federal judiciary to ensure the swift, 
fair, and effective administration of justice, as is required by the 
Constitution. Our space needs are unique and unlike those of any other 
Federal entity. One of our primary concerns is that courthouses are 
currently treated as commercial office space by GSA for rent assessment 
purposes when, in reality, there is no building that is commercially 
equivalent to a Federal courthouse. The fact that the judiciary has 
added significantly to its space inventory over the last 10 years does 
not fully justify or explain our sharply escalating rent payments to 
GSA, which are expected to consume 20 percent of the courts' budget in 
fiscal year 2006 and will soon top $1 billion per year.
    The need to reduce the judiciary's enormous rent burden, which 
threatens judicial independence, is critical to the courts' financial 
well-being. Chief Justice John G. Roberts, Jr., in his ``2005 Year-End 
Report on the Federal Judiciary'', identified the GSA rent issue as one 
of ``. . . two areas of concern that have come to the fore and now 
warrant immediate attention and action.'' Despite numerous appeals, GSA 
has repeatedly declined to provide the judiciary with any measure of 
rent relief, although in 2005 it provided rent relief to 14 other 
Federal entities. As the Chief Justice stated, ``The disparity between 
the judiciary's rent and that of other government agencies, and between 
the cost to GSA of providing space and the amount charged to the 
judiciary, is unfair. The Federal judiciary cannot continue to serve as 
a profit center for GSA.''
    In the absence of any changes to GSA's current rent pricing 
structure for court-occupied space, the judiciary over the last year 
has been meeting with appropriations and authorizing committees in 
Congress to raise awareness of the detrimental impact GSA's rent 
pricing policies have had on the judiciary's core mission of 
administering justice. In those meetings, we have stressed that the 
judiciary's recent budget problems, particularly in 2004 where the 
courts lost 1,350 probation and clerks' office staff, were due at least 
in part to GSA's rent pricing policies that diverted to rent funds 
needed by the courts to perform their essential functions.
    In the absence of rent relief, the judiciary has assumed the burden 
of minimizing its rent payments to GSA by scrutinizing rent bills and 
identifying overcharges. In New York, court staff spent months 
examining GSA billings and identified space rent overcharges, the 
cumulative effect of which resulted in savings or cost avoidance over 3 
fiscal years totaling $30 million. GSA has corrected these errors 
through rebates and rent credits. This was a time-intensive effort by 
the New York courts that involved 2,000 staff hours--the equivalent of 
one person working full-time for a year. The real impact is that it 
took clerk's office staff away from core duties of processing the 
court's caseload in order to validate, and eventually correct, the 
billings from another Federal entity.
    Because these overcharges may be happening elsewhere, the judiciary 
is expanding its effort to identify billing errors and has launched a 
nationwide initiative to train clerks' office staff on how to research 
and detect errors. Again, this effort will come with a cost. It is 
estimated that this nationwide effort will require a minimum of 13,000 
staff hours--equivalent to six people working full-time for a year--in 
addition to $4.3 million for training, travel, and contractor support 
costs, including professional real estate appraisal services. This is 
not work that clerks' office staff should have to do, and surely 
Congress did not intend that we would have to devote scarce resources 
to finding rent overcharges. But we are left with no choice. Given the 
judiciary's austere budget situation, we must pursue savings and 
economies whenever possible, even if we have to divert valuable court 
resources in order to do so. I would conclude my remarks on this topic 
by again quoting Chief Justice Roberts who said in his year-end report 
``. . . the judiciary must still find a long-term solution to the 
problem of ever-increasing rent payments that drain resources needed 
for the courts to fulfill their vital mission.'' The judiciary stands 
ready to work with Congress and the administration on this very 
important issue.

              COST-CONTAINMENT STRATEGY FOR THE JUDICIARY

    The judiciary fully recognizes the fiscal situation facing the 
Congress and has made cost containment a major priority. As was 
reported to Congress last year, the Judicial Conference of the United 
States approved in September 2004 a cost-containment strategy of 
identifying and implementing measures to economize and reduce costs 
while not adversely affecting the delivery of justice. Director Mecham 
will be discussing cost-containment efforts in more detail in his 
testimony, but I would like to emphasize that these cost-containment 
efforts are having a real and immediate impact on our resource 
requirements. As an example, the fiscal year 2007 budget request was 
lowered by $80 million principally due to cost-containment efforts and 
productivity improvements in clerks' and probation and pretrial 
services offices. The judiciary is preparing a report, for release this 
spring, to update Congress on the status of various cost-containment 
initiatives.

           RESPONSE TO RECENT HURRICANES ALONG THE GULF COAST

    Director Mecham will be discussing emergency preparedness 
activities in his testimony today, but I would like to talk briefly 
about the recent hurricanes along the Gulf Coast and their impact on 
Federal court operations. First, and most importantly, I am happy to 
report that the Third Branch suffered no loss of life due to the 
hurricanes, although some judges and court staff did lose their homes 
in Hurricane Katrina. I would also like to thank you for the $18 
million in fiscal year 2006 supplemental appropriations that was 
provided to help the courts deal with the aftermath of these natural 
disasters. This funding has paid for travel and per diem expenses for 
judges, court staff, and their dependents who were displaced by the 
hurricanes as well as for security, furniture, and operating expenses 
for the affected courts. If Congress had not provided this emergency 
funding, the judiciary would have been forced to absorb these expenses 
which in turn would have reduced the funding available to the courts in 
fiscal year 2006 for court support staff.
    The hurricanes, particularly Katrina, caused significant disruption 
to court operations along the Gulf Coast. The damage caused by 
Hurricane Katrina forced the Fifth Circuit and its personnel to move to 
temporary duty locations in Houston, Texas, and Baton Rouge, Louisiana. 
District court personnel in the Eastern District of Louisiana were 
moved from New Orleans to temporary duty locations in Houma, Baton 
Rouge, and Lafayette, Louisiana, and in the Southern District of 
Mississippi, district court personnel were moved from Gulfport to 
temporary duty locations in Hattiesburg and Jackson, Mississippi. 
Hurricane Rita impacted court operations in the Eastern District of 
Texas. In that district, court personnel were moved from Beaumont to 
temporary space in Tyler and Lufkin, Texas. All of the courts affected 
by the hurricanes have resumed normal operations with the exception of 
the district court in Gulfport, which is expected to reopen in June 
2006. Of course, for those who lost their homes in the hurricanes, a 
return to normalcy may be delayed for some time.
    Quick action helped to minimize the cost of both bringing up court 
operations at the temporary locations and restoring operations at 
permanent locations. For example, court personnel in the Eastern 
District of Louisiana entered the courthouse in New Orleans soon after 
Hurricane Katrina hit and, under U.S. Marshals Service guard escort, 
retrieved computer and office equipment and transported it to temporary 
duty locations, thus reducing the need to replace equipment. GSA 
quickly moved into affected court facilities to repair damages and 
restore power and air conditioning. This saved millions of dollars that 
would have been needed to replace furnishings damaged by mold and 
mildew. After Hurricane Rita hit, courts around the country sent used 
computer equipment to the Eastern District of Texas district court for 
judges and staff to use at temporary duty locations, again minimizing 
the need to purchase new equipment.
    The disruption caused by the hurricanes--especially Katrina--
presented unique challenges, particularly for probation officers who 
had to locate displaced offenders under their supervision. I would like 
to relate one story for you in particular that exemplifies the quick 
thinking and dedication of Federal probation officers across the 
country.
    Following Hurricane Katrina, probation officers in the Eastern 
District of Louisiana scrambled to locate all the offenders under their 
supervision, but gave special attention to convicted sex offenders. I 
am pleased to say that all were found and are again in treatment and 
under supervision. In one such case, however, an offender fled to his 
mother's house in Alabama, which happened to be next door to an 
elementary school. He did not contact his probation officer or local 
police as required of convicted sex offenders. He was found, however, 
thanks to the good work of a Federal probation officer from the 
Northern District of Alabama. That officer recalled having briefly 
supervised a serious sex offender from the Eastern District of 
Louisiana while that offender was in Alabama, and, on a hunch, took it 
upon herself to drive by the offender's mother's house. There in the 
driveway was a car registered to the offender. Along with another 
officer, she confronted the offender who admitted he had not registered 
as a sex offender and had not tried to call his Louisiana Eastern 
probation officer. The probation officer called local police who took 
the offender into custody for failing to register. The offender is now 
back in Louisiana in a community corrections center.
    This is only one of many stories I could give you that would 
demonstrate the commitment and dedication of our probation officers--
not just during a crisis--but in the day-to-day conduct of their law 
enforcement duties.

               CONTRIBUTIONS OF THE ADMINISTRATIVE OFFICE

    The Administrative Office (AO) of the United States Courts has 
served and supported the courts in an exemplary manner in a very 
difficult fiscal year. The more the courts have to do, and the fewer 
resources with which they have to do it, the more challenging is the 
job of the AO. With only a fraction (1.2 percent) of the resources that 
the courts have, the AO does a superb job of advising us and supporting 
our needs.
    The AO continues to serve as the central support agency for the 
Federal courts, with key responsibility for judicial administration, 
policy implementation, program management, and oversight. It performs 
important administrative functions, but also provides a broad range of 
legal, financial, management, program, and information technology 
services to the courts. None of these responsibilities has gone away 
and new ones are continually added, yet the AO staffing level has been 
essentially frozen for 10 years. Time spent on new initiatives and on 
assisting the courts in operating under fiscal constraints means basic 
support and infrastructure work has to be deferred.
    Last year was a particularly challenging one. In 2005, the AO 
played a central role in assisting the courts to implement the 
bankruptcy reform legislation, as well as in helping those courts 
affected by Hurricanes Katrina and Rita deal with the myriad of space, 
travel, technology, and personnel issues that had to be addressed. The 
commitment of significant resources to these and other initiatives over 
the last year further stretched the AO's already strained resources.
    In my role as Chair of the Judicial Conference Committee on the 
Budget, I have the opportunity to work with many staff throughout the 
AO. They are dedicated, hard working, and care deeply about their 
fundamental role in supporting this country's system of justice.
    The fiscal year 2007 budget request for the Administrative Office 
is $75.3 million, representing an increase of $5.8 million. All of the 
requested increase is necessary to support adjustments to base, mainly 
standard pay and general inflationary increases, as well as funding to 
replace the anticipated lower level of fee revenue and carryover with 
appropriated funds in fiscal year 2007.
    I urge the subcommittee to fund fully the Administrative Office's 
budget request. The increase in funding will ensure that the 
Administrative Office continues to provide program leadership and 
administrative support to the courts, and lead the efforts for them to 
operate more efficiently.

              CONTRIBUTIONS OF THE FEDERAL JUDICIAL CENTER

    I also urge the subcommittee to approve full funding for the 
Federal Judicial Center's request, which is only 7.5 percent over its 
2006 level.
    The Center's director, Judge Barbara Rothstein, has laid out in 
greater detail what the Center needs and why it needs it in her written 
statement. I want to add that the Center plays a vital role in 
providing research and education to the courts. The Judicial Conference 
and its committees request and regularly rely on research projects by 
the Center. These provide solid empirical information on which the 
judges, the judiciary, and Congress and the public, depend in reaching 
important decisions relating to litigation and court operations. 
Likewise, the Center's educational program for judges and court staff 
are vital in preparing new judges and employees to do their jobs, and 
in keeping them current so that they can better deal with rapid changes 
in the law, and in tools--like technology--that courts rely on to do 
their work efficiently.
    The Center has made good use of its limited budget. It has made 
effective use of emerging technologies to deliver more information and 
education to more people, more quickly. The relatively small investment 
you make in the Center each year (less than one-half of 1 percent of 
the judiciary's budget) pays big dividends in terms of the effective, 
efficient fulfillment of the courts' mission.

                               CONCLUSION

    Mr. Chairman, I hope that my testimony today provides you with a 
better appreciation of the challenges facing the Federal courts. I 
realize that fiscal year 2007 is going to be another tight budget year, 
perhaps the tightest ever. With the gains you helped us achieve in 
fiscal year 2006, we are on the brink of setting a new course that will 
restore the financial health of the Federal court system. But it will 
take the resources we seek in our fiscal year 2007 budget request to 
accomplish that goal and to avoid a repeat of the staffing losses that 
occurred in fiscal years 2004 and 2005. I know that you agree that a 
strong, independent judiciary is critical to our citizens, our economy, 
and our homeland security. I urge you to fund this request fully in 
order to enable us to maintain the high standards of the United States 
judiciary. Failure to do so could result in a significant loss of 
existing staff, dramatic cutbacks in the levels of service provided, 
and a diminishment in the administration of justice.
    I would be happy to answer any questions the subcommittee may have.

                               APPENDIX A

                                         JUDICIARY APPROPRIATION FUNDING
                                             [Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
                                                                                                  Percent Change
                                                   Fiscal Year                    Change Fiscal     Fiscal Year
             Appropriation Account               2006 Available    Fiscal Year    Year 2007 vs.      2007 vs.
                                                       \1\        2007 Request     Fiscal Year      Fiscal Year
                                                                                       2006            2006
----------------------------------------------------------------------------------------------------------------
U.S. Supreme Court:
    Salaries & Expenses........................         $60,143         $63,405          $3,262              5.4
    Care of Building and Grounds...............           5,568          12,959           7,391            132.7
                                                ----------------------------------------------------------------
      Total....................................          65,711          76,364          10,653             16.2
                                                ================================================================
U.S. Court of Appeals for the Federal Circuit..          23,783          26,300           2,517             10.6
U.S. Court of International Trade..............          15,342          16,182             840              5.5
Courts of Appeals, District Courts & Other
 Judicial Services:
    Salaries & Expenses:
        Direct.................................       4,308,395       4,687,244         378,849   ..............
        Supplemental...........................          18,000  ..............         (18,000)  ..............
        Vaccine Injury Trust Fund..............           3,795           3,952             157   ..............
                                                ----------------------------------------------------------------
          Total................................       4,330,190       4,691,196         361,006              8.3
                                                ----------------------------------------------------------------
    Defender Services..........................         709,830         803,879          94,049             13.3
    Fees of Jurors & Commissioners.............          60,705          63,079           2,374              3.9
    Court Security.............................         368,280         410,334          42,054             11.4
                                                ----------------------------------------------------------------
      Subtotal.................................       5,469,005       5,968,488         499,483              9.1
                                                ================================================================
Administrative Office of the U.S. Courts.......          69,559          75,333           5,774              8.3
Federal Judicial Center........................          22,127          23,787           1,660              7.5
Judiciary Retirement Funds.....................          40,600          58,300          17,700             43.6
U.S. Sentencing Commission.....................          14,256          15,740           1,484             10.4
                                                ----------------------------------------------------------------
      Direct...................................       5,698,588       6,256,542         557,954   ..............
Supplemental...................................          18,000  ..............         (18,000)  ..............
Vaccine Injury Trust Fund......................           3,795           3,952             157   ..............
                                                ----------------------------------------------------------------
      Total....................................       5,720,383       6,260,494         540,111              9.4
----------------------------------------------------------------------------------------------------------------
\1\ Fiscal year 2006 appropriated funds include the effect of the 1 percent across-the-board discretionary
  rescission where applicable (Public Law 109-148).

                          APPENDIX B--SUMMARY

    The fiscal year 2007 appropriation request for the Courts of 
Appeals, District Courts, and Other Judicial Services totals 
$5,968,488,000, an increase of $499,483,000, or 9.1 percent, over 
fiscal year 2006 available appropriations. In addition to appropriated 
funds, the judiciary utilizes other funding sources to supplement our 
appropriations including fee collections, carry forward of fee balances 
from a prior year, and the use of no-year funds. When all sources of 
funds are considered, the increase in obligations for fiscal year 2007 
is $362,506,000 or 6.2 percent.
    Of the $499,483,000 increase in appropriations, 85 percent 
($425,742,000) is adjustments to the fiscal year 2006 base associated 
with standard pay and other inflationary increases as well as other 
adjustments that will allow the courts to maintain current services in 
fiscal year 2007. The remaining 15 percent ($73,741,000) is needed to 
respond to increased requirements for magistrate judges, Federal 
defender offices, an increase in panel attorney non-capital rate 
increases, court security systems and equipment, digital video 
equipment in all new courthouses, information technology upgrades and 
to fund additional court staff required to handle the most critical 
workload, particularly along the southwest border.
    The requests for the principal programs are summarized below.

Salaries and Expenses
    The salaries and expenses of circuit, district, and bankruptcy 
courts and probation and pretrial services offices account for most of 
our request. A total of $4,691,196,000 in appropriations is required 
for this account, including funding for the Vaccine Injury program, an 
increase of $361,006,000 above the fiscal year 2006 available 
appropriation. Funding totaling $285,892,000 is expected to be 
available from other sources, including fee collections and 
carryforward balances to fund Salaries and Expenses requirements. 
Combined with our appropriations request, this results in obligations 
of $4,977,088,000.
    Of the $361,006,000 increase in appropriations, 93 percent 
($335,553,000) is needed to fund adjustments to the fiscal year 2006 
base including: pay and benefit increases for judges and chambers staff 
($13,168,000); increase in the number of senior, Article III, and 
magistrate judges and associated staff ($5,771,000); pay and benefits 
for court personnel and programs ($106,694,000); GSA space rental and 
related services ($46,886,000); information technology related 
adjustments ($42,595,000); financing adjustments to replace non-
appropriated sources of funds with appropriated funds ($115,082,000); 
and other operations and maintenance costs that are uncontrollable in 
nature ($5,357,000).
    The remaining 7 percent ($25,453,000) will fund 3 additional 
magistrate judges and their staff to help Article III judges handle 
civil cases and the record number of criminal cases facing the courts 
($1,282,000); 257 court support FTE to address fiscal year 2007 
workload requirements ($22,109,000); and increases to support new 
information technology projects and upgrades ($2,062,000).

Defender Services
    An appropriation of $803,879,000 is required for the Defender 
Services program to provide representation for eligible criminal 
defendants in fiscal year 2007. This is an increase of $94,049,000 
above the fiscal year 2006 available appropriation.
    Of this increase, 74 percent ($69,133,000) is needed for 
adjustments to the fiscal year 2006 base for inflationary and workload 
increases. Included in these adjustments are standard pay and inflation 
increases for Federal defender organizations ($19,310,000); a cost-of-
living adjustment to the capital and non-capital panel attorney rates 
($1,717,000) and annualization costs of the 2006 panel attorney non-
capital and capital rate adjustments ($1,535,000); and other 
inflationary increases ($2,849,000); increase in the projected number 
of representations ($14,214,000); funding adjustments to replace 
carryforward funding with appropriated funds ($17,644,000); funding for 
deferred panel attorney payments from fiscal year 2006 and unfunded 
fiscal year 2006 base requirements ($12,464,000); and a reduction in 
non-recurring costs (-$600,000).
    Twenty-five percent ($23,676,000) is requested to provide funding 
for the costs associated with increasing the panel attorney non-capital 
rate to $113 per hour, effective January 1, 2007.
    The remaining increase of 1 percent ($1,240,000) will fund an 
increase for six new positions at the Administrative Office ($640,000); 
and start-up costs of two new Federal defender organizations expected 
to be opened in fiscal year 2007 ($600,000).

Fees of Jurors and Commissioners
    For the Fees of Jurors program, an appropriation of $63,079,000 is 
required, an increase of $2,374,000 from the fiscal year 2006 available 
appropriation. The Fees of Jurors request is a current services budget 
for fiscal year 2007 with no program increases. The adjustments to the 
fiscal year 2006 base include a net decrease in the projected number of 
juror days (-$722,000); an inflationary adjustment ($832,000); and a 
financing adjustment to replace carryforward funding with appropriated 
funds ($2,264,000).

Court Security
    For the Court Security program, an appropriation of $410,334,000 is 
required, which is an increase of $42,054,000 above the fiscal year 
2006 available appropriation. Of this increase, 44 percent 
($18,682,000) is for adjustments to base including an increase for 
standard pay and benefit increases ($292,000); a fiscal year 2007 
Department of Labor wage rate adjustment for court security officers 
(CSOs) ($10,250,000); annualization costs for 37 new fiscal year 2006 
CSOs ($889,000); 34 additional CSOs for new and existing space 
($2,626,000); inflationary adjustments ($1,200,000); an increase for 
Federal Protective Service security charges ($7,371,000); and a 
reduction for non-recurring security systems and equipment 
(-$3,946,000).
    The remaining increase of 56 percent ($23,372,000) will fund 
security systems and equipment enhancements ($16,778,000); the 
installation of digital video recorders ($6,569,000); and a United 
States Marshals Service server replacement initiative ($25,000).
                                 ______
                                 
 Prepared Statement of Leonidas Ralph Mecham, Director, Administrative 
                       Office of the U.S. Courts

                              INTRODUCTION

    Chairman Bond, Senator Murray, and members of the subcommittee, I 
am pleased to present my final testimony before the Senate in support 
of the fiscal year 2007 budget request for the Administrative Office of 
the United States Courts (AO). I will soon be retiring as Director of 
the Administrative Office. I have served three Chief Justices, 
thousands of judges and court staff, and directed the AO during two 
decades of unprecedented change. I have worked closely with members and 
staff of the various committees of Congress with jurisdiction over the 
judiciary and am extremely proud of what we have accomplished together. 
I am grateful for the opportunity afforded me to head what I believe is 
the finest agency in the Federal Government.
    I especially want to thank you and your committee for the support 
provided to the judiciary during our first year under the purview of 
this subcommittee. Only weeks after the Appropriations Committee 
reorganization last year, you supported emergency supplemental funding 
to enhance the protection of judges in their homes, and language 
ensuring sufficient fees would be available to support the judiciary's 
implementation of the new Bankruptcy law. Then, during consideration of 
the fiscal year 2006 Transportation-Treasury Appropriations Act, you 
made funding for the judiciary a priority, recognizing the 
uncontrollable nature of the workload in our Nation's courts. And, as 
the year drew to a close, you supported emergency supplemental funding 
to assist Gulf Coast courts in their recovery efforts in the aftermath 
of Hurricanes Katrina, Rita, and Wilma. Your leadership in support of 
the Judicial Branch during these times of tremendous budget pressures 
is deeply appreciated.

                  CONTAINING COSTS THROUGH RENT RELIEF

    As you may recall from my visit with you last year, I am deeply 
concerned about the adverse impact the judiciary's rent bill has had on 
court operations. As Chief Justice John Roberts stated in his 2005 
Year-End Report, ``The Federal judiciary cannot continue to serve as a 
profit center for GSA.'' While the judiciary has taken steps of its own 
to control its rent bill by undertaking a comprehensive review of its 
courthouse construction program, including a moratorium on new 
construction projects, it is the so-called ``market-based'' or 
commercially equivalent rent we are paying for existing facilities that 
is exacerbating our budget difficulties.
    During the 18-month period from October 2003 through March 2005, 
budget shortfalls and delayed appropriations forced the judiciary to 
reduce court staffing by 8 percent or 1,800 employees. Yet, during this 
same time period, the rent bill paid to GSA increased and was paid in 
full. Faced with the choice of paying an even higher rent bill or 
firing additional court employees, all during a period of historically 
high workload, the judiciary tried unsuccessfully to seek a rent 
exemption from the GSA--similar to those the GSA provided at the same 
time to 14 other executive branch entities. Each request by the 
judiciary was turned down or GSA offered alternatives that, in the long 
term, would not save money. Unable to sustain any further staffing 
reductions, and without cooperation from GSA, the judiciary had no 
choice but to engage in a detailed, and costly, technical review of 
rent bills at the local level to try to identify rent discrepancies 
that would result in a lower rent bill.
    Judge Gibbons describes this effort in her testimony and shares the 
success we have had in identifying inaccuracies and errors in the rent 
bills for the Northern and Southern Districts of New York, which 
resulted in a savings of $30 million to the judiciary through rebates 
and rent credits. Certainly we are pleased with this result as the 
unanticipated return of funds has helped to offset the impact of the 1 
percent across-the-board rescission to our fiscal year 2006 
appropriation. But, the rebates provide only short-term rent relief. As 
Chief Justice Roberts stated in his 2005 Year-End Report, ``. . . the 
judiciary must still find a long-term solution to the problem of ever-
increasing rent payments that drain resources needed for the courts to 
fulfill their vital mission.'' Unless judiciary appropriations keep 
pace with the increase in our rent bills, we will be unable to sustain 
the staffing levels necessary to carry out the mission of the Judicial 
Branch. Despite the aforementioned rebates, rent paid to GSA in fiscal 
year 2006 is expected to consume over 20 percent--nearly $1 billion--of 
the courts' operating budget. In contrast, the Executive Branch as a 
whole spends less than two-tenths of 1 percent of its budget on GSA 
rent--in part because many agencies have managed to become totally 
independent of the GSA.
    On February 8, 2006, Congressman Sensenbrenner introduced H.R. 
4710, the Judiciary Rent Reform Act of 2006. A similar bill, S. 2292, 
was introduced in the Senate by Senator Specter on February 16, 2006. 
The purpose of this bipartisan legislation is to ensure that the rent 
paid by the Federal judiciary is fair and equitable, and is related to 
the actual costs of providing court facilities. Enactment of the 
legislation would change existing practice by requiring the judiciary 
to pay only for the GSA's direct expenses associated with the operation 
and maintenance of federally-owned space occupied by the courts, as 
well as applicable indirect GSA expenses, which principally entail 
GSA's administrative overhead at the field office, regional and central 
office levels. The judiciary would be required to pay only the 
underlying contract rent for any court-occupied leased space and would 
be exempt from paying for components of GSA's current pricing policy, 
which are above and beyond its actual costs of operating and 
maintaining federally-owned space.
    With regard to future courthouse construction or major repair and 
alteration projects undertaken by GSA on behalf of the judiciary, under 
this proposed legislation, the judiciary would request appropriations 
directly from Congress and transfer appropriations approved by Congress 
to GSA for deposit into the Federal Buildings Fund. The amounts 
transferred would be designated specifically for those projects. This 
legislation will not change the current congressional process for 
authorizing new courthouse construction and repair and alteration 
projects, nor will it change appropriations subcommittee jurisdiction. 
It simply will ensure that the judiciary pays a fair and equitable 
amount to GSA to lease, operate, and maintain court facilities. 
Furthermore, it will ensure that all funding deposited in the Federal 
Buildings Fund by the judiciary is used to support and build judiciary 
facilities, and is not used by the administration to fund Executive 
Branch projects instead.
    Modifying the funding mechanism for judiciary facilities will 
improve the process for both the judiciary and Congress, and will 
preclude the situation the judiciary finds itself with respect to 
fiscal year 2007 and, in fact, 5 of the past 10 years. The Judicial 
Conference has identified to GSA and the administration the need for 
five courthouse projects, at a cost of $307 million for fiscal year 
2007. The President's budget has included no funds whatsoever for 
courthouse construction projects. OMB has included no funds for 
projects funded out of the Federal Buildings Fund. Yet, the judiciary 
will pay approximately $1 billion in rent to GSA in fiscal year 2007, 
which is about $500 million more than is needed to pay for the cost to 
lease and operate court facilities. While there is $148.6 million in 
the fiscal year 2007 request for three courthouse Repair and Alteration 
projects, the vast majority of the ``rent profit'' realized by GSA from 
the judiciary goes to support Executive Branch projects.
    Mr. Chairman and members of the subcommittee, I hope you will 
support the judiciary's efforts to address the burden that excessive 
rent costs are placing on the judiciary by co-sponsoring S. 2292. 
Especially during these times of limited resources, I fear that our 
ability to carry out the basic functions of the judicial branch are at 
stake if rent relief is not obtained.

                   ROLE OF THE ADMINISTRATIVE OFFICE

    The Administrative Office of the U.S. Courts was created by an Act 
of Congress in 1939 and is devoted to helping the courts fulfill the 
judiciary's mission--administering justice to the citizens of this 
country. Neither the Executive Branch nor the Legislative Branch has a 
comparable organization that provides the broad range of services and 
functions that the Administrative Office does for the Judicial Branch. 
My successor will be only the seventh Director of this unique 
institution in almost 70 years.
    The AO provides administrative, legal, financial, management, 
program, security, and information technology services to the Federal 
courts. It provides support and staff counsel to the Judicial 
Conference of the United States and its 25 committees, and it helps 
implement Judicial Conference policies as well as applicable Federal 
statutes and regulations. The AO is also the focal point for judiciary 
communication, information, program leadership, and administrative 
reform. Our administrators, accountants, systems engineers, analysts, 
architects, lawyers, statisticians, and other staff provide 
professional services to meet the needs of judges and staff working in 
the Federal courts nationwide. The AO staff also responds to 
Congressional inquiries, providing information on pending legislation 
and congressionally mandated reports.
    As I prepare to retire from this extraordinary organization, I want 
to take this last opportunity to appeal for sufficient resources to 
sustain the AO's staffing level, which has not been increased in over 
10 years despite many new work demands. In the past few years, we have 
been forced to maintain high vacancy rates due to funding shortages. I 
hope the following examples of recent challenges and achievements will 
illustrate the critical role the employees of the Administrative Office 
play in supporting the Federal judiciary.

Implementing the Bankruptcy Abuse Prevention and Consumer Protection 
        Act of 2005
    The most sweeping changes to bankruptcy law in the past 20 years 
were enacted on April 20, 2005, with the signing of the Bankruptcy 
Abuse Prevention and Consumer Protection Act of 2005 (Public Law 109-
8). The Act's impact on judiciary resources, including AO and court 
staff, has been monumental. The 500-page Act made many substantive 
changes to the Bankruptcy Code that required significant amendments to 
the judiciary's bankruptcy rules and forms. It also established a host 
of new procedures and proceedings that are adding to the work of 
bankruptcy judges, bankruptcy clerks, bankruptcy administrators, and 
staff here at the AO. Most of the Act's provisions took effect October 
17, 2005, just 180 days after enactment, requiring the AO, Judicial 
Conference committees, and the bankruptcy courts to undertake an 
enormous effort to meet the tight deadline. Moreover, implementing the 
Act required the AO to quickly develop a new version of CM/ECF, the 
case management and electronic filing system, used by the courts.
    To coordinate the AO's national implementation of the Act, I formed 
a Bankruptcy Act Implementation Working Group, which met three times a 
month to identify all implementation tasks and issues and to coordinate 
all phases of implementation of the provisions of the Act. Over 100 
employees representing a minimum of 15 program offices at the AO were 
involved in this tremendous effort--all of which had other principal 
duties.
    I also approved the creation of a Bankruptcy Legislation Working 
Group, comprising judges, unit executives, and deputy clerks, who 
worked many hours, in conjunction with my staff, to address many of the 
new issues raised in the Reform Act. This Group created a ``grid'' of 
information, addressing various areas of the law, including means 
testing, credit counseling, and tax returns. This grid, which included 
procedural and legal guidance, statutory cites, and CM/ECF information, 
proved an invaluable resource for the courts as they prepared to 
implement the new law.
    In addition, the Advisory Committee on Bankruptcy Rules, the 
Committee on the Administration of the Bankruptcy System, and court 
working groups devoted substantial hours and effort to ensure 
compliance with the Act. Beginning with an organizational meeting the 
day after enactment of the law, the Advisory Committee conducted more 
than 20 conference calls, held three subcommittee meetings, and two 
full committee meetings. Members of the Committee, the Committee's 
consultants--four law professors--and AO staff spent countless hours 
conferring, drafting, and redrafting the new and revised rules and 
forms. As a result of this work, on August 11, 2005, the Executive 
Committee of the Judicial Conference approved eight new rules, 
amendments to 35 existing rules, amendments to 33 existing forms, and 
nine new official forms, and authorized the distribution to the courts 
of interim rules with the recommendation that the courts adopt them by 
local order. In the meantime, the Standing Rules Committee is 
proceeding with permanent changes to the Federal Rules of Bankruptcy 
Procedure, following the normal procedures of the Rules Enabling Act.
    Administrative Office staff posted these Interim Rules and official 
forms on the judiciary's internet website. From October 2005 to January 
2006, the new forms had nearly 362,000 visitors and the interim rules 
had almost 100,000 visitors. AO staff have responded to thousands of 
inquiries about the rules and forms, the new procedures and the amended 
Bankruptcy Code in general, and have participated in many meetings on 
the interim rules and amended forms, including dozens of national and 
local seminars and teleconferences, and a satellite broadcast with 
bankruptcy judges, clerks, and other court staff.
    AO staff also completed major revisions to the case management 
software, the courts' electronic docket and case management system, to 
incorporate the many procedural changes in bankruptcy cases and 
proceedings that took effect on October 17. This updated version of the 
software enabled the courts to comply with the means test, as well as 
the new noticing requirements. Currently, AO staff are working on the 
development of a new statistical database and analysis system to enable 
the courts to meet the Act's data reporting requirements, which will 
become effective 18 months after the enactment. The enhanced 
statistical infrastructure needed to produce the new statistics will be 
in place by October 1, 2006.
    Later in my statement, I will discuss the overall impact our 
electronic case management system has had on the courts, but I would 
like to point out here that without this system, the bankruptcy courts 
would have been paralyzed during the period preceding the October 17, 
2005, effective date. During the 16 days preceding the Act's effective 
date, over 625,000 bankruptcy cases were filed, more than would 
normally be expected over a 5-month period. In paper form, if an 
average no-asset Chapter 7 case file measures three-eighths of 1 inch 
thick, then those 625,000 cases would have required a shelf almost 4 
miles long, to support a weight of 208 tons. With a lot of hard work 
and overtime, and with the incredible performance of CM/ECF, our 
bankruptcy clerks were able to begin processing this avalanche of 
cases--which are still in progress--with minimal adverse impact on the 
courts.

Disaster Response--Hurricane Recovery Efforts
    In 2001, after the terrorist attacks of 9/11, I created a Judiciary 
Emergency Preparedness Office at the AO to ensure that the courts have 
the capability to perform essential activities and function without 
extended delays in the event of natural disasters, terrorist attacks, 
or civil emergencies. It is led and staffed by individuals who have 
other duties during non-emergency periods. The AO's leadership role for 
the judiciary in disaster response was demonstrated and tested during 
the hurricanes of 2005. The staff of the AO met the challenge with 
commitment, dedication, expertise, and above all--success.
    In the wake of Hurricane Katrina, the AO launched an immediate and 
intensive effort to assure that judges, court staff, and their families 
were safe, and to return court operations to normal as quickly as 
possible. Seventy court units from Houston to Miami experienced some 
break in telecommunications and more than 1,500 court employees were 
affected. Here in Washington, AO staff from 18 program offices formed 
the Judiciary Emergency Response Team (JERT) to coordinate information 
and assistance to the affected courts in the areas of procurement, 
space and facilities, technology, travel, finance, human resources, 
legislative affairs, public affairs, and legal counsel. The JERT met 
for nearly 7 weeks to assess the situation and provide advice and 
assistance to the courts, to include site visits to the affected areas.
    Staff contacted banks in Louisiana and Mississippi to ensure 
paychecks were received and processed, negotiated with benefit 
providers to expedite payments, and made available phone and electronic 
communication services for courts unable to access their long-distance 
carriers. At the direction of the Judicial Conference, legislation was 
pursued by the AO and quickly enacted to allow courts to convene 
outside their regional jurisdiction during times of emergency. 
Memoranda were also issued to affected judges and court unit executives 
addressing areas of key concern such as: relocating judges and court 
employees; providing guidance on temporary duty travel and related 
expense reimbursement; allocating funds to cover disaster expenses; 
delegating certain procurement authority for the immediate replacement 
of furniture, supplies, and equipment; and reestablishing information 
technology systems.
    Throughout September, teams of experts from the AO were deployed to 
Jackson in the Southern District of Mississippi, Baton Rouge, Houma, 
and Lafayette in the Eastern and Western Districts of Louisiana, and to 
the Hurricane Rita-impacted Southern and Eastern Districts of Texas. 
The AO staff provided on-site assistance in human resources management, 
temporary duty travel, information technology, procurement, space and 
leasing, security, and coordination with other assisting government 
agencies.
    Court operations are running fairly well in the districts affected 
by the hurricanes of 2005. Mr. Chairman, we owe a debt to you and your 
subcommittee, which was especially supportive of our emergency 
supplemental request. Our funding needs were primarily to recover costs 
associated with per diem, travel expenses, and replacing lost 
equipment. Fortunately, through quick action and the personal 
dedication of our court staff, we were able to avoid hundreds of 
thousands of dollars in equipment replacement costs. I am proud of the 
work of the AO's Judiciary Emergency Preparedness Office, and the 
judiciary employees across the country who were instrumental in the 
judiciary's swift recovery from these natural disasters.

Continuity of Operations Plans (COOPs)
    Since its creation, a principal focus of the AO's Judiciary 
Emergency Preparedness Office has been to assist each court in the 
development of continuity of operations plans (COOPs). During the last 
several years, courts have been testing and validating their COOPs.
    Before Katrina hit, and throughout the disaster recovery period, 
the affected courts used their Continuity of Operations Plans to 
safeguard staff, court files, and property. At both the circuit and the 
district court levels, the intensive efforts to develop and test COOPs 
paid off in the aftermath of Katrina. Court employees knew their space 
and equipment requirements, knew which employees were critical to the 
resumption of operations, and the employees themselves knew their 
roles. Ten days after Katrina hit, the courts affected felt that they 
were much further ahead than they would have been if Hurricane Katrina 
had struck 4 years ago.

Cost-containment Initiatives
    Supporting the judiciary's overall cost-containment initiatives has 
been a top priority of the AO during the past year. Led by Judicial 
Conference Committees, and working closely with court advisors, AO 
staff is currently engaged in more than 50 cost-containment initiatives 
related to space and facilities cost control, workforce efficiency, 
review of compensation costs, effective uses of technology, program 
changes in defender services, court security, and law enforcement, and 
adjustments to fees. To date, initiatives that have already yielded 
savings include the moratoria on space projects, reductions to 
probation and pretrial services work requirements, reductions and 
elimination of Federal Protective Service contract guard services that 
were deemed to be redundant and/or unnecessary, and productivity 
adjustments to court staffing formulas.
    The AO is also leading by example. During 2005, the AO continued 
implementation of internal cost-control measures--staffing vacancies 
were closely monitored and controlled. Because of funding limitations, 
the AO maintained a vacancy rate of nearly 10 percent also, all 
operations, projects, and functions were closely examined to identify 
cost reduction opportunities. Only limited travel and training were 
allowed, and orders for all other contracts, services, supplies, and 
equipment were restricted to those essential to basic operations and to 
supporting Judicial Conference committees, continuing court operations, 
and implementing information technology projects previously approved. 
While such restrictions may be acceptable for a short period, over the 
longer term, they begin to adversely affect the AO's ability to support 
the courts. For example, having a properly trained workforce is 
absolutely critical to maintaining legal, financial, human resources, 
and technology support for the courts. It is also necessary to maintain 
up-to-date information technology and office equipment if we are to 
communicate with the courts effectively. Lastly, it is essential that 
AO staff travel to the courts in order to perform program reviews and 
audits, and to assist in the implementation of more cost-effective 
practices which will benefit the taxpayers in the long run. Later, I 
will discuss how our fiscal year 2007 budget request will meet these 
needs.
    We also sought and secured, thanks to your subcommittee, changes to 
judiciary procurement authorities which will allow us to enter into 
multi-year contracts that are more competitive and cost-efficient. The 
Executive Branch already had these authorities and we appreciate your 
extending them to the judiciary as part of the fiscal year 2006 
appropriations act.

 INCREASING PRODUCTIVITY IN THE COURTS THROUGH INFORMATION TECHNOLOGY 
                                SYSTEMS

    Another key AO responsibility is to lead and manage the 
development, implementation, and support of new information technology 
systems that will enhance the management and processing of information 
and the performance of court business functions. During 2005, the AO 
focused on continuing to strengthen the judiciary's information 
technology infrastructure.

Electronic Case Filing
    By the end of 2005, the Federal courts' Case Management-Electronic 
Case Files (CM/ECF) system was operating in virtually all district and 
bankruptcy courts. The prototype system was launched in 1995 when a 
team from the AO helped the U.S. District Court in the Northern 
District of Ohio cope with more than 5,000 document-intensive maritime 
asbestos cases. That court faced up to 10,000 new pleadings a week, and 
a workload that quickly became unmanageable. Together, the team 
developed a system that allowed attorneys to file and retrieve 
documents and receive official notices electronically. A year later, 
the Bankruptcy Court in the Southern District of New York began live 
operations with a similar system that the AO had tailored for 
bankruptcy court needs. That court faced some of the early mega-
bankruptcies, and was drowning in paper. Since those early efforts, the 
system has processed more than 24 million Federal court cases and 
served hundreds of thousands of attorneys and litigants nationwide.
    The implementation of CM/ECF is the largest system development and 
implementation effort ever undertaken in the judiciary. Virtually all 
bankruptcy and district courts are now using this system, and the 
appellate courts are testing a version for deployment later this year. 
The reach of the project is almost staggering. More than 400,000 
attorneys have registered and been trained in CM/ECF and in 1 month 
alone--August 2005--4.6 million docket entries were made using CM/ECF. 
In coordination with the Public Access to Court Electronic Records 
System (PACER), it provides lawyers, the media, and any interested 
party with access to important case documents from anywhere, at any 
time, and replaces what had previously been a burdensome, labor- and 
paper-intensive responsibility. Attorneys have praised the systems, 
noting that they are easy to use, reduce their service and copying 
expenses, and provide quick notice of actions.

Bankruptcy Noticing Center
    The AO's Bankruptcy Noticing Center (BNC) electronically retrieves 
data from bankruptcy courts' case management systems and prints, 
addresses, batches, and mails the resulting notices. The Bankruptcy 
Code and Federal Rules of Bankruptcy Procedure require bankruptcy 
courts to send these notices to all interested parties in a bankruptcy 
case. The BNC not only eliminates local preparation and mailing of 
notices by deputy clerks, it also generates notices in a fraction of 
the time and at a far lower cost than local noticing. The BNC, now in 
its eighth year, is estimated to have saved nearly $36 million for the 
judiciary since its inception.
    As bankruptcy courts across the country handled long lines of 
bankruptcy filers, the Bankruptcy Noticing Center also was generating a 
flood of notices. In the weeks prior to and immediately after October 
17, 2005--the law's effective date--the BNC produced up to 1.7 million 
individual notices per day, over triple its normal workflow. By the end 
of October, the BNC was still churning out over 1 million notices a 
day.

Probation and Pretrial Services Automated Case Tracking System
    The Probation and Pretrial Services Automated Case Tracking System 
(PACTS) is a case tracking and case management tool that demonstrated 
its value in the days and weeks that followed the destruction on the 
Gulf Coast. PACTS collects case-related information, produces 
statistical and workload reports, and provides efficient retrieval of 
case information by probation and pretrial services officers. An 
interface between PACTS and personal digital assistants (PDAs)--as well 
as laptop computers--allows officers field access to information in all 
districts. The system is now implemented in all 94 districts and in the 
aftermath of the hurricanes, we are working to provide PDAs to as many 
officers as possible.
    Without access to their offices, and in many cases, computers of 
any kind, probation officers were able to use their PDAs and PACTS to 
locate and check-up on supervised offenders who were displaced from 
their homes after the hurricanes hit. One particular lesson learned in 
our disaster recovery is the need to expedite the provision of PDAs to 
all probation officers nationwide. At your direction, funding in the 
Courts' fiscal year 2006 financial plan will allow us to do that.

                  ADMINISTRATIVE OFFICE BUDGET REQUEST

    The fiscal year 2007 appropriations request for the Administrative 
Office of the U.S. Courts is $75,333,000, representing an increase of 
$5,774,000, or 8.3 percent, over fiscal year 2006 available 
appropriations. While the percentage increase in appropriations we are 
seeking may appear significant, overall it represents a current 
services budget request. The primary reason for this large increase in 
appropriations is to replace non-appropriated funds (fee/carryover) 
that were used to finance the fiscal year 2006 financial plan, but 
which are expected to decline in fiscal year 2007.
    Specifically, the increases needed to maintain current services 
include $1.1 million for standard pay and other inflationary increases 
and a $4.7 million financing adjustment associated with a projected 
decline in fees and carryforward in fiscal year 2007 from what was 
available in fiscal year 2006. Should our current declining fee and 
carryover projections come to pass, and they are not replaced with 
direct appropriated funds, we will be forced to reduce current on-board 
staffing. This will adversely affect our ability to serve the courts. 
We will, of course, keep you apprised of actual fee collections and 
carryover estimates as the year progresses. Should collections surpass 
our estimates, the amount we are requesting could be reduced.

                    AO RESOURCES ARE STRETCHED THIN

    The AO's funding situation is extremely tight. Without enough funds 
to maintain a full complement of staff, the agency and its managers and 
staff are under enormous strain. As demonstrated by some of my earlier 
examples, unanticipated events over the past several years have 
required us to provide greater support to the courts in the areas of 
security, emergency preparedness and disaster recovery, financial 
management and planning, technology, and the development and 
implementation of new business practices resulting from changes in 
Federal law. Without adequate staff resources, the AO struggles to meet 
these challenges head on--we have been forced to pull people away from 
their daily duties to handle the crises as they arise but cannot 
continue to do this on a long term basis.
    As illustrated in the following graph, staffing levels at the AO 
have actually declined since fiscal year 1995, while during the same 
time period, the number of judges and court staff being supported by 
the AO have grown by 22 percent. This widening disparity between 
staffing and support of the courts has been a hardship for the AO and 
could be crippling in fiscal year 2007 if the non-appropriated sources 
of funding available to the AO in fiscal year 2006 are not replaced 
with direct appropriations.


                               CONCLUSION

    Chairman Bond, Senator Murray, members of the subcommittee, I hope 
that I have conveyed the wide array of responsibilities vested in the 
AO and the seriousness with which we undertake them. For every issue 
that affects the judiciary, every new piece of legislation that expands 
or alters Federal jurisdiction, every administration initiative that 
impacts Federal law enforcement, every congressional request for 
information, personnel at the AO must quickly master the subject area 
and render expert advice and support to the courts.
    During these times of fiscal constraint and limited discretionary 
spending, the AO takes the lead in assisting the courts in developing 
new, innovative, and cost-effective ways to carry out the business of 
the judiciary. I am proud of the AO's record of service to the courts 
in this regard and know that the staff will continue to work tirelessly 
to ensure the administration of justice is able to be carried out 
efficiently and effectively. While I recognize that fiscal year 2007 
will be another difficult year for you and your colleagues as you 
struggle to meet the funding needs of the agencies and programs under 
your purview, I urge you to consider the significant role the AO plays 
in supporting the courts and the mission of the judiciary. Once again, 
our budget request is one that will require the staff at the AO to do 
more with less--it does not seek new resources for additional staff or 
programs. I hope you will support it.
    Thank you again for the opportunity to be here today. It has been a 
privilege for me to serve the Federal courts for the past 21 years. I 
have particularly enjoyed working with the Appropriations Committee.
    I would be pleased to answer your questions.
                                 ______
                                 
     Prepared Statement of the United States Sentencing Commission
    Chairman Bond, Ranking Member Murray, members of the committee, the 
United States Sentencing Commission thanks you for the opportunity to 
submit this statement in support of the Commission's appropriations 
request for fiscal year 2007.
    In the Commission's statements in support of its fiscal year 2005 
and 2006 appropriations requests, the Commission detailed for the 
committee the impact the Supreme Court's decisions in Blakely v. 
Washington \1\ and United States v. Booker \2\ were having not only on 
the Commission, but the entire criminal justice community. The 
Commission continues to feel the impact of these decisions but remains 
firmly committed to meeting all of its statutory obligations.
---------------------------------------------------------------------------
    \1\ 542 U.S. 296 (2004).
    \2\ 543 U.S. 220, 125 S. Ct. 738 (2005).
---------------------------------------------------------------------------
    The Commission continues to be the central agency for the 
collection, analysis, and reporting of Federal sentencing statistics 
and trends, and it is dedicated to continuing this critical role. The 
Commission also continues to develop appropriate guideline penalties 
for a vast array of new and existing crimes, respond to Congressional 
directives and inquiries regarding sentencing policy generally, provide 
education on sentencing issues to the judiciary and other participants 
in the criminal justice community, and conduct research activities that 
help to shape the future of sentencing policy.
    The preceding fiscal years have been extraordinarily busy for the 
Commission, and it anticipates that fiscal year 2007 will be equally 
so. Full funding of its fiscal year 2007 request will ensure that the 
Commission can continue to meet all of its statutory obligations and, 
most importantly, continue to provide the criminal justice community 
with the most comprehensive and timely sentencing information 
available.

                          RESOURCES REQUESTED

    The Commission is requesting $15,740,000 for fiscal year 2007, 
representing a 9 percent increase over allotted funding for fiscal year 
2006. The Commission recognizes that the fiscal year 2007 budget cycle 
is extraordinarily tight, and it does not seek this increase lightly. 
The Commission's request is backed by significant resource demands, 
including increased demand for Commission work product.

          JUSTIFICATION FOR COMMISSION'S APPROPRIATION REQUEST

    The statutory duties of the Commission include, but are not limited 
to: (1) promulgating sentencing guidelines to be considered, 
determined, and calculated in all Federal cases; (2) collecting 
sentencing data systematically to detect new criminal trends, determine 
if Federal crime policies are achieving their goals, and serve as a 
clearinghouse for Federal sentencing statistics; (3) conducting 
research on sentencing issues and serving as an information center for 
the collection, preparation, and dissemination of information on 
Federal sentencing practices; and (4) providing training to judges, 
prosecutors, probation officers, the defense bar, and other members of 
the criminal justice community in the application of the guidelines.
    The Booker decision had a dramatic impact on the Federal sentencing 
system, but it did not change these core missions. In fact, the Supreme 
Court reaffirmed these statutory obligations by explaining that the 
Commission's post-Booker mission remained ``writing Guidelines, 
collecting information about district court sentencing decisions, 
undertaking research, and revising the Guidelines accordingly.''
Sentencing Policy Development and Guideline Promulgation
    The Commission has maintained an active policy cycle in the wake of 
Blakely and Booker, despite the resource drain responding and adapting 
to these cases has caused. In fiscal year 2006, for example, the 
Commission has promulgated proposed amendments and issues for comment 
in 14 areas of criminal law, including: immigration, steroids, 
terrorism, transportation, and firearms offenses. With regard to 
immigration offenses which now make up almost one-quarter of the entire 
Federal caseload--the Commission has held one round table discussion 
(in Washington, DC) and two regional hearings (one in San Antonio, 
Texas and one in San Diego, California) at which it received expert 
testimony from judges, prosecutors, defense attorneys, probation 
officers, and others about issues related to immigration offenses. The 
Commission also met with key congressional staff to advise them of the 
Commission's findings and actions, and provided them with a detailed 
staff report on immigration reform and the Federal sentencing 
guidelines.
    The Commission took a similar approach with regard to its 
consideration of steroids offenses. The Commission held a roundtable in 
Washington, DC that brought in practitioners, scientists, and other 
academics to discuss these offenses and their associated harms. 
Commission staff also met with congressional staff and worked with 
staff from the Government Accountability Office on this very important 
topic. As part of its amendment process, the Commission also produced a 
detailed report on steroids use and abuse.
    The Commission anticipates another active amendment cycle in fiscal 
year 2007. In addition to its own policy priorities (which it 
identifies each spring and finalizes each fall), the Commission expects 
to address issues related to terrorism, transportation, sex offenses, 
and drug offenses, as well as implementation of other pending crime 
legislation from the 109th Congress warranting a Commission response. 
The Commission believes that the multi-faceted approach it took with 
regard to its consideration of immigration and steroids offenses should 
continue to be the model for its future amendment cycles. As such, the 
Commission will have to devote more staff (and Commissioner) resources 
to the planning and execution of this type of outreach, including 
associated travel costs. This approach to the amendment process also 
will require greater resources to synthesize the information received 
into meaningful sentencing policy. Full funding of our fiscal year 2007 
request will allow the Commission to meet this key statutory obligation 
in the most complete manner possible.

Collecting, Analyzing, and Reporting Sentencing Data
    As detailed previously, recent Supreme Court activity has had a 
major impact on the Commission's workload, primarily in the area of 
data collection, analysis, and reporting. Immediately after Blakely and 
Booker, the Commission realized that the most critical role it could 
play as the criminal justice community assessed the impact of these 
decisions was the reporting of the most timely and accurate sentencing 
data available.
    The Commission extracts information from five documents--in every 
Federal case--that the courts are required to send to the Commission 
under the 2003 PROTECT Act. On average, the Commission receives 70,000 
cases annually, so the number of documents and pages that must be 
collected, analyzed, and then reported by the Commission is voluminous. 
Beginning in fiscal year 2005, the Commission refined its entire data 
collection and reporting process so that it could provide ``real time'' 
data about the effects of Booker on national sentencing to the criminal 
justice community. The Commission now reports national sentencing data 
on an almost monthly basis, a monumental task for any Federal agency, 
let alone an agency as small as the Commission. This refinement of our 
data collection and reporting efforts has resulted in very significant 
demands on the Commission's resources, particularly personnel. The 
Commission's fiscal year 2007 funding request is designed to increase 
personnel in the key areas of data collection and analysis, and 
research. Increased funding during fiscal year 2007 also will allow the 
Commission to keep up with both the time and volume demands on its data 
collection and analysis resources it now faces.

            Information Technology Issues Associated With Data 
                    Collection, Analysis, and Reporting

    As important as meeting the Commission's personnel needs in the 
area of data collection and analysis, full funding will allow the 
Commission to continue moving forward with its plans to collect, 
analyze, and report data in an all-electronic format. Proceeding with 
these efforts will allow the Commission to work with members of the 
criminal justice community to gather information efficiently and in a 
manner that promotes cooperation and efficiency, avoids unnecessary 
duplication of efforts, and ensures that the entire criminal justice 
system is operating at optimum levels.
    To enhance the Commission's ability to process cases in a quick and 
cost-efficient manner, it has developed and implemented an electronic 
document submission system that enables sentencing courts to submit 
electronically the five required sentencing documents directly to the 
Commission, as opposed to having to spend court resources on copying, 
bundling, and mailing hard copies. Currently, 64 districts are using 
the electronic document submission system. The Commission anticipates 
that all 94 districts will be using the system by the end of fiscal 
year 2007.
    The Commission also is moving to a fully automated document 
collection and data analysis system so that by the end of fiscal year 
2007, all document receipt and data extraction and analysis will be 
done electronically. The Commission has spent the last several months 
building the foundation of this process and expects to have a completed 
system running by the end of fiscal year 2007. Becoming fully automated 
is critical to the success of the Commission's statutory missions and 
offers significant benefits to the entire criminal justice community. 
First, our electronic document submission system already has reduced 
personnel and resource burdens on the courts and probation offices, and 
updating this system so that all aspects are automated will allow for 
even more efficiencies. Second, by becoming fully automated, the 
Commission anticipates being able to provide even more detailed and 
accurate data on national sentencing trends to the criminal justice 
community at an even more expedited pace. Third, a fully automated 
system will allow the Commission to work closely with members of the 
criminal justice community in creating an unparalleled system of 
document receipt and data reporting that avoids unwarranted duplication 
of efforts and promotes best practices throughout the system. Finally, 
by increasing internal efficiencies, the Commission will be able to 
dedicate more resources to research-oriented tasks that, in the 
preceding fiscal years, have been curtailed.
    Full funding of the Commission's fiscal year 2007 request will 
ensure that the Commission can meet its information technology needs 
and continue to work with members of the criminal justice community in 
a technologically efficient, non-duplicative manner.

            Increased Demands for Commission Work Product from Congress

    In addition to the new demands for national data placed on the 
Commission by the Booker decision, the Commission also is experiencing 
increased demands for work product from Congress. In addition to 
providing its monthly reports on national sentencing practices, the 
Commission is required to assist Congress in assessing the impact 
proposed crime legislation will have on the Federal prison population. 
These assessments often are complex, time-sensitive, and require highly 
specialized Commission resources. In addition, in fiscal year 2005 and 
2006, the Commission responded to a number of more general requests 
from Congress on issues such as gangs, drugs, immigration, and sex 
offenses. These requests are not expected to diminish during fiscal 
year 2007, and the Commission must ensure that it has adequate 
resources to address the needs of Congress.

Conducting Research
    Research is a critical part of the Commission's overall mission. As 
such, the Commission has undertaken in fiscal year 2006 to prepare a 
number of internal and external reports that provide a detailed 
examination of key policy areas such as immigration, drugs, and 
firearms offenses. These reports are crucial to the Commission's 
overall objective of promulgating reasoned and well-informed guideline 
and policy statement amendments. Also during fiscal year 2006, the 
Commission released a detailed report on the Booker decision and its 
impact on national sentencing.
    The Commission anticipates undertaking a number of new research 
projects in fiscal year 2007. In addition to reports associated with 
its policy work, the Commission expects to continue its comprehensive 
review of recidivism. The Commission is in the midst of a multi-part 
series on recidivism in the Federal system that is the most 
comprehensive study of its kind to be undertaken. The Commission also 
anticipates undertaking other coding projects and research initiatives 
of interest to the criminal justice community. Full funding of its 
fiscal year 2007 request will allow the Commission to devote the 
resources necessary to accomplish its research mission.

Training and Outreach
    The Commission continues its commitment to providing specialized 
guideline training and technical assistance to Federal judges, 
prosecutors, defense attorneys, probation officers, staff attorneys, 
and law clerks. The Commission provides intensive training sessions 
throughout the year, and has increased its efforts since the Booker 
decision. In calendar year 2005, the Commission trained over 9,700 
people. Commissioners and staff traveled to, and provided training in, 
59 districts and all 12 circuits. Commissioners and staff also 
participated in numerous academic programs and symposia across the 
country as part of the ongoing debate about the future of Federal 
sentencing. Commission representatives also attended a number of 
circuit court conferences, meetings of the Criminal Law Committee of 
the Judicial Conference of the United States, and the judiciary's 
National Sentencing Institute. The Commission also held its own annual 
national training seminar with over 500 representatives of the criminal 
justice community in attendance.
    The Commission expects its training and outreach efforts to 
continue at this accelerated pace in fiscal year 2007. As a result, the 
Commission will continue to incur increased personnel and travel 
demands, including more demands on Commissioners to travel. Full 
funding of the Commission's request will ensure that these increased 
demands can be met.

                                SUMMARY

    The Commission is uniquely positioned to assist all three branches 
of government in ensuring the continued security of the public while 
providing fair and just sentences. An independent agency housed in the 
Judicial branch, the Commission is an expert bipartisan body of Federal 
judges, individuals with varied experience in the Federal criminal 
justice system, and ex-officio representatives of the Executive Branch. 
In short, the Commission is at the crossroads of where the three 
branches of government intersect to determine Federal sentencing 
policy.
    The Commission has worked hard and performed well with the 
resources available, and it appreciates the funding efforts of this 
committee. Meeting the Commission's fiscal year 2007 funding request 
will ensure that the Commission continues to: develop aggressive and 
timely policy agendas; collect, analyze, and report accurate and 
comprehensive sentencing data; train members of the criminal justice 
community; and engage in meaningful research projects. The Commission 
urges Congress to support fully our fiscal year 2007 appropriation 
request of $15,740,000 so that it can continue its role as a leader in 
Federal sentencing policy.
                                 ______
                                 
  Prepared Statement of Hon. Barbara J. Rothstein, Director, Federal 
                            Judicial Center

    I am Barbara Rothstein. I have been the Center's director since 
2003, and a district judge since 1980. I am pleased to submit the 
Center's 2007 budget request on behalf of the Center's Board, which the 
Chief Justice chairs, and which approved this request.
    Our 2007 request is for $23,787,000, a $1,660,000, or 7.5 percent 
increase, over 2006. The increase includes $868,000 for standard 
adjustments to base, and $792,000 for 9 full-time equivalent positions 
(12 positions for 9 months).
    Before providing more detail on this request, let me provide you 
with a little background on the Center and its activities. I hope to 
convey to you the important contribution that the Center makes to the 
effective and efficient functioning of the Federal courts; the Center's 
careful, cost-effective use of the money Congress has provided us; and 
my concern about the effects of having received less than full 
adjustments to base for 9 of the last 10 years.

                THE CENTER'S CONTRIBUTION TO THE COURTS

    Speaking not only as the Center's director but also as a judge, I 
can attest to the importance of the Center to the courts. The Center's 
mission is to provide objective, well-grounded empirical research and 
balanced, effective educational programs for the courts.
    The courts, and particularly the Judicial Conference of the United 
States, as well as Congress and the public, are regular consumers of 
the Center's research projects. They rely on the Center for thorough, 
unbiased, well-documented research. Examples include: examining the 
impact of the Class Action Fairness Act of 2005 on the resources of the 
Federal courts; providing information to assist judges in handling 
capital cases; surveying the use of visiting judges that resulted in a 
guide on how to make effective use of this cost-efficient judicial 
resource. Not only do projects such as these help judges decide cases 
efficiently and fairly, they also help the judiciary and Congress make 
better informed decisions about policies and procedures affecting the 
courts.
    Center education programs are vital to judges and court staff. For 
new judges, orientation programs enable them to assume their new 
responsibilities quickly. Continuing education programs bring judges 
up-to-date on topics ranging from case-management techniques to new 
statutes and case law. (For example, last year the Center produced for 
judges and court staff 11 different programs on the Bankruptcy Abuse 
Prevention and Consumer Protection Act of 2005, using in-person 
workshops, satellite and video-streaming television programs, and audio 
conferences. We also posted dozens of summaries, reports, articles, and 
analyses on the Act on our intranet site.)
    Court staff, who play a critical role in supporting judges and 
ensuring the efficient operation of the courts, rely on the Center for 
educational programs and materials that help them do their jobs better, 
for example, integrating new technologies and executing cost-
containment strategies. The Center's Professional Education Institute, 
which provides basic and advanced programs on leadership and management 
for managers and supervisors at all levels in the courts, is a key 
component of court staff training.
    The Center uses a wide range of tools to deliver education. One 
reality of the information age is that people can (and expect to) 
receive information in many different ways. Twenty years ago the Center 
relied almost exclusively on in-person programs, audiotapes, and hard-
copy publications to reach judges and court staff. Around 10 years ago 
we were expanding into satellite television broadcasting, 
teleconferencing, and use of the Internet and the courts' intranet. In 
just the last 3 years we have moved into web-conferencing and streaming 
video. And all the while we kept--and enhanced--all the earlier modes 
of delivery. All these delivery means are needed to meet the diverse 
needs of a diverse population of judges, managers, and staff.
    The importance of the Center's educational programs is reflected in 
their use by the courts. All Center training is voluntary; large 
numbers of judges and court staff choose to participate in Center 
programs and use its services because they know the Center's products 
will help them do their jobs better. In 2005, nearly 11,500 employees 
of the courts (including over 2,000 judges) attended Center programs in 
person--over 60 percent of these did so in their own districts. Another 
4,000 participated in Center video, audio, and web conferences. 
Thousands more watched Center television programs, downloaded materials 
from the Center's intranet site, and used Center publications.

          THE CENTER HAS MANAGED ITS APPROPRIATION RESPONSIBLY

    Understanding the need for fiscal responsibility, the Center has 
made careful use of its appropriation each year. As I noted earlier, we 
use a wide variety of cost-effective delivery tools to provide 
education and information to judges and staff efficiently. The various 
delivery tools we use have enabled us to reach a larger and larger 
audience for far less money than we could with only one or two of these 
media--but they also require a highly professional staff with diverse 
skills in order to take full advantage of these media and to identify 
and implement newer technologies as they emerge.
    In-person programs remain a vital part of our education efforts. 
Here we economize in several ways. Most staff training (and some judge 
education) is done by bringing faculty to the courts for local 
training. Most programs to which participants must travel are conducted 
in hotels in large cities where we can negotiate reasonable rates and 
take advantage of competitive airfares. We also conduct smaller 
seminars in collaboration with several outstanding law schools, 
enabling us to avoid faculty and overhead costs.
    We also stretch our appropriation by working closely with our 
sister agencies, the Administrative Office of the U.S. Courts and the 
U.S. Sentencing Commission. We regularly consult with them to avoid 
duplicative efforts, and we often provide them an opportunity to convey 
their information to the courts at Center-sponsored programs.
    Internally, the Center held to a hard hiring freeze for over 3 
years: 22 full-time employees retired or left the Center in 2003-2005 
without a single replacement, reducing our staffing level from 147 to 
125. We can no longer sustain this attrition, and in late 2005 we hired 
two full-time employees to fill key vacancies. We will continue to fill 
only selected vacancies.
    Since 2002, the Center has closely controlled pay raises and 
bonuses for staff. While we have followed the Executive Branch and the 
rest of the courts in granting the annual ECI and locality pay 
increases, we have limited additional pay raises each year to 1 percent 
of total Center salaries, and bonuses to one-quarter of 1 percent of 
total Center salaries, each year. While this has helped to control 
costs, it causes us concern over our competitiveness with public and 
private employers in hiring and retention.

   BUDGET SHORTFALLS WILL ADVERSELY AFFECT OUR SERVICE FOR THE COURTS

    The Center is grateful for the efforts of Congress to provide 
$903,000 in adjustments to its 2006 base. After the application of the 
1 percent rescission, however, the Center was again, as in prior years, 
forced to absorb $223,500 (25 percent) of those important funding 
dollars. As I mentioned earlier, the Center has suffered shortfalls in 
its adjustments to base in all but 1 of the last 10 years. This has 
effectively reduced our spending power by 17 percent. As described 
above, in the past 3 years alone, we have had to compensate for 
shortfalls by not filling 22 positions that became vacant during that 
time, thus reducing our staffing level from 147 to 125. Even as the 
Center's staff has declined by 15 percent during that time, the courts' 
needs for its services have continued to grow.
    The continued shortfall in our appropriation will erode our ability 
to provide the quality education and research that the courts need. The 
tools we have used the last several years--a hiring freeze, salary 
limits, and other reductions in spending--cannot go on indefinitely 
without degrading the quality and quantity of work we can perform.

                 THE CENTER'S FISCAL YEAR 2007 REQUEST

    Our request for 2007 is modest--standard adjustments to our 2006 
base and a small amount to enable us to fill 12 of the most necessary 
of the 22 vacancies (6 devoted to our education and distance learning 
efforts; 3 to our ever-increasing number of research projects; and 3 to 
our automation and technology function). These few positions will 
return the Center to its fiscal year 2005 staffing level of 134. That 
is still far below the 158 staff employed by the Center in the early 
1990's, but with these resources we can continue to help the courts 
prepare for and meet the many substantive, procedural, and operational 
challenges they face.
    Thank you for your careful consideration of our request. I would be 
pleased to respond to any questions you may have.
                                 ______
                                 
Prepared Statement of Paul R. Michel, Chief Judge, United States Court 
                   of Appeals for the Federal Circuit

    Mr. Chairman, thank you for allowing me to submit my statement 
supporting the United States Court of Appeals for the Federal Circuit's 
fiscal year 2007 budget request.
    Our request totals $26,300,000, an increase of $2,517,000 over the 
fiscal year 2006 approved appropriation of $23,783,000, after a 1 
percent across-the-board rescission. Although this represents an 
overall increase of 10.6 percent, 63 percent of that increase, 
$1,591,000, is for necessary adjustments to the base appropriation. The 
remaining $926,000 (37 percent of the requested increase) is for 
funding for information technology security upgrades, development and 
maintenance of a disaster recovery plan for electronic information, and 
courtroom technology implementation.
    Along with the mandatory adjustments, we have included in our base 
request $496,000 for off-site leased space for senior judges and their 
staffs. The court has one judge who took senior status in February 2006 
and four other judges who currently are eligible for senior status. The 
court has no additional space in the courthouse for chambers for these 
judges when they take senior status as they are expected to do. Keeping 
these judges working is essential in order to keep up with the caseload 
handled by the judges of this court which nearly has doubled since its 
creation in 1982. In the last month the Administrative Office of the 
United States Courts has directed GSA to begin to negotiate a lease for 
off-site space for the senior judges.
    The $926,000 requested for program increases includes the following 
three items previously requested:
  --(1) Information technology upgrades account for $87,000 of that 
        amount to provide the computer security software and hardware 
        required for the detection and prevention of electronic 
        computer attacks and intrusions into the court's network 
        computers and data. This equipment is necessary to provide a 
        secure computer environment which we now lack. For example, 
        court data stolen from unsecured equipment could greatly affect 
        stock market prices of corporate securities if obtained before 
        the court's decisions are made public.
  --(2) Disaster recovery of information accounts for $255,000 of the 
        requested increase to cover the cost of establishing a 
        telecommunications infrastructure and client computer equipment 
        to connect to appropriate services to overcome destruction of 
        the court's electronic communications systems. This would 
        include remote dial-in access; file backup and restoration; and 
        electronic database support, among other emergency access 
        services that would be needed in the event of a disaster at the 
        courthouse.
  --(3) The remaining $584,000 requested covers the large, nonrecurring 
        start-up cost of providing for modern video conferencing 
        technology in two of our three courtrooms. As you know, the 
        judiciary has adopted information technology initiatives for 
        reducing the reliance on paper, achieving economy in its 
        business processes, and providing better service to citizens at 
        locations around the country. This is especially critical to 
        our court because of its Nation-wide jurisdiction. The court 
        requests this funding to implement this program. The amount 
        requested is based on recommendations from the Administrative 
        Office of the United States Courts to provide two-way video and 
        audio transmission between the court and remote sites. We have 
        begun this process in one of our courtrooms by reprogramming 
        money from last year's appropriation as the subcommittee 
        suggested. Further such reprogramming would, however, 
        compromise core court functions. This funding will enable us to 
        proceed with the upgrades in the remaining two courtrooms.
    I would be pleased, Mr. Chairman, to answer any questions the 
committee may have or to meet with the committee members or staff about 
our budget request.
    Thank you.
                                 ______
                                 
Prepared Statement of Jane A. Restani, Chief Judge, United States Court 
                         of International Trade

    Mr. Chairman, members of the committee, I would like to once again 
thank you for providing me the opportunity to submit this statement on 
behalf of the United States Court of International Trade, which is 
established under Article III of the Constitution with exclusive 
nationwide jurisdiction over civil actions pertaining to matters 
arising out of the administration and enforcement of the customs and 
international trade laws of the United States.
    The Court's budget request for fiscal year 2007 is $16,182,000, 
which is $840,000 or 5.5 percent over the fiscal year 2006 available 
appropriation of $15,342,000. This request will enable the Court to 
maintain current services and provide for standard pay and other 
inflationary adjustments to base. The request also includes funds to 
pay for increases in costs paid to GSA for rent and to the Federal 
Protective Service for building basic and building-specific security 
surcharges. These surcharges provide for the Court's pro-rata share of 
installing, operating and maintaining the systems for the critical and 
necessary security of the Federal Complex in lower Manhattan. The Court 
continues, as it has done for the past 12 years, to budget 
conservatively and request funds that will provide for mandatory 
increases in pay, benefits and other inflationary factors, as well as 
to fund the essential on-going operations and initiatives of the Court.
    Within the funds requested, the Court continues to meet the 
objectives set forth in its Long-Range Plan through the use of its 
annual appropriation and the Judiciary Information Technology Fund 
(JITF). These objectives promote access to the Court through the 
effective and efficient delivery of services and information to 
litigants, bar, public, judges and staff. As a national court, this 
access is critical in realizing the Court's mission to resolve disputes 
by: (1) providing cost-effective, courteous and timely service by those 
affected by the judicial process; (2) providing independent, 
consistent, fair and impartial interpretation and application of the 
customs and international trade laws; and (3) fostering improvements in 
customs and international trade law and practice and improvements in 
the administration of justice.
    Technology is a critical component of the Court's commitment to 
service delivery to its varied constituencies. As such, in fiscal year 
2005, the Court: (1) purchased new servers for and upgraded the 
database used in connection with the Federal Judiciary's Case 
Management/Electronic Case Files (CM/ECF) System; (2) cyclically 
upgraded, replaced and supported desktop computers and vital existing 
software applications; (3) purchased new software applications that 
enhance computer security and ensure the efficient deployment of 
software updates to all computer systems at the Court; and (4) 
purchased a fire wall server and software to ensure the security of the 
Court's network and help build a secure identity management system. 
Additionally, in fiscal year 2005, the Court continued its cyclical 
maintenance program by refurbishing its trial courtrooms, robing rooms 
and jury rooms, and replacing aging furniture.
    For fiscal year 2006, the Court plans to expend funds to: (1) 
implement the new operating system for the CM/ECF System and migrate 
the attendant database; (2) continue the support of its upgraded data 
network and voice connections and Virtual Private Network (VPN) System; 
(3) replace the servers for the Court's library on-line cataloguing and 
acquisition system and for the Court's Internet web site; (4) replace 
desktop computer systems, laptops and printers in accordance with the 
Judiciary's extended cyclical replacement program; (5) upgrade and 
support existing software applications; (6) purchase new software 
applications to ensure the continued operational efficiency of the 
Court; (7) support Court equipment by the purchase of yearly 
maintenance agreements; and (8) upgrade the Court's digital recording 
equipment. Additionally, the Court will expand its efforts to provide 
the developmental and educational programs for staff in the areas of 
job-related skills and technology. In the same vein, the Court will 
further its work with bar associations and law schools to provide 
continuing legal education programming to raise the quality of practice 
in the area of customs and international trade law.
    In carrying out its mission in fiscal year 2007, the Court remains 
committed to enhancing the administration of justice to the litigants, 
bar, Court family and public. In so doing, the Court will continue its 
information technology initiatives. Among the technology projects to be 
supported by the Court's fiscal year 2007 budget request and the carry-
forward balance from its JITF are: (1) continuing the deployment of its 
CM/ECF System and training the bar in its use; (2) supporting and 
maintaining all technical equipment and systems; (3) supporting new 
software applications that enable judges and staff to view 
instructional videos at individual workstations and integrates the 
Federal Judiciary's Training Network with the Court's local area 
network; and (4) upgrading the Court's wiring closets with switches and 
fiber modules.
    Additionally, the Court intends to continue its cyclical 
replacement and maintenance program for equipment, furniture and 
building maintenance. This program not only ensures the integrity of 
equipment and furnishings, but maximizes the use and functionality of 
the internal space of the Courthouse. Moreover, the fiscal year 2007 
request includes funds for the support and maintenance of the upgraded 
security systems implemented by the Court in fiscal years 1999 through 
2005, and the Court's COOP. Lastly, the Court again will participate in 
efforts to address the educational needs of the bar and the Court 
staff.
    As I stated last year, maintaining security systems and ensuring 
the protection of those who work in and visit the Courthouse continue 
to be top priorities. In July 2005, GSA received Senate approval for 
fiscal year 2006 funding for the construction of a security pavilion 
for entry into the Courthouse. The Court is working closely with GSA in 
the design and construction of this entrance pavilion. To that end, the 
Court, in fiscal year 2005, entered into a Reimburseable Work 
Authorization with GSA for a non-prospectus project for replacing the 
present entrance doors to the Courthouse with blast resistant glass and 
for installing video-surveillance cameras in strategic locations in the 
new pavilion that will further secure the Courthouse and its environs. 
GSA expects construction of the new pavilion to begin in the fourth 
quarter of fiscal year 2006. The Court will continue to work in full 
partnership with GSA to ensure the success of the security pavilion 
project.
    I would like to emphasize that the Court remains committed, as it 
has in the past, to an approach of conservatively managing its 
financial resources through sound fiscal, procurement and personnel 
practices. As a matter of internal operating principles, the Court 
routinely has engaged in cost-containment strategies in keeping with 
the overall administrative policies and practices of the Judicial 
Conference, particularly regarding rent, security costs, equipment 
costs, technology, contractual obligations and personnel. I can assure 
you that this management approach with respect to the Court's financial 
affairs will continue into fiscal year 2007 and beyond.
    The Court's ``General Statement and Information'' and 
``Justification of Changes,'' which provide more detailed descriptions 
of each line item adjustment, were submitted previously. If the 
committee requires any additional information, we will be pleased to 
submit it.
                                 ______
                                 
Prepared Statement of Marilyn L. Glynn, Acting Director, U.S. Office of 
                           Government Ethics

    Thank you for the opportunity to present this statement in support 
of the request of the U.S. Office of Government Ethics (OGE) for fiscal 
year 2007 resources of $11,489,000 and 80 FTEs. This request, as 
reflected in the President's fiscal year 2007 budget, represents a 3 
percent increase over the amount appropriated for fiscal year 2006.
    The Office of Government Ethics is responsible for overseeing the 
ethics program of the executive branch, a program designed to help 
prevent conflicts of interest and promote integrity in government. OGE 
sets the requirements of the program, develops executive branch-wide 
policies, serves as a resource/consultant to agency ethics officials 
and monitors agency programs to help ensure that the agencies are 
carrying out their responsibilities effectively. While each executive 
branch agency is responsible for carrying out many of the day-to-day 
functions of the program, OGE's specific role includes: reviewing and 
certifying the financial disclosure forms filed by Presidential 
nominees requiring Senate confirmation; reviewing and certifying annual 
financial disclosure reports filed by senior executive branch 
employees; serving as the primary authority on executive branch conduct 
and financial disclosure issues; conducting evaluations of agency 
ethics programs; training agency ethics officials and developing 
employee training materials used by agencies in their ethics training; 
offering direct support to agencies through a desk officer program, 
under which OGE staff serve as ethics liaison to executive branch 
departments and agencies; and providing interpretative guidance on the 
criminal conflict of interest laws.
    The ethics program that OGE directs is part of the basic 
infrastructure that supports good governance within the executive 
branch of the Federal Government. The resources expended by OGE to help 
promote integrity and prevent conflicts of interest are small compared 
to the resources expended by investigators and prosecutors who enforce 
ethics and conflict of interest rules and laws. Moreover, our 
preventive efforts help guard against the loss of government resources 
through inadvertent or deliberate misuse. We believe the resources we 
have requested are those necessary to support a strong ethics program.

                            FISCAL YEAR 2007

    In order to enhance our ethics program and continue to foster 
public confidence in government programs and operations, OGE 
established three strategic goals as outlined in our new strategic plan 
for fiscal years 2007-2011. OGE's three strategic goals are: (1) 
strengthening the ethical culture, and promoting an ethical workplace 
within the executive branch, (2) preventing conflicts of interest, and 
(3) promoting good governance. What follows is a summary of the major 
programs OGE is planning to implement to achieve these goals during 
fiscal year 2007.
    OGE expects that there will continue to be a significant number of 
Presidential nominees to positions requiring Senate confirmation during 
the third year of the current administration. OGE performs a key role 
in clearing these nominees, a process which is designed to help them 
understand the application of the conflict of interest requirements to 
their government service and to secure their agreement to take the 
necessary steps to resolve potential conflicts of interest. Our goal is 
to review nominee financial disclosure statements in a timely manner to 
avoid any unnecessary delay in the nomination and confirmation process. 
Once an individual is appointed, OGE follows through to see that any 
agreements made by an appointee to address potential conflicts of 
interest are carried out. In addition, over this period, OGE will 
continue to conduct a second level review of over 1,000 annual and 
termination financial disclosure statements filed by Presidential 
appointees each year.
    Through the use of improved technology OGE will enhance the 
financial disclosure reporting and review process by developing a 
confidential financial disclosure form that can be filed 
electronically. In addition, OGE will modify the confidential financial 
disclosure form in order to make the reporting process more streamlined 
and user friendly. OGE will also partner with the Department of the 
Army to develop an electronic filing system for public financial 
disclosure filers. During fiscal year 2007, this electronic filing 
system will be available to those agencies within the Department of 
Defense that meet the web-based security requirements set by the 
Department of the Army. OGE will continue to partner with the 
Department of the Army in an attempt to make the electronic filing of 
public financial disclosure forms more widely available.
    OGE prepared and submitted two reports to Congress in fiscal years 
2005 and 2006 pursuant to the Intelligence Reform and Terrorism 
Prevention Act of 2004 (Public Law 108-458). The first report, which 
was delivered in March 2005, evaluated the executive branch financial 
disclosure requirements. The second report, which OGE compiled in 
consultation with the Department of Justice, and delivered in January 
2006, examined the criminal conflict of interest laws as they pertain 
to the executive branch. OGE will work with the Office of Management 
and Budget and the Congress on any Congressional efforts to consider 
and implement any changes identified by these two reports. OGE will 
take the necessary steps to revise its financial disclosure forms and 
regulations to implement any changes in existing law. In addition to 
implementing any changes in legislative mandates, OGE also plans to 
improve the effectiveness of ethics policy by publishing a proposed 
regulation revising the Standards of Conduct for Executive Branch 
Employees.
    OGE expects to purchase some new computer hardware and software. 
This includes security software to protect our network and keep it 
FISMA compliant, software necessary to keep our network up to date, and 
hardware to replace computers that fail. In addition, OGE will 
implement a comprehensive update to its web site making the information 
contained on the site more accessible to a variety of users including, 
designated agency ethics officials, Congress, the media, and the 
public.
    OGE will continue to provide international technical assistance in 
the areas of anti-corruption and good governance programs in support of 
international agreements and regional initiatives of the United States 
in general and the Departments of State and Justice in particular. For 
example, during the fiscal year, OGE will, as a principal member of the 
U.S. delegation, represent the United States before the Group of States 
Against Corruption (GRECO) in the plenary discussion and adoption of a 
report on GRECO's evaluation of the U.S. adherence to certain of the 
adopted Guiding Principles in the Fight Against Corruption. OGE will 
also assist the State Department in the mutual evaluation mechanism 
that is a follow-up to the Inter-American Convention Against Corruption 
and with regional good governance/anti-corruption initiatives such as 
Good Governance for Development for the Middle East and North Africa 
states (MENA) and the Asian Pacific Economic Cooperation (APEC). 
Primarily at the request of the State Department, OGE continues to 
provide briefings to about 40 foreign delegations visiting Washington 
each year.
    As part of our ongoing education and training efforts, OGE will 
prepare and conduct ethics training for agency ethics officials. To 
reach ethics officials outside the Washington area, OGE plans to offer 
three regional symposia. In addition, OGE will hold the fifteenth 
National Government Ethics Conference for approximately 700 ethics 
practitioners. These events provide an introduction to the ethics rules 
and laws for new agency officials and advanced updates and refresher 
sessions for those who are more experienced. Attendees will include 
ethics practitioners, trainers, counselors, financial disclosure 
reviewers, and enforcement officials. In addition, we also plan to 
develop a 2-day orientation program for new ethics officials and offer 
the program at OGE headquarters as well as on a regional basis as 
needed.
    OGE desk officers will maintain their day-to-day communications 
with agencies assigned to them. This continuing liaison between OGE and 
agency ethics staffs enables OGE to respond to the needs of the 
agencies in a timely and accurate manner, as well as provide OGE with 
an early warning that an agency ethics program is deficient or has 
problems that require specialized attention. OGE plans to conduct 
employee surveys regarding individual agency ethics programs, and the 
information gathered through these surveys provides OGE with a better 
basis on which to judge the effectiveness of the individual agency 
programs under review and of the overall ethics program. We also plan 
to conduct ethics program evaluations in 35 Federal agencies, regional 
offices and military commands. In addition, OGE will develop a program 
of self-assessment for agencies to use in years that OGE is not 
scheduled to perform a program review.
    OGE also plans to increase the effectiveness of our support to 
agencies' ethics programs by raising awareness of ethical issues 
arising from the presence of contractors in the Federal work place. For 
example, during fiscal year 2006, OGE participated in and contributed 
to a National Academy of Public Administration working group on the 
issues presented by the multi-sector workforce. We will continue to 
expand our outreach activities to Federal agencies and contractors by 
providing educational materials and presentations on ethics issues that 
arise when contractors work side-by-side with Federal employees. 
Finally, we will also expand our educational and outreach activities to 
Federal agency procurement officials in order to increase their 
awareness of various ethical issues that arise from interacting with 
contractors.
    The programs and activities we have described are just some of 
those envisioned for fiscal year 2007. We are pleased with the past 
success of the executive branch ethics program and look forward to the 
challenge of maintaining and enhancing the quality of the program.
                                 ______
                                 
 Prepared Statement of John E. Potter, Postmaster General/CEO, United 
                         States Postal Service

    Good morning, Mr. Chairman, and members of the subcommittee. I am 
pleased to be with you today as we discuss the United States Postal 
Service, its achievements, its challenges, its opportunities, and our 
appropriations request for fiscal year 2007.
    I know this subcommittee shares our mutual goal of protecting 
affordable, universal service for every American household and business 
for many, many years to come.
    Since it was created by reform legislation in 1970, the Postal 
Service has demonstrated a remarkable ability to transform itself from 
a traditional government agency to a customer-focused, business-driven 
organization--one that has realized outstanding results. For the 
greater part of three decades, this success was supported by a business 
model that made it possible to balance the costs of an ever-expanding 
delivery network with revenue from continuing growth in mail volume, 
particularly high-contribution First-Class Mail.
    Over the last decade, it has become clear that this model would be 
unsustainable for the long term. The explosive expansion of electronic 
communications and, to a lesser extent, intense competition for package 
and document delivery, has had profound effects on mail volume growth, 
upsetting the delicate balance that is at the heart of our 36-year-old 
business model.
    Against this background, the Postal Service took decisive steps to 
stabilize finances, increase efficiency, improve performance, and 
pursue growth by making mail a better value than ever. Our 2002 
Transformation Plan defined specific strategies to help us achieve 
these goals.
    The results speak for themselves. We ended 2001 with outstanding 
debt of $11.3 billion. By 2006, that debt was completely retired, 
reducing interest costs on borrowings from more than $300 million per 
year to only $2 million in 2005.
    We committed to removing $5 billion in costs from our system by the 
end of 2006. We achieved that goal 1 year ahead of time. Cumulatively, 
our Transformation Plan savings have reached $17 billion.
    By the end of 2005, we achieved a record sixth consecutive year of 
productivity gains, helping to offset a portion of inflationary cost 
growth over the same period. Since 2000, our annual productivity gains 
have, on average, been almost six times higher than those achieved 
annually from 1972 through 1999. This progress was not a given. It is 
the result of sound governance, focused management, engaged employees 
and the effective use of technology, both in operations and 
administrative activities.
    Total revenue of $70 billion in 2005 was up from $66.7 billion in 
2002. This is a positive reflection of our efforts to drive growth by 
adding value to the mail by adding products, services and features that 
meet the needs of our customers, and by expanding access, making it 
easier than ever for all mailers to do business with the Postal 
Service. Significantly, our customers experienced a full 3\1/2\ years 
of rate stability during this period.
    Our focus on the bottom line was matched by a focus on service. We 
closed fiscal year 2005 with 11 straight quarters of 95 percent or 
better on-time delivery of First-Class Mail with an overnight service 
commitment. Similarly, customer satisfaction continued to maintain 
record levels.
    Through the dedication and performance of the 700,000 men and women 
of the Postal Service, we have sustained our historic mission to bind 
the Nation together and we remain a vital part of American commerce and 
American life.
    And yet, the challenges we face have never been greater.
    While we had record volume of 212 billion pieces in 2005, this was 
marked by a challenging trend in the mix of mail entering our system. 
For the first time in our history, Standard Mail, primarily catalogs 
and advertising mail, has exceeded First-Class Mail volume; it is now 
our largest volume category.
    At the same time, First-Class Mail growth was essentially flat, 
with a 4 percent decline in single piece First-Class Mail offset by 
growth of just below 4 percent in workshare First-Class Mail.
    Single piece First-Class Mail is most vulnerable to electronic 
diversion, and we expect its continued decline as businesses, 
organizations, governments, and consumers increasingly shift 
transactions from the mail to the Internet. Since 1998, the volume of 
single piece First-Class letters has declined by 20 percent--11 billion 
pieces--representing a revenue loss of $3 billion. From a revenue 
perspective, it takes two to three pieces of Standard Mail to make the 
same contribution to system overhead as just one piece of First-Class 
Mail.
    While 2005's total mail volume set a new record of 212 billion 
pieces, the shifting mix of the mail has affected revenues 
substantially. At 2005 postage rates, the lower volume and the specific 
mail mix of 2000 would have generated $3.3 billion more in revenue.
    We are also challenged by continued growth in our delivery network, 
which must expand to serve about 2 million additional homes and 
businesses every year. The costs of this expansion, coupled with the 
financial effects of the changes in the mail mix, have resulted in a 
continued decline in revenue per carrier delivery.
    And we are faced with steady increases in costs over which we have 
little or no control. Every 1 cent increase in the cost of gasoline 
adds $8 million to our costs. Last year alone, our transportation costs 
increased by $468 million, due primarily to higher fuel costs.
    Despite significant reductions to our workforce, the cost of health 
benefits for current employees has doubled since 2001, reaching $5.1 
billion in 2005. Over the same period, retiree health benefits have 
grown from $858 million to $1.5 billion. Overall, retirement and health 
benefits for active and retired Postal Service employees, most of which 
are statutorily mandated, accounted for $14 billion last year, fully 20 
percent of all Postal Service costs, and an increase of almost $1 
billion from 2004.
    Looking ahead, we are concerned by a sluggish economy. For the 
fourth quarter of 2005, the Gross Domestic Product increased by only 1 
percent. This was reflected in the Postal Service's first quarter 
results, with First-Class Mail volume down by 3.8 percent, compared to 
the same period last year, producing a $415 million revenue decline. 
This was only partially offset by growth of 0.5 percent in Standard 
Mail volume, representing a revenue increase of just $30 million. 
Clearly, this is a trend that is unsustainable in the long term.
    It is our experience that mail use is an indicator of general 
economic activity. Quarter 1 results suggest that customers are 
changing their mailing behavior in response to the economy. We are 
monitoring this situation carefully and we will continue to do 
everything we can to increase efficiency to help offset any continued 
volume decline.
    Our focused transformation efforts since 2002, coupled with the 
limited-term financial relief provided by the Postal Civil Service 
Retirement System Funding Reform Act of 2003, Public Law 108-18, have 
made it possible for us to absorb rising costs without the need to 
raise rates to meet increased operational costs since June, 2002.
    The recent 5.4 percent across-the-board postage increase was 
implemented solely to meet the $3.1 billion escrow payment required 
this year by Public Law 108-18. None of the revenue from the new rates 
is available to offset other costs as they continue to rise over the 
coming months and years. As a result, we are projecting a loss of up to 
$2 billion this year.
    Reluctantly, we have concluded that it will be necessary to ask the 
Governors of the Postal Service to file a rate case in the near future. 
While we have not determined when the filing will occur, we are working 
closely with the Governors as we prepare for this action. This would 
represent the first adjustment in the price of postage since mid-2002 
to address operational cost increases.
    As I mentioned, the Postal Service and its customers have benefited 
from our strategy of pursuing increased productivity. In just the last 
year, this has resulted in the equivalent of more than $700 million in 
cost savings. Looking forward, we must do everything possible to 
support continued productivity growth.
    Building on the momentum of our original Transformation Plan, our 
Strategic Transformation Plan 2006-2010, is keeping us focused on our 
core business and the strategies we know produce results. We will 
promote growth by continuing to create more value for every customer. 
We will continue to reduce costs by improving efficiency in all of our 
operational and business processes. We will bring service performance 
to even higher levels. And we will achieve these results with an 
energized, customer-focused workforce.
    Our transformation goals, and the methods we will use to achieve 
them, were developed to help us push the limits of business 
effectiveness and operational efficiency. They represent a sound 
approach to a dynamic business environment. They are effective. We 
believe they have the potential to be even more effective when applied 
to a business model that addresses the challenges of a new century.
    I am also here today with more immediate needs--our appropriations 
request for fiscal year 2007. This request covers funding for revenue 
forgone and free and reduced rate mail. Our request differs from the 
amounts recommended by the administration's fiscal year 2007 budget in 
several ways.
    Our first request is for $29 million for revenue forgone 
reimbursements. The administration's budget does not include funding 
for the Federal Government's own debt to the Postal Service for 
services required by statute. In accordance with the Revenue Forgone 
Reform Act of 1993, the Postal Service is to receive $29 million 
annually through 2035. This payment covers the cost of services we were 
required to provide in fiscal years 1991 through 1993, but for which 
there were insufficient amounts appropriated. It also covers payment 
for services provided from fiscal year 1994 through 1998.
    For two decades after the creation of the Postal Service, Congress 
continued to fund reduced postage rates for certain categories of mail 
and mailers through the so-called ``revenue forgone'' appropriations. 
Congress required that the Postal Service provide reduced postage rates 
as well as free mail for purposes which Congress considers to be in the 
public interest. These favored types of mail included reduced-rate bulk 
standard mail advertising sent by qualified non-profit organizations, 
and in-county mailings of local newspapers. These appropriations were 
devoted entirely to the benefit of these historically-favored mailers, 
and did not financially benefit the Postal Service.
    Under the provisions of the Revenue Forgone Reform Act of 1993, 
approximately half of the former taxpayer subsidy to non-profit mailers 
was transferred to regular-rate postal customers, and that portion of 
the ``revenue forgone'' subsidy was ended. In this same legislation, 
Congress authorized a series of 42 annual appropriations of $29 
million, without interest, as reimbursement for $1.2 billion in costs 
incurred by the Postal Service ($515 million in past under-funding of 
revenue forgone plus the cost of phasing reduced postage rates to 
higher levels over 5 years, under the Revenue Forgone Reform Act). The 
outstanding balance on this debt is approximately $840 million. This 
year's appropriation would be the fourteenth in the series of 42 annual 
payments to reimburse the Postal Service the $1.2 billion owed for 
these purposes. Failure to fund this authorized appropriation places 
the remaining debt of nearly $840 million at risk of nonpayment.
    As the Postal Service continues to responsibly address its long-
term obligations, it is counter-productive to increase those costs 
through non-payment of a debt already deferred by interest-free 
installment payments spread over a period of 42 years.
    The second part of our request is for $123.7 million in payment for 
costs imposed on the Postal Service by statute. This $123.7 million is 
for current year costs of $80.127 million and a $43.608 million 
reconciliation adjustment for prior years. This appropriation 
reimburses the Postal Service for the statutory obligations to provide 
free mail for the blind and others who cannot use or read 
conventionally printed materials, the mailing of absentee balloting 
materials that can be mailed free by members of the armed forces and 
other United States citizens residing outside of the United States, and 
balloting materials that can be mailed in bulk between State and local 
election officials.
    This request differs from the administration's budget 
recommendation of $79.915 million. The administration provides $60.725 
million for current year costs plus a $19.190 million reconciliation 
adjustment. The administration's proposal not only provides an amount 
less than that requested, but also continues an ``advance funding'' 
process adopted in recent years of deferring actual payment of the 
recommended funding until the following fiscal year.
    Although this approach provides limited funding for these services, 
these funds are only made available long after the service has been 
delivered. These actions place the postage ratepayer at a greater risk 
of absorbing a social service cost beyond the mission of the Postal 
Service. The Postal Service does not have the authority to control or 
limit these mailings to reduce the funding needed. And we have no way 
to mitigate the shortfall in funding. Providing less than the requested 
amount will continue to compound the financial burden caused by the 
current ``advance'' funding.
    I should note that the Postal Service takes great pride in its 
success in funding postal operations solely through the sale of postal 
products and services. While we are authorized by statute to request a 
public service appropriation every year for costs incurred in providing 
effective and regular postal services nationwide, even in communities 
where Post Offices may not be deemed self-sustaining, we have operated 
without this appropriation since fiscal year 1982, saving the American 
taxpayers more than $11 billion. Again, for fiscal year 2007, we are 
not requesting an appropriation for public service.
    In closing, I would like to take this opportunity to acknowledge 
the hard work and dedication of the men and women of the Postal 
Service. They are at the heart of our success. They are valued and 
trusted members of every community they serve.
    Thank you, Mr. Chairman and members of the subcommittee for the 
opportunity to discuss our fiscal year 2007 appropriations request. I 
would be pleased to respond to any questions at this time.
                                 ______
                                 
           Prepared Statement of the United States Tax Court

    The United States Tax Court provides a national forum for the 
resolution of disputes between taxpayers and the Internal Revenue 
Service (IRS). As such, the U.S. Tax Court handles over 95 percent of 
Federal tax cases.
    The Tax Court is uniquely able to deal with disputes arising under 
the Nation's tax laws. As the largest Federal trial court, we receive 
and close approximately 23,000 cases each year. The Court maintains 
numerous courtroom facilities and conducts hundreds of weeks of trial 
sessions in 77 cities across the United States. The Court accomplishes 
this mammoth task with less than 300 employees, including the judges 
and their staffs.

                      TAX COURT CASES AND WORKLOAD

    Significantly, the Tax Court has no control over the type or volume 
of cases that are docketed. Congress, through legislation; the Internal 
Revenue Service, through its audit and enforcement activity, and 
taxpayers by their choice of forum determines our caseload.
    Deficiency cases comprise 90 percent of the current caseload. The 
remaining 10 percent of cases include: administrative costs, abatement, 
employment classification, lien/levy, Tax Equity and Fiscal 
Responsibility Act of 1982 (TEFRA) partnership, declaratory judgment, 
and section 6015 (stand alone, innocent spouse) cases. The Court's 
pending caseload increased by 4 percent in fiscal year 2005. The 
largest increase was in deficiency cases.
    The Tax Court's fiscal year 2007 budget request anticipates a 
moderate increase in cases of all types. The estimated caseload in 
fiscal year 2007 is in part, based on the increase in audit and 
enforcement activity projected by the IRS.

                    FISCAL YEAR 2007 BUDGET REQUEST

Staffing Needs
    The Tax Court studied caseload data and projections of IRS audit 
and enforcement activity and determined that it could lower the number 
of funded vacancies from 40 to 15. Maintaining these positions provides 
the Court the flexibility to promptly address increases in caseload. 
The requested positions allow the Court to make contingency plans for 
changes in workload. With no control over the flow of cases into the 
Court, it is prudent to maintain the flexibility to respond to 
increases in workload.
    The Court expects to have a stable staffing pattern in fiscal year 
2007. However, the Court, as of June 1, 2006, will have only 17 of 19 
of its presidentially appointed judges on board. Funding for two 
additional presidentially appointed judges and staff is included in the 
Court's request.

Training
    As mentioned in the fiscal year 2007 budget request, the training 
program for Court employees is ongoing. The program, begun in 2005, 
focuses on improving employees' job-related skills and helping them 
become eligible for greater responsibility as part of the Court's 
succession plan.
    The Tax Court has a large number of employees eligible to retire. A 
total of 43.2 percent of the Court's staff can retire over the next 5 
years. Of the total eligible to retire, 19.7 percent are eligible now. 
The training program is a key part of the Court's succession plan. The 
Court is identifying and training employees, so they are ready to fill 
positions of increased responsibility or areas where the Court lacks 
sufficiently trained staff.
    Training is provided consistent with guidelines for employee 
training contained in 5 C.F.R. Part 410. The Court maximizes its 
training dollars by providing on-site group training where possible.

Modular Furniture
    In 2005, the Court initiated a project to replace a large inventory 
of outmoded wooden desks purchased in 1985, with modular furniture. The 
modular or systems furniture more suitably accommodates today's office 
technology by providing built-in electrical outlets and wiring raceways 
for computer and printer equipment. It provides a further advantage 
over the traditional desk configuration by offering better space 
economy and the flexibility to reconfigure workspace to meet the 
requirements of workload and corresponding staffing changes. To date, 
using modular furniture has allowed the Court to more efficiently use 
the space in its headquarters.
    The fiscal year 2007 budget request builds on this replacement 
project. Fiscal year 2007 is the final year for replacing old, 
traditional office furniture with new, efficient modular furniture. The 
Tax Court is establishing a cyclical replacement program to ensure 
cost-effective use and replacement of furniture in the future.

Field Courtroom Restoration
    In fiscal year 2006, the Court initiated a multi-year effort to 
survey, renovate and refurnish, as needed, its field courtroom 
inventory. The Court's national jurisdiction requires its judges to 
travel to over 70 cities providing litigants with a geographically 
convenient forum. The Court leases courtroom and chambers space in 35 
of these cities. Many of these leased sites have not been refurnished 
or refurbished in 20 years. Several of these facilities are in dire 
need of new furniture to replace worn 25-year-old equipment. Several 
facilities are in need of new carpet and paint, and a handful will 
undergo minor remodeling to correct deficiencies.
    We are also installing technology systems cabling in all of the 
leased field courtroom and chambers to facilitate networking 
capabilities with headquarters. Judges and Court personnel will have 
secure electronic access to the Court's network and their case files. 
All of the Court's case information is now electronically stored and 
must be accessible by the judges and staff when they are hearing cases 
across the country.
    We expect to spend approximately $1 million in our field courtroom 
renovation project in fiscal year 2006. This effort will address, at a 
minimum, the problems in one-third of the Court's leased space 
inventory. The fiscal year 2007 request contains funding to accomplish 
needed upgrades in another one-third of field courtrooms. We anticipate 
requesting funds for the final one-third of needed renovations for 
fiscal year 2008.

Technology Upgrades
    The Court's fiscal year 2007 budget request continues the cyclical 
replacement of technology begun in the fiscal year 2006 budget. In 
addition to replacing or upgrading technology at the Court, we have 
been engaged in a comprehensive review of our operating procedures in 
an effort to enhance our services to the tax bar and the taxpayers we 
serve. This comprehensive evaluation is intended to result in the 
application of technological tools, such as automated master 
calendaring, comprehensive document imaging and RFID (radio frequency 
identification) enabled records tracking, to improve the quality of 
service and the speed at which it is delivered. We expect to continue 
these improvements within the funding levels requested in the fiscal 
year 2007 budget.
    The Tax Court implemented a new telephone system in February 2006. 
The Court is now using a voice-over-internet protocol for its phone 
service. This technology allows Court judges and employees who travel 
to retrieve voice mail wherever they are by phone or through a web 
portal. This technology provides faster, less expensive, and more 
efficient communication between Headquarters staff and traveling judges 
and employees. The Court also purchased and installed a server that 
runs SQL software, allowing us to implement improvements in our 
accounting, purchasing, payroll and human resources systems. The Tax 
Court appreciates the subcommittee's support for these projects that 
will make the Tax Court more efficient in accomplishing its mission.
    The Tax Court is launching an e-filing pilot project this year that 
will be ready for beta testing in fiscal year 2007. In connection with 
this, the Court is currently reprogramming its case management database 
and ancillary systems from a legacy language to a sequel medium to 
permit them to operate on a SQL server. As a result, the Court will be 
able to receive and process electronically delivered case documents. In 
advance of implementation, we will update our attorney admissions and 
enrollment database and will be training, late this fiscal year or 
early in fiscal year 2007, the enrollees in the selected e-filing pilot 
group on the e-filing program. In addition to facilitating access to 
case data, the Court expects electronic filing will save time for the 
parties and reduce their document processing expenses.

Tax Court Independent Counsel Fund
    The Tax Court independent counsel fund is established by IRC 
section 7475. The Tax Court uses the fund to retain counsel to assist 
the Court in its attorney disciplinary process, for example, 
investigations of alleged misconduct.
    The monies in the independent counsel fund are derived from fees 
charged to individuals who wish to practice before the Court. The 
current balance in the independent counsel fund is $404,239.18.
    The Tax Court Modernization Act, S. 661, would expand the Court's 
authority to use the fund to provide more services for pro se 
taxpayers.

The Judges' Survivors Annuity Fund (JSAF)
    The Judges' Survivors Annuity Fund was statutorily created to 
provide survivor benefits for the spouses and eligible children of 
presidentially-appointed Tax Court Judges. The Judges' Survivors 
Annuity (trust) Fund is funded with approximately $8.5 million. The 
majority of the funds are invested in Treasury securities with a 
portion held aside to pay current annuitants. In addition to income 
from interest payments, judges contribute 3.5 percent of their salary 
or retired pay to the fund. The JSAF is voluntary. Of the 32 judicial 
officers of the Tax Court, 21 participate in and contribute to the 
JSAF. Additional funds, subject to a maximum of 11 percent of the 
participating judges' salaries and based on an annual actuarial study, 
are paid into the fund from the Tax Court's annual appropriation to 
ensure that the JSAF is actuarially sound. The fiscal year 2006 
liability for survivorship annuity payments is $511,911.
    For fiscal year 2007, the Tax Court is requesting budget authority 
of $1 million in order to make payments to the annuitants of the JSAF.

               OTHER MATTERS OF CONCERN TO THE TAX COURT

    The following matters are of concern to the Tax Court. The Court is 
not asking the subcommittee for any funds in its fiscal year 2007 
budget to address these concerns. These matters are being brought to 
the subcommittee's attention because of their possible impact on future 
budget requests by the Court.

Security
    Unlike other Federal judicial officers, the U.S. Tax Court Judges 
are not protected by the United States Marshals Service (USMS). While 
Tax Court Judges do not hear criminal matters, they are involved with 
tax protesters and other individuals who wish to express their 
opposition to the United States Government. The Marshals Service is not 
always available to provide courtroom security for Tax Court Judges. 
They do not provide any security directly to the Tax Court in its 
Washington, DC Courthouse and offices. The Tax Court has a contractual 
agreement with the Marshals Service to provide special security 
officers for the Tax Court building in Washington, DC. The USMS has 
informed the Tax Court that the Court will have to bear more of the 
cost of providing courthouse security in Washington, DC, as well as in 
each of the cities in which we conduct trial sessions. The USMS also 
has informed the Court that they are not legally required to provide 
outside-of-the-courthouse security to our Court.
    The Tax Court believes that the security needs of its judicial 
officers require the same level of attention as provided for the safety 
and security of judicial officers in other Federal courts. The Tax 
Court will continue to work with the Marshals Service and Congress to 
ensure the security of its judges.

Leased Space
    The Tax Court holds trial sessions in over 70 cities. The Court 
currently leases courtroom and chambers space in 35 cities. As noted in 
our fiscal year 2006 budget, the Court reviewed its space usage and was 
able to reduce some of its leased space. We continue to monitor our 
space needs and work with the General Services Administration (GSA) to 
obtain the space we need to serve the taxpayers.
    In the cities in which the Court does not lease space, it must try 
to borrow space in Federal courthouses and other Federal buildings. The 
Court finds it increasingly difficult to borrow suitable space in which 
to hold trial sessions. We are working with GSA to lease space in 
Seattle, Washington; Nashville, Tennessee; and Columbia, South 
Carolina, as we have been unable to borrow space from other courts in 
these cities. The Court continues to work with other Federal courts to 
obtain space when needed in order to conduct sessions throughout the 
country. Because the Tax Court must provide a convenient Nation-wide 
litigation forum, it cannot reduce its space budget at this time.
    The Tax Court remits it annual rental payments to GSA. The rental 
payments made to GSA are approximately 20 percent of the Court's 
operating budget.

                               CONCLUSION

    The Court is carefully monitoring its use of resources. The Court 
also tries to use technology wherever possible to help reduce the cost 
of service delivery. Substantially all of the Court's budget is non-
discretionary--spent for salaries, courtroom space rental, and travel 
and transportation. The Tax Court also pays for its retired judges from 
its appropriation, a practice that does not exist in most Federal 
agencies.
    We have one program--managing docketed cases and providing a trial 
forum for those cases that are not settled prior to trial. In a large 
agency, a rescission or budget cut might be absorbed by reducing or 
eliminating one of several programs. With only one program or mission 
and no discretion over the volume or type of cases the Tax Court 
receives, we cannot easily absorb reductions to our budget.
    However, the Court's ongoing efforts to control costs, improve the 
Tax Court's infrastructure, and efficiently manage the Court's business 
resulted in a $888,000 reduction to the overall budget request for 
fiscal year 2007.
    The Court is committed to being an effective steward of its 
resources while meeting its responsibilities to carry out its mission. 
The Tax Court's fiscal year 2007 request was designed to address the 
Court's needs and those of the government and taxpayers who appear 
before the Court. Thank you for your consideration of our fiscal year 
2007 request.
                                 ______
                                 
   Prepared Statement of the Honorable Hal Stratton, Chairman, U.S. 
                   Consumer Product Safety Commission

    I appreciate this opportunity to present to the subcommittee the 
appropriation request for the U.S. Consumer Product Safety Commission 
(CPSC) for fiscal year 2007. CPSC is an independent, bipartisan agency 
charged with protecting children and families from unreasonable risks 
of serious injury or death from more than 15,000 categories of consumer 
products under the agency's jurisdiction. Since its inception, CPSC has 
delivered critical safety benefits to America's families and has made 
significant contributions to the 30 percent decline in the rates of 
injuries and deaths related to hazardous consumer products.
    While we are proud of these achievements, there still remains an 
average of over 25,000 deaths and 33 million injuries every year from 
consumer product incidents. These injuries and deaths and property 
damage cost the Nation more than $700 billion annually. Because new 
products, new trends and new technologies are continuously being 
introduced into the marketplace, and subsequently into the American 
home, improving consumer product safety is never a completed task but 
always an ongoing process of research, standards development, 
enforcement and public education.
    The CPSC appropriation request for fiscal year 2007 is $62,370,000. 
This is the same funding level as the agency's final 2006 
appropriation. To manage this funding projection for 2007, staff levels 
at the agency are again being reduced through natural attrition and 
incentives, such as ``early outs'' and ``buy outs.'' Such actions will 
allow the agency to meet the increased costs of salaries and increased 
costs related to infrastructure that supports the agency's mission.
    CPSC is a staff intensive organization with 80 percent of its 
funding going to staff salaries. Primarily as a result of the proposed 
2.2 percent Federal pay increase for 2007 and other compensation costs, 
we estimate that the cost of staff will increase in the new fiscal year 
by $2 million. To achieve the necessary savings to pay this increase, 
CPSC's staffing level for fiscal year 2007 is targeted to be 420 FTEs, 
a decrease of 20 FTEs from the current fiscal year and a decrease of 51 
FTEs from fiscal year 2005. This represents a decrease in our FTE 
ceiling during these 2 fiscal years of over 10 percent.
    We estimate that non-salary costs such as service contracts, IT 
equipment and software maintenance will also increase. For example, 
over the past few years we have been required to implement several new 
operating systems, purchase IT infrastructure improvements, and provide 
increased building and information technology security enhancements. 
These system startups and enhancements all have recurring annual 
maintenance charges and cost increases.
    Additionally, we foresee an increase in the cost of operation of 
our most important data source, the National Electronic Injury 
Surveillance System (NEISS), an internationally-recognized hospital 
emergency room injury reporting system which provides national 
estimates for injuries related to consumer products. CPSC staff 
annually reviews about 360,000 product-related injuries reported by 
NEISS.
    Because quality data is central to the execution of CPSC's mission 
and lays the groundwork for the agency's standards setting and related 
hazard reduction activities, continuously maintaining and improving the 
overall quality of NEISS and other CPSC data is critical. Data 
collection is the foundation of the agency's early warning system that 
identifies hazardous products, injury patterns, and causes of deaths 
and injuries. Early identification of product hazards by our Office of 
Hazard Identification and Reduction allows CPSC to take prompt action 
to prevent and reduce injuries and deaths. This information is the 
underpinning of the agency's decision-making process as it relates to 
voluntary standards development, compliance, consumer education, 
product labeling, and rulemaking initiatives.
    One example of a CPSC rulemaking that relied on the quality of our 
data is the new open-flame flammability standard for mattresses that 
was promulgated earlier this year. This is one of the most important 
safety standards ever adopted by the agency; it is estimated that when 
fully effective, the new standard will save over 250 lives per year. As 
with all Federal standards, its success and effectiveness rely on the 
accuracy, precision and soundness of the data that was used to develop 
it.
    CPSC's mandatory safety standards are enforced by our Office of 
Compliance. In fact, whenever potential product hazards are identified, 
the Compliance staff conducts investigations to determine whether 
corrective action is required. In addition to monitoring compliance 
with safety standards by conducting field inspections of manufacturing 
facilities and distribution centers and making purchases at retail 
establishments or via the internet, CPSC Compliance staff also conducts 
surveillance and sampling of imported products at the Nation's ports of 
entry.
    In 2005, CPSC staff conducted over 250 seizures and detentions 
involving almost 4 million units of imported products at the ports 
because of possible safety hazards. Examples of these products included 
over 240,000 units of hazardous toys and other children's products and 
over 1.3 million non-complying fireworks devices.
    Our governing statutes also permit the Commission to assess civil 
penalties. Due to aggressive enforcement of our safety laws, 2005 set a 
new record with civil penalty assessments of $8.8 million including the 
largest civil penalty ever issued by the agency against a company that 
failed to report some 12 million products that posed a danger to young 
children. (All of these amounts are paid to the U.S. Treasury and none 
are retained by CPSC.) In addition, staff assisted in securing criminal 
convictions for violations of the Federal Hazardous Substances Act.
    In 2005, CPSC announced 398 cooperative recalls, also an all-time 
record for the agency, involving a wide range of products that included 
defective bicycles, cribs, all-terrain vehicles, gas grills and 
pacifiers. Over 100 of these recalls were for toys and other children's 
products involving nearly 16 million production units.
    A key element of any recall is the targeted public notice that goes 
out to alert owners of the product to the hazard and to the remedies 
that are available to them. This effort is led by CPSC's Office of 
Information and Public Affairs which uses numerous outlets to publicize 
the recall.
    In 2005 Public Affairs staff informed the public of hazardous 
products through 383 press releases and recall alerts, 1.2 million 
distributed publications (in English and in Spanish), numerous 
appearances on network television, and through CPSC's consumer hotline 
and website that had an increase in consumer ``hits'' from 200,000 in 
1997 to 13.7 million in 2005. Staff also placed a number of video news 
releases that reached an audience of over 85 million viewers and 
conducted national public awareness campaigns throughout the year on 
critical issues such as swimming pool safety.
    As noted earlier, one of the major challenges facing the agency is 
the surge in imported consumer products. In addition to our activities 
at the ports-of-entry, the Office of International Programs and 
Intergovernmental Affairs has been expanded to focus on this challenge. 
Through this office CPSC has established working relationships with our 
counterparts in other countries through the execution of formal 
memoranda of understanding with 11 foreign governments including major 
trading partners such as China, Mexico, Canada, and the European Union.
    As I stated last year, China is the No. 1 toy-producing country and 
the United States is the No. 1 toy-consuming country in the world. It 
is critical that we work to make certain these imported products are 
safe for American families before they are ever put on a ship bound for 
an American port.
    CPSC is a small agency with a big mission. By any measure, each 
year CPSC saves the Nation many times the agency's annual budget. 
Through our standards work, compliance efforts, industry and consumer 
partnerships, and education programs, the agency contributes to 
substantial reductions in deaths and injuries from a wide variety of 
hazards. Notable CPSC ``success stories'' include significant death and 
injury reduction over the years from residential fires, electrocutions, 
carbon monoxide poisonings, and child poisonings. In fact, consumer 
product-related deaths in these hazard areas decreased by almost 500 
deaths per year by the end of the period covered by our first Strategic 
Plan.
    We have worked diligently to generate savings and implement 
efficiencies to offset the cost increases that we confront. We have 
achieved substantial cost savings in the past with such efforts as 
replacing regional offices with field telecommuting.
    In 2005, we began the process of reducing our FTE ceiling from 471 
to 440. We achieved those staff reductions, primarily, by focusing on 
administrative efficiencies. With expected 2006 attrition, by offering 
``early outs'' and ``buy outs'', and by careful attention to filling 
only critical vacancies, the agency plans to achieve the necessary 420 
FTE staff level by the start of 2007. Our goal is to carefully adjust 
our activities to this reduced resource level in such a manner that the 
remaining programs continue to adequately protect American families.
    I appreciate the committee's continued interest in our work, and I 
want to assure the senators that we at the CPSC remain committed to our 
mission to reduce product hazards and to assure the safety of the 
consumer products that are used in our homes, backyards and playgrounds 
across the Nation.
                                 ______
                                 
Prepared Statement of Patricia Black, Deputy Inspector General, Office 
      of Inspector General, Federal Deposit Insurance Corporation

    Mr. Chairman and members of the subcommittee, I am pleased to 
present the fiscal year 2007 budget request totaling $26.3 million, or 
$4.4 million less than fiscal year 2006 (including a 1 percent 
rescission) for the Office of Inspector General (OIG) at the Federal 
Deposit Insurance Corporation (FDIC). This budget has been possible 
because of the improved health of the banking industry since the early 
1990's, the continued staff downsizing at the FDIC and within the OIG, 
and our internal efforts to improve our performance and productivity 
even with reduced budgets.
    As you know, the FDIC was established by the Congress in 1933, 
during the Great Depression, to maintain stability and public 
confidence in the Nation's banking system. Our Nation has weathered 
several economic downturns since that era without the severe panic and 
loss of life savings unfortunately experienced in those times. The 
Federal deposit insurance offered by the FDIC is designed to protect 
depositors from losses due to failures of insured commercial banks and 
thrifts. While the basic insurance coverage of individual deposits 
remains at $100,000, as of April 1, 2006 the FDIC raised the deposit 
insurance coverage on certain retirement accounts to $250,000 from 
$100,000. As of December 31, 2005, the FDIC insured $3.893 trillion in 
deposits for 8,845 institutions, of which the FDIC supervised 5,245. 
The FDIC also promotes the safety and soundness of these institutions 
by identifying, monitoring, and addressing risks to which they are 
exposed.
    The Corporation reports that financial institutions have recently 
had record earnings. The rate of bank and thrift failures has remained 
at a relatively low level over the past 10 years, and the Corporation 
has substantially reduced its estimates of future losses from failures. 
In fact, 2005 was the first year in the FDIC's history where no 
institution has failed, nor has 2006 seen any failures to date. Assets 
held in receiverships following bank failures are at comparatively low 
levels, and significant progress has been made in closing older 
receiverships. These are important indicators of a healthy banking 
system, and the Corporation can take pride in its positive 
contributions in these areas.
    The FDIC OIG is an independent and objective unit established under 
the Inspector General Act of 1978, as amended (IG Act). The OIG's 
mission is to promote the economy, efficiency, and effectiveness of 
FDIC programs and operations, and protect against fraud, waste, and 
abuse to assist and augment the FDIC's contribution to stability and 
public confidence in the Nation's financial system.
    As the Deputy Inspector General, I have led the office since 
January 2005 (when Gaston L. Gianni, Jr. retired). I will continue to 
dedicate myself to carrying out the mission of the OIG until an 
Inspector General is confirmed. In this capacity, I will support the 
Congress, the FDIC Chairman, and other corporate management in meeting 
current and future challenges facing the FDIC and the banking industry.
    I am proud of the work the OIG accomplished this past fiscal year. 
This statement discusses the fiscal year 2005 accomplishments, our 
assistance to FDIC management, internal management and operational 
initiatives to improve the OIG, and our new ``2006 Business Plan''. I 
am also providing additional details about our fiscal year 2007 budget 
and how it will be spent.

      A REVIEW OF THE FDIC OIG'S FISCAL YEAR 2005 ACCOMPLISHMENTS

    As in past years, during fiscal year 2005, our work resulted in a 
number of major achievements, as follows:
  --$42.4 million in actual and potential monetary benefits;
  --76 non-monetary recommendations to FDIC management;
  --42 referrals to the Department of Justice;
  --36 indictments/informations;
  --27 convictions; and
  --3 employee/disciplinary actions.
    More specifically, our accomplishments included 38 completed 
investigations that led to the above indictments and convictions as 
well as fines, court-ordered restitution, and recoveries that 
constitute slightly over $29.5 million in actual and potential monetary 
benefits from our work. Also, we issued a total of 40 audit and 
evaluation reports, which included about $3.3 million in questioned 
costs and $9.5 million in recommendations that funds be put to better 
use. The audit reports contained 76 non-monetary recommendations to 
improve FDIC policies, operations, and controls that ultimately are 
designed to improve FDIC's ability to effectively and efficiently 
accomplish its mission. A number of these recommendations addressed 
important cross-cutting corporate issues, e.g., the corporate planning 
process, the use of consultants, and human capital.
    Further, the OIG accomplished many of its organizational goals 
during the fiscal year as outlined in our annual performance plan. Our 
2005 Performance Report shows that we met or substantially met 31 of 
our 37 goals, or 84 percent. This compares to 76 percent met or 
substantially met in 2004. In a measurable way, this achievement shows 
the progress we continue to make in adding value to the Corporation 
with our audits, investigations, and evaluations in terms of impact, 
quality, productivity, and timeliness.
    Examples of the OIG's audit, investigation, and evaluation work 
that contributed to these accomplishments follow:

Bank Fraud in Connection with BestBank Failure
    After a 3-week trial in the U.S. District Court, District of 
Colorado, a jury found the owners of Century Financial Services, Inc. 
and its successor Century Financial Group, Inc. (Century), guilty on 
charges of conspiracy, bank fraud, wire fraud, and operating a 
continuing financial crimes enterprise that contributed to the 1998 
failure of BestBank in Boulder, Colorado.
    By way of background, the owners owned and operated Century, a 
company that marketed and sold travel club memberships to subprime 
borrowers. Subprime credit card borrowers are high-risk borrowers with 
poor credit histories. The subprime borrower would finance a membership 
by charging it to a new BestBank unsecured VISA card. In 1998, the 
largest asset of the bank was the portfolio of subprime credit card 
accounts containing more than 500,000 credit card accounts with a 
reported value of more than $200 million.
    From 1996 through July 1998, the defendants, through Century, 
applied $20 credits to the accounts of numerous cardholders who did not 
pay their credit card bill and whose accounts otherwise would have 
grown increasingly delinquent. These payments made the portfolio appear 
to be performing better than it was. During this same period of time, 
BestBank continued to fund the growing credit card portfolio with 
insured deposits. In July 1998, the Colorado State Banking Commissioner 
and the FDIC determined that the value of the subprime credit card 
portfolio, the primary asset of BestBank, was overstated because 
delinquent loans were fraudulently made to appear current. BestBank was 
found to be severely undercapitalized, with losses exceeding $200 
million, resulting in one of the largest adverse impacts to the Bank 
Insurance Fund in the last 10 years.
    While Century earned in excess of $460 million in gross receipts, 
the owners each derived more than $11 million from the offenses. Each 
of them faces a possible mandatory minimum sentence of 10 years to life 
in Federal prison and fines of up to twice the amount gained from 
committing the offenses. Sentencing has not yet been scheduled by the 
Court.
    Also charged in the same indictment for offenses relating to the 
failure of BestBank are the dissolved bank's Chief Executive Officer 
and Chairman of the Board, the Chief Financial Officer, and the 
President. The jury trial against the remaining three defendants is 
scheduled to begin in July 2006.
    We investigated the case jointly with the FBI and the IRS Criminal 
Investigative Division. The U.S. Attorney's Office for the District of 
Colorado and the U.S. Department of Justice are prosecuting the case.

Investigation Into Misapplication of Bank Funds at Connecticut Bank of 
        Commerce
    The former chairman of the board of directors of Connecticut Bank 
of Commerce was sentenced in January 2005, to 51 months' incarceration 
and 36 months' supervised release after pleading guilty to one count of 
misapplication of bank funds. No criminal restitution was ordered by 
the court because the parties agreed that the former chairman's payment 
of $8.5 million to the FDIC, as part of his settlement of the agency's 
administrative charges, satisfied all losses directly related to his 
criminal conduct.
    We conducted this investigation jointly with the FBI. The U.S. 
Attorney's Office for the District of Connecticut prosecuted the case.

FDIC's Supervision of an Institution's Compliance With the Bank Secrecy 
        Act (BSA)
    We conducted this audit in response to a congressional request for 
our independent assessment of the circumstances related to an 
institution's BSA violations. We reported that responsibilities to 
ensure compliance with BSA were not adequately fulfilled by either 
institution management or the FDIC. In addition, FDIC examinations 
lacked sufficient follow-up on corrective measures to address BSA 
violations. Further, the FDIC needed to more thoroughly consider the 
impact of BSA compliance violations when qualifying potential acquirers 
of a failed institution. As a result of our recommendations and its own 
initiatives, the FDIC has made significant improvements in, and is 
devoting substantially more resources to, its supervision of 
institution BSA compliance programs.

FDIC's Investment Policies
    We issued a report on the results of an audit conducted by 
PricewaterhouseCoopers, LLP to determine whether the FDIC's investment 
strategy and portfolio management procedures provided the highest 
possible investment returns for the FDIC. This audit concluded that the 
FDIC's Division of Finance performed well in managing the FDIC's 
investment portfolio in the context of the applicable legal and 
regulatory framework, stated investment strategy, interest rate 
environment, and assessment of certain insured institutions undergoing 
financial stress.
    The audit identified opportunities for the FDIC to improve the 
return on its investments through two broad courses of action. First, 
in certain market environments, the FDIC should decrease holdings in 
overnight certificates and increase holdings in longer-maturity 
securities. Second, the FDIC should explore the possibility of changes 
in its investment approach, such as expanding the universe of allowable 
investments. We recommended that the Corporation perform an internal 
review of its investment policies, adopt certain performance measures 
and goals, and obtain periodic independent reviews of the investment 
program. All recommendations in the report were resolved.
    Our semiannual reports to the Congress provide many other examples 
of OIG work that has contributed to fiscal year 2005 accomplishments. 
These reports can be found on our Web page at http://fdicig.gov or 
obtained by contacting our office.

                     ASSISTANCE TO FDIC MANAGEMENT

    In addition to 2005 audits, investigations, and evaluations, the 
OIG made contributions to the FDIC in several other ways. We strive to 
work in partnership with Corporation management to share our expertise 
and perspective in certain areas where management is seeking to make 
improvements. Among these contributions were the following activities:
  --Reviewed 35 proposed corporate policies and offered comments and 
        suggestions when appropriate.
  --Provided advisory comments on the FDIC's 2005 Annual Performance 
        Plan and 2005 Annual Report.
  --Participated in division-level conferences and meetings to 
        communicate our audit and investigation work and processes.
  --Provided technical assistance and advice to several FDIC groups 
        working on information technology issues, including 
        participating at the FDIC's information technology security 
        meetings. We also participated in an advisory capacity on the 
        Information Technology Subcommittee of the Audit Committee.

               OIG MANAGEMENT AND OPERATIONAL INITIATIVES

    An important part of our stewardship over the funding we receive 
includes our continuous efforts to improve OIG performance and plans. 
We provide objective, fact-based information and analysis to the 
Congress, the FDIC Chairman, other FDIC officials, and the Department 
of Justice. Our key efforts typically involve our audits, evaluations, 
or criminal investigations conducted pursuant to the IG Act and in 
accordance with applicable professional standards. We also make 
contributions to the FDIC in other ways, such as reviewing and 
commenting on proposed corporate policies and draft legislation and 
regulations; participating in joint projects with management; providing 
technical assistance and advice on various issues such as information 
technology, strategic planning, risk management, and human capital; and 
participating in internal FDIC conferences and seminars.
    The OIG has continued to downsize with the Corporation through 
reorganization, closing two field audit offices, and offering buyouts 
and retirement incentives to impacted employees under an FDIC-wide 
program. The OIG will continue to carry out several key initiatives to 
implement our human capital strategic plan and ensure that the OIG is a 
results-oriented high-performance organization. Many of the planned 
initiatives relate to staff development and include: the establishment 
of a mentoring program; providing training and development related to 
the OIG core competencies and business knowledge needs; and developing 
a strategy to improve the supervisor-staff feedback process.
    Other internal initiatives included our hosting an interagency 
symposium on the Federal Information Security Management Act (FISMA) of 
2002. Representatives from more than 18 Federal agencies attended the 
symposium to share information, ideas, and best practices related to 
the implementation of FISMA. The OIG also hosted an ``Emerging Issues'' 
conference with participants from other OIGs of financial regulatory 
agencies, GAO, regulatory agency officials, and congressional staff. 
The conference brought together distinguished speakers who shared their 
perspectives on the banking and financial services community with 
Inspector General staff in the interest of enhancing the value that 
OIGs can add to their agencies by successfully addressing risk areas. 
We also sponsored the annual conference of the Federal Audit Executive 
Council, a working group comprised of the heads of Federal audit 
organizations. This forum helps ensure that Federal audit organizations 
keep current with auditing standards, practices, priorities, and issues 
of concern.

                             BUSINESS PLAN

    The OIG developed a new business plan that explains what we are 
about, what we want to accomplish, and how we will get there. It also 
provides a means to assess our performance. Our ``2006 Business Plan'' 
represents the results of concerted efforts over time, especially 
during the past year, to improve our planning process and demonstrate 
the value added by our office to sound FDIC governance and to executive 
and legislative branch decision-makers.
    The ``2006 Business Plan'' combines the OIG Strategic Plan and 
Performance Plans. This plan contains six strategic goals to help 
accomplish our mission. In carrying out the key efforts of our plan, we 
will strive to demonstrate to the Congress, the public, the FDIC, and 
the banking industry that the OIG is doing the right things and 
generating results that are a worthy return on the investment made in 
us.
    The complete ``2006 Business Plan'' is available at www.fdicig.gov. 
We have begun the process for developing performance goals and key 
efforts for fiscal year 2007, which will continue building on this 
strategic framework. Our six 2006 strategic goals and selected key 
efforts follow:

Strategic Goal 1.--Assist the FDIC to Ensure the Nation's Banks Operate 
        Safely and Soundly
    Bank supervision is a cornerstone of the FDIC's efforts to ensure 
stability and public confidence in the Nation's financial system. The 
OIG's role under this strategic goal is targeting audits and 
evaluations that review the effectiveness of various FDIC programs 
aimed at providing continued stability to the Nation's banks. The OIG 
also conducts investigations of fraud at FDIC-supervised institutions, 
fraud by bank officers, directors, or other insiders; obstruction of 
bank examinations; fraud leading to the failure of an institution; 
fraud impacting multiple institutions; and fraud involving monetary 
losses that could significantly impact the institution. Below are 
selected key efforts representing ongoing work or work envisioned in 
support of this goal.
  --Conduct material loss reviews of failed banks, as needed;
  --Review bank examination procedures for addressing bank sensitivity 
        to interest rate risks;
  --Investigate criminal obstruction of bank examinations;
  --Review bank examination procedures for addressing electronic 
        banking risks;
  --Review whether bank examinations adequately consider the 
        reliability of property appraisals;
  --Investigate financial institution fraud;
  --Review the FDIC's use of the Financial Crimes Enforcement Network 
        (FinCEN); and,
  --Review the use of Bank Secrecy Act examinations for foreign 
        transactions.

Strategic Goal 2.--Help the FDIC Maintain the Viability of the Deposit 
        Insurance Funds
    FDIC deposit insurance remains a central component of the Federal 
Government's assurance to the public that it can be confident in the 
stability of the Nation's banks and savings associations. Since its 
establishment in 1933, the FDIC has insured deposits up to the legally 
authorized threshold, which historically was at $100,000. For almost 
two decades following bank crises in the late 1980's and early 1990's, 
the FDIC has managed two deposit insurance funds--one for banks with 
about $35 billion, and one for savings and loans with about $13 
billion. These funds, which are primarily an accumulation of premiums 
that insured depository institutions have paid the FDIC and interested 
earned, have been used to pay FDIC operating expenses and insured 
depositors, as necessary. On February 1, 2006, the Congress enacted 
deposit reform legislation that will create a deposit insurance system 
that is more focused on risk and better able to adapt to rapidly 
changing industry. The new deposit insurance reform legislation:
  --Merges the two deposit insurance funds into a single Deposit 
        Insurance Fund.
  --Maintains deposit insurance coverage for individual accounts at 
        $100,000, but provides for indexing for inflation every 5 years 
        beginning in 2010.
  --Increases deposit insurance coverage for retirement accounts to 
        $250,000 and provides for indexing for inflation every 5 years 
        beginning in 2010.
  --Replaces the current Designated Reserve Ratio of 1.25 percent of 
        estimated insured deposits by permitting the reserve ratio to 
        move within a range of 1.15 percent to 1.50 percent of 
        estimated insured deposits.
  --Requires the FDIC to provide cash rebates in amount equaling 50 
        percent of the amount in excess of the amount required to 
        maintain the reserve ratio at 1.35 percent. Requires the FDIC 
        to provide cash rebates in amount equaling the total amount in 
        excess of the amount required to maintain the reserve ratio at 
        1.50 percent.
  --Provides financial institutions with a one-time transitional 
        premium assessment credit based on the assessment base of the 
        institution on 12/31/96 as compared to the combined aggregate 
        assessment base of all eligible depository institutions.
    The Corporation has begun the process for implementing the 
provisions of the new legislation. To date, the FDIC has merged the two 
deposit insurance funds into a single Deposit Insurance Fund and raised 
the deposit insurance coverage on certain retirement accounts to 
$250,000 from $100,000. As insurer, the FDIC must evaluate and 
effectively manage how changes in the economy, the financial markets, 
and the banking system affect the adequacy and the viability of the 
deposit insurance funds. The OIG has a responsibility to evaluate the 
FDIC's programs and operations to ensure that the agency has adequate 
information to gauge the risks inherent as financial institutions 
consolidate, enter into new business areas, and become more global. In 
support of this goal, we have planned the following key efforts.
  --Review the FDIC's approach to risks posed by large or multiple bank 
        failures;
  --Review the FDIC's risk-based premium program;
  --Review the insurance application process for industrial loan 
        companies (ILCs); and,
  --Review FDIC methods for maintaining adequate insurance fund 
        reserves.

Strategic Goal 3.--Assist the FDIC to Protect Consumer Rights and 
        Ensure Community Reinvestment
    The FDIC oversees statutory and regulatory requirements aimed at 
protecting consumers from unfair and unscrupulous banking practices. 
The FDIC has recognized the importance of its role in this regard by 
establishing its own strategic goal to ensure that consumers' rights 
are protected and supervised institutions invest in their communities. 
The FDIC's bank examiners conduct examinations in FDIC-supervised banks 
on a scheduled basis to determine the institutions' compliance with 
laws and regulations governing consumer protection, unfair lending, and 
community investment. When problem institutions are identified, 
primarily through the examination process, the FDIC attempts using 
reason and moral suasion to bring about corrective actions; however, 
the Corporation possesses broad enforcement powers to correct 
situations that threaten an institution's compliance with applicable 
laws. The OIG's role under this strategic goal is targeting audits and 
evaluations that review the effectiveness of various FDIC programs 
aimed at protecting consumers, fair lending, and community investment. 
Additionally, the OIG's investigative authorities are used to identify, 
target, disrupt, and dismantle criminal organizations and individual 
operations engaged in fraud schemes that target our financial 
institutions. Our planned 2006 work towards this goal includes the 
following key efforts:
  --Investigate misrepresentations of deposit insurance coverage;
  --Work with Congress and FDIC management to strengthen enforcement 
        against misrepresentations of deposit insurance;
  --Investigate ``phishing,'' ``pharming,'' and other identity theft 
        schemes;
  --Review multiple FDIC efforts to ensure financial data privacy;
  --Evaluate the FDIC's approach to examining fair lending and 
        community reinvestment;
  --Review risks posed to institutions and the FDIC by predatory 
        lending;
  --Assess how the FDIC makes use of data required by the Home Mortgage 
        Disclosure Act; and,
  --Review how the FDIC addresses deficiencies reported in compliance 
        examinations.

Strategic Goal 4.--Help Ensure That the FDIC is Ready to Resolve Failed 
        Banks and Effectively Manages Receiverships
    When a bank that offers Federal deposit insurance fails, the FDIC 
fulfills its role as insurer by either facilitating the transfer of the 
institution's insured deposits to an assuming institution or by paying 
insured depositors directly. Although there have been far fewer 
failures in recent years than occurred during the years of crisis in 
the banking industry, the FDIC's responsibility for resolving troubled 
institutions remains a challenge. The FDIC reports that failures in 
today's economy would differ in nature, size, and cost from the record 
failures of the 1980's and early 1990's. Nonetheless, the FDIC could 
potentially have to handle a failing institution with a significantly 
larger number of insured deposits than it has had to deal with in the 
past or have to handle multiple failures caused by a single 
catastrophic event.
    The OIG's role under this strategic goal is targeting audits and 
evaluations that assess the effectiveness of the FDIC's various 
programs designed to ensure that the FDIC is ready to and does respond 
promptly, efficiently, and effectively to financial institution 
closings. Additionally, the OIG investigative authorities are used to 
pursue instances where fraud is committed to avoid paying the FDIC 
civil settlements, court-ordered restitution, and other payments as the 
institution receiver. Our office is focusing on the following key 
efforts.
  --Assess the FDIC's planning for large or multiple bank failures;
  --Review the recovery of unclaimed deposits in failed banks;
  --Review the development framework for a new technology-driven asset 
        servicing project; and,
  --Identify and investigate instances of assets fraudulently concealed 
        from the FDIC.

Strategic Goal 5.--Promote Sound Governance and Effective Stewardship 
        of Financial, Human, Information Technology, and Procurement 
        Resources
    The FDIC must effectively manage and utilize a number of critical 
strategic resources in order to carry out its mission successfully, 
particularly its financial, human, information technology (IT), and 
procurement resources. Financial resources are but one aspect of the 
FDIC's critical assets. The Corporation's human capital is also vital 
to its success. The FDIC appreciates the importance of its people, with 
four of its six values, integrity, competence, team work, and fairness 
specifically referencing the workforce.
    Information technology drives and supports the manner in which the 
public and private sector conduct their work. At the FDIC, the 
Corporation seeks to leverage IT to support its business goals in 
insurance, supervision, consumer protection, and receivership 
management, and to improve the operational efficiency of its business 
processes. Along with the positive benefits that IT offers comes a 
certain degree of risk. In that regard, information security has been a 
long-standing and widely acknowledged concern among Federal agencies. A 
key effort for all agencies must be the establishment of effective 
information security programs.
    The OIG's role in this strategic goal is to perform audits, 
evaluations, and investigations that identify opportunities for more 
economical, efficient, and effective corporate expenditures of funds; 
recommend actions for more effective governance and risk management 
practices; foster corporate human capital strategies that benefit 
employees, strengthen employees' knowledge, skills, and abilities; 
ensure employee and contract integrity; inspire employees to perform to 
their maximum capacity; help the Corporation to leverage the value of 
technology in accomplishing the corporate mission; promote the security 
of both IT and human resources; and ensure that procurement practices 
are fair, efficient, effective, and economical. The key efforts below 
are some of the ongoing work or work to be undertaken in support of 
this goal.
  --Evaluate selected FDIC efforts to operate efficiently, effectively, 
        and economically;
  --Review the FDIC's personnel discrimination complaint tracking 
        system;
  --Investigate FDIC employee or contractor misconduct, as needed;
  --Review succession planning initiatives;
  --Review safeguards over sensitive employee information;
  --Review the FDIC's information security, privacy, and data 
        protection programs; and,
  --Review selected procurement practices.

Strategic Goal 6.--Continuously Enhance the OIG's Business and 
        Management Processes
    The OIG's final strategic goal has an internal focus on continuous 
improvement. Our aim under this goal is to:
  --Enhance our own business and management practices;
  --Enhance strategic and annual planning and performance measurement;
  --Strengthen human capital management;
  --Ensure the continued quality and efficiency of audits and 
        investigations; and,
  --Foster good relationships with clients, stakeholders, and OIG 
        staff.

               THE OIG'S FISCAL YEAR 2007 BUDGET REQUEST

    The proposed fiscal year 2007 OIG budget includes funding in the 
amount of $26,256,000, or $4,434,000 less than fiscal year 2006 (after 
a 1 percent rescission). This budget will support an authorized 
staffing level of 130--a 19 percent reduction from the 160 staff 
authorized in fiscal year 2006. The FDIC has continued a downsizing 
effort over several years in response to changes in the banking 
industry, information technology, and fewer bank failures. 
Consequently, we have conducted a thorough review of our workload and 
determined that we can reduce the number of audits to be performed and 
some other aspects of our workload because of certain decreased 
elements of risk, fewer assets under FDIC receivership management, and 
fewer bank failures experienced and anticipated. However, the OIG's 
investigative workload is increasing, with a substantial caseload of 
financial institution fraud because Federal Bureau of Investigation 
resources have been redirected to the war on terrorism.
    The FDIC OIG has been operating under an appropriated budget since 
fiscal year 1998 in accordance with Section 1105(a) of Title 31, United 
States Code, which provides for ``a separate appropriation account for 
appropriations for each Office of Inspector General of an establishment 
defined under Section 11(2) of the Inspector General Act of 1978.'' The 
FDIC OIG is the only appropriated entity in the FDIC, and this funding 
approach is part of the statutory protection of the OIG's independence. 
As in past years, the funds for the OIG budget would be derived from 
deposit insurance funds and the FSLIC Resolution Fund. The insurance 
funds are funded by assessments on deposits held by insured banks and 
thrifts and from the interest on the required investment of fund 
reserves held in government securities. These funds are the ones used 
to pay for other FDIC operating expenses.

                       BUDGET BY STRATEGIC GOALS

    For fiscal year 2007, the OIG developed the budget based on the six 
strategic goals that I discussed earlier. The six strategic goals, 
along with their associated portion of budget dollars follow:


  --Strategic Goal 1.--Assist the FDIC to Ensure the Nation's Banks 
        Operate Safely and Soundly;
  --Strategic Goal 2.--Help the FDIC Maintain the Viability of Deposit 
        Insurance Funds;
  --Strategic Goal 3.--Assist the FDIC to Protect Consumer Rights and 
        Ensure Community Reinvestment;
  --Strategic Goal 4.--Help Ensure the FDIC is Ready to Resolve Failed 
        Banks and Effectively Manages Receiverships;
  --Strategic Goal 5.--Promote Sound Governance and Effective 
        Stewardship of Financial, Human, Information Technology, and 
        Procurement Resources; and,
  --Strategic Goal 6.--Continuously Enhance the OIG's Business and 
        Management Processes.
          fiscal year 2007 budget by major spending categories
    The following chart shows the distribution of the OIG's budget by 
major spending categories. Mostly, the OIG budget is comprised of 
salaries and benefits for its employees and the necessary funding for 
travel and training expenses. Our fiscal year 2007 budget also includes 
funds to replace our staff's laptop computers, which will be over 3 
years old and due for replacement, in accordance with the Corporation's 
computer replacement schedule.


                           CONCLUDING REMARKS

    Mr. Chairman and members of the subcommittee, I appreciate the 
support and resources we have received through the collaboration of the 
President, the Congress, and the FDIC. As a result, the OIG has 
continued to make a real difference in FDIC operations in terms of 
financial benefits and improvements, and by strengthening our own 
operations and efficiency. I look forward to continue working with this 
subcommittee and working with the new Inspector General when appointed. 
I believe our fiscal year 2007 budget strikes an appropriate balance 
between the mandate of the Inspector General Act, other legislative 
requirements, our judgments of OIG workload needs, the changing 
conditions in the banking industry, and the FDIC's downsizing. We 
continue to seek your support so that we will be able to effectively 
and efficiently conduct our work on behalf of the Congress, the FDIC, 
and the American public.
                                 ______
                                 
  Prepared Statement of Austin Smythe, Office of Management and Budget
    Mr. Chairman, Senator Murray, members of the subcommittee, I am 
pleased to present the President's fiscal year 2007 budget request for 
the Office of Management and Budget (OMB).

                     PROGRESS ON SPENDING RESTRAINT

    Before reviewing OMB's fiscal year 2007 budget, I would like to 
take a moment to review the substantial accomplishments in spending 
restraint we were able to achieve together over the past year. In line 
with the President's budget request, the Congress sent the President 
appropriations bills that held the growth of total discretionary 
spending below the rate of inflation and cut non-security spending. In 
addition, Congress adopted 89 of the President's proposed 154 cuts and 
terminations, saving $6.5 billion in the process. And Congress achieved 
nearly $40 billion in mandatory savings over 5 years, the first time in 
8 years reconciliation has been used to slow the growth in spending.
    President Bush's 2007 budget builds on last year's progress by 
focusing on national priorities and tightening our belt elsewhere. It 
gives our troops and those who defend our security what they need to 
fight and win the Global War on Terror. And it supports the President's 
pro-growth economic agenda.
    In order to stay on track to meet the President's goal of cutting 
the deficit in half by 2009, we must continue to do two things: keep 
the economy growing and restrain spending.
    First, the 2007 budget will support continued economic growth by 
proposing to make permanent the tax relief signed into law by the 
President in 2001 and 2003. Some have argued that we should let the tax 
relief expire. A tax increase is the wrong prescription, not only for 
the Nation's economic health, but for the government's fiscal health as 
well.
    We are not an under-taxed society. By rejecting tax increases on 
families and small businesses, this budget will help keep the economy 
on a continuing course of job creation and strengthen the foundations 
for long-term growth.
    The second critical component of deficit reduction is a vigorous 
policy of spending restraint. Similar to last year, the budget holds 
overall discretionary spending growth below the rate of inflation. It 
again proposes a cut in non-security discretionary spending. It calls 
for major reductions in or total eliminations of 141 Federal programs, 
saving nearly $15 billion. And it continues our efforts to slow the 
growth in spending on mandatory programs, by proposing $65 billion in 
savings over 5 years.
    The Appropriations Committees and the Congress have achieved 
considerable progress in restraining discretionary spending. We need to 
continue this progress on the mandatory side of the budget. The efforts 
begin to restrain the growth in mandatory spending are vital--not just 
for our near-term deficit reduction efforts--but especially for the 
long-term. Toward the end of the next decade, deficits stemming largely 
from entitlement programs such as Social Security and Medicare will 
begin to rise indefinitely. At that point, no plausible amount of 
discretionary spending cuts or tax increases will restore our long-term 
fiscal health.
    The President has shown a willingness to take on these future 
unfunded obligations and to propose long-term reforms. This year's 
budget proposes $36 billion in savings from Medicare, and includes 
proposals that pave the way for additional reforms in the future. As 
with Social Security and Medicaid, we do not need to cut Medicare, but 
we do need to slow its growth--and the President's budget begins to do 
just that.

                           DELIVERING RESULTS

    To ensure the Federal Government spends taxpayer dollars more 
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 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. To support these efforts, OMB has 
introduced a new website called ExpectMore.gov. ExpectMore.gov allows 
taxpayers to review the OMB assessments of nearly 800 Federal programs. 
You can search the programs by rating, topic, or by a simple keyword 
search. I urge you and your staffs to use this new resource in 
evaluating whether programs are achieving the results you, the 
Congress, intend.
    In addition to the PART, I want to highlight our competitive 
sourcing and electronic government initiatives about which some members 
of Congress have raised concerns.
    The Competitive Sourcing initiative finds the lowest cost, highest 
quality sources to perform the government's commercial activities. This 
initiative is expected to generate savings to the taxpayers of more 
than $800 million a year.
    The Expanded Electronic Government initiative is identifying and 
eliminating duplicative information technology systems in agencies. The 
result is improved service delivery to citizens, businesses and Federal 
employees at a lower cost. Overall, these E-Government initiatives are 
delivering to Congress and the American people more than $380 million a 
year in cost savings and millions more in cost avoidance.
    Both of these initiatives have been the subject of statutory 
restrictions that inhibit their progress. OMB's Deputy Director for 
Management Clay Johnson is the lead for the administration on these 
issues and we want to work with you to make these initiatives a 
success. In this time of fiscal restraint, our mutual goal should be to 
maximize rather than limit the savings resulting from these common 
sense programs.

                              OMB'S BUDGET

    Consistent with the President's overall fiscal year 2007 Budget, 
the Office of Management and Budget has submitted a disciplined request 
for our agency. OMB's budget requests $68.8 million--a 0.6 percent 
reduction from the fiscal year 2006 enacted level when measured on an 
apples-to-apples basis.
    To achieve this spending restraint, OMB is pursuing cost savings 
wherever possible. OMB has been operating under very tight budgets. Our 
budget is nearly entirely comprised of salaries and expenses and our 
only significant means to achieve savings is through reductions in 
staffing. To accommodate lower funding levels, we have reduced OMB 
staff from 527 positions in fiscal year 2001, to 510 positions in 2004, 
to 490 positions in 2005.
    In last year's appropriations bill, Congress provided a net 
increase of $750,000 to our request, boosting our budgeted staff levels 
to 500 positions. Following the guidance provided by the committee, we 
have increased staff levels in the resource management offices (RMOs) 
of OMB. To meet increased pay and other costs and achieve the 0.6 
percent reduction proposed in OMB's budget for fiscal year 2007, OMB 
would reduce staff levels by 11 positions compared to the enacted 
fiscal year 2006 level.
    We believe OMB can continue to deliver high-quality performance and 
fulfill our many important core responsibilities with these lower staff 
levels. The best known of OMB's responsibilities is the preparation of 
the President's annual budget. In addition, our responsibilities 
include oversight of the other agencies regarding budgetary matters, 
management issues, the administration's legislative proposals, 
regulatory reforms, procurement policies and other important subjects. 
We work to ensure that all the administration's proposals in these 
areas 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 while 
focusing on national priorities.
                                 ______
                                 
      Prepared Statement of W. Douglas Buttrey, Chairman, Surface 
                          Transportation Board

    Mr. Chairman, and members of the subcommittee, thank you for the 
opportunity to submit for the record this testimony on the fiscal year 
2007 budget request of the Surface Transportation Board (Board).

                        BACKGROUND ON THE BOARD

    The Board is a three-member, bipartisan, decisionally independent 
adjudicatory body organizationally housed within the Department of 
Transportation (DOT) with jurisdiction over certain surface 
transportation economic regulatory matters.
    The Board provides an efficient and effective forum for the 
resolution of disputes relating to surface transportation regulation. 
The Board has jurisdiction over railroad rate and service issues and 
rail restructuring transactions (mergers, line sales, line 
construction, and line abandonments); certain trucking company, moving 
van, and non-contiguous ocean shipping company matters; certain matters 
relating to the structure, finances and operations of intercity 
passenger bus companies; and certain pipeline matters not regulated by 
the Federal Energy Regulatory Commission.
    The Board's Section of Environmental Analysis performs 
environmental reviews of construction, abandonment, and merger matters 
that come before the Board for review and approval, as required by the 
National Environmental Policy Act. These reviews have become more 
complex and require significant resources.

              THE BOARD'S FISCAL YEAR 2007 BUDGET REQUEST

    The budget request submitted by the Board for fiscal year 2007 
totals $25,618,000. This budget level mirrors the Board's fiscal year 
2006 budgetary authority enacted by Congress, adjusted for a decrease 
in funding associated with the one-time build-out cost in fiscal year 
2006 for the Board's new office space and offset by the fiscal year 
2007 pay raise as well as the amount required to physically move to the 
new space. The Board also seeks resources and authority to operate at 
150 FTEs, the current staffing level authorized by Congress.
    The Board is requesting $375,000 for moving services to complete 
the agency's relocation by the General Services Administration (GSA) 
from its current physical site. The Board has been at its current site 
for the duration of its 10-year lease, which expires early in 2007. The 
Board cannot remain in its current building and must find new space 
because the building owners intend to vacate the building to provide 
for extensive renovation and modernization. GSA had the replacement 
lease prospectus approved by Congress during 2004. GSA advertised the 
lease solicitation during the summer of 2005 and will award the lease 
by the summer of 2006. GSA will begin the design and interior 
construction in 2006 with an anticipated move-in date of January 2007. 
Funds included in the fiscal year 2006 appropriations bill will provide 
GSA with the resources to schedule the network and telecommunication 
connections and interfaces and perform the required structural changes 
to the leased space to support the Board's mission. The Board is 
requesting funds in fiscal year 2007 for the physical relocation of its 
furniture, equipment and files to the new space, as well as an amount 
to pay for the new level of rent.
    The Board would use the remaining additional funds requested to 
cover salary and employee benefit costs associated with the fiscal year 
2006 and fiscal year 2007 pay increase and increases associated with 
employee health benefit and retirement costs. Unlike many agencies, 
there is little room in the Board's budget to absorb a pay increase 
without additional resources, because fixed costs, including salary and 
rent, comprise about 95 percent of the agency's expenses. Absorbing 
even a small amount of the pay increase would impair the Board's 
ability to perform its statutory mission.
    The requested authorization for 150 FTEs will enable the Board to 
hire staff to replace retirement eligible staff prior to their 
anticipated retirement date. Currently, 47 employees, or 34 percent of 
the Board staff, are retirement eligible. Several retirements can be 
expected in the near future. Having the flexibility to hire qualified 
people when they are available is particularly important for an agency 
that must hire professionals with technical expertise when they are 
available in the labor market.
    Consistent with appropriation acts for past fiscal years, the Board 
requests a provision allowing user fee collections to be credited to 
the appropriation as offsetting collections and used for necessary and 
authorized expenses to the extent that they are collected. The overall 
budget request reflects the workload that is expected and the statutory 
and regulatory deadlines associated with the resolution of the cases 
filed.

                       OVERALL GOALS OF THE BOARD

    The Board seeks to resolve matters brought before it fairly and 
expeditiously. Through use of its regulatory exemption authority, 
streamlining of its decisional process and the regulations, and 
consistent application of legal and equitable principles, the Board 
seeks to facilitate commerce by providing an effective forum for 
efficient dispute resolution and facilitation of appropriate business 
transactions. The Board continues to strive to develop, through 
rulemakings and case disposition, new and better ways to analyze unique 
and complex problems, to reach fully justified decisions more quickly, 
and to reduce the costs associated with regulatory oversight. The Board 
will continue to:
  --strive for a more streamlined process for the expeditious handling 
        of rail rate reasonableness and other complaint cases in an 
        effort to provide additional regulatory predictability to 
        shippers and carriers;
  --diligently process cases before the Board and ensure that 
        appropriate market-based transactions in the public interest 
        are facilitated;
  --adhere to all statutory deadlines for the resolution of matters 
        pending before the Board;
  --encourage new opportunities for the various sectors of the 
        transportation community to work cooperatively with the Board 
        and with one another to find creative solutions to persistent 
        industry and/or regulatory problems involving carriers, 
        shippers, employees, and local communities;
  --work to ensure the provision of rail service that is responsive to 
        the needs of customers; and
  --ensure that the Board's processes are open and transparent to the 
        public.

   NATIONAL RAILROAD PASSENGER CORPORATION (AMTRAK) DIRECTED SERVICE 
                               PROVISION

    The fiscal year 2006 Transportation Appropriations Act directed the 
Secretary of Transportation to reserve $60 million of Amtrak's fiscal 
year 2006 appropriation to fund directed service, that is to direct 
another carrier or carriers to carry out the functions currently 
performed by Amtrak that are necessary to continue commuter and freight 
rail operations, in the event Amtrak ceased to operate during the 
fiscal year. The fiscal year 2007 President's budget request also 
proposes to provide the Board with $60 million to support commuter and 
freight rail service should Amtrak cease operations. These funds would 
allow the Board to direct service of commuter and freight rail 
operations that fail as a result of a cessation of service by Amtrak.
    The Board has statutory authority under section 11123 of title 49 
to direct service, or in other words, order another railroad to step 
into the shoes of a rail carrier that has stopped operating (usually 
because of bankruptcy) and serve its customers. This authority was 
broadened by Congress in 2005 to include authority for the Board to 
direct the continuation of commuter and freight rail services that fail 
as a result of a cessation of service by Amtrak. The Board participates 
in a joint working group to coordinate issues relating to Amtrak 
directed service with the U.S. Department of Transportation's Federal 
Railroad Administration (FRA). That group has met with all major 
stakeholders--including Amtrak, the affected commuter and freight 
railroads, and representatives of labor--to identify issues. It has 
compiled all of the services Amtrak provides to commuter and freight 
railroads, and has examined legal issues that might arise. However, 
these planning efforts would need to be significantly supplemented were 
the need to implement directed service imminent. While matters brought 
before the Board are often lengthy, in directed service proceedings 
section 11123 does alter some administrative procedures to allow the 
Board to act cooperatively and quickly.

           FISCAL YEAR 2006 AND 2007 ACTIVITIES OF THE BOARD

    The Board's workload involving rail rates and services is expected 
to remain stable through fiscal year 2007. The Board will continue to 
look for ways to streamline and improve its regulatory process and to 
promote private sector resolution of problems. In this regard, the 
Board is open to proposals filed by parties and independently will look 
for ways to shorten and streamline its procedures and processes.
    The Board has instituted a rulemaking proceeding to address major 
issues regarding the proper application of the stand-alone cost (SAC) 
test in rail rate cases and the proper calculation of the floor for any 
rail rate relief. The Board's general standard for judging 
reasonableness of rail freight rates are set forth in the Coal Rate 
Guidelines, which adopted a set of pricing principles known as 
constrained market pricing (CMP). Most captive rail shippers seek 
relief under CMP's SAC test. Under the SAC constraint, the rate at 
issue cannot be higher than the railroad would need to charge to serve 
the complaining shipper while fully covering all its costs, including a 
reasonable return on investment. Because the issues being addressed in 
the rulemaking have been raised or are implicated in the pending rail 
cases, the Board is holding the pending rail rate cases in abeyance 
while it examines these important issues.
    The Board will continue to handle rail cases involving questions of 
whether certain State or local regulation of certain rail-related 
facilities is preempted by Federal law. These issues have generated 
considerable interest in recent years, as the Board and the courts have 
explored the extent of Federal preemption on a case-by-case basis.
    Board staff expeditiously handles on an informal basis rail 
consumer inquiries and complaints concerning matters related to rates 
and other charges, car supply and other service issues, claims for 
damages, and service-related problems, employee concerns, and community 
issues. The Board's Rail Consumer Assistance Program is an informal 
mechanism for resolving disputes between freight railroads, and between 
those railroads and their customers. This program has a special toll-
free telephone number and a website connection to assist rail customers 
and others with concerns involving railroads. It resolved 121 rail 
consumer issues during 2005.
    The Board has participated in forums between railroads and their 
customers to facilitate better communications regarding service issues 
and plans to resolve them. The Board continues to encourage parties in 
cases before it to reach private sector solutions to their disputes 
outside of the Board's formal processes.
    The Board's responsibility with respect to rail carrier 
consolidations includes a broad range of control transactions among 
larger railroads and smaller railroads. In addition, the Board 
continues to resolve issues related to past Class I rail mergers. We 
are not aware that any major rail mergers are contemplated in the 
immediate future, so the workload in this category is expected to 
remain constant through fiscal year 2007. Of course, it is impossible 
to predict with certainty that no major merger will be proposed during 
fiscal year 2007. If a major merger is proposed, that would 
significantly increase the workload beyond the expected level.
    The Board projects that its line construction docket will remain 
constant through fiscal year 2007. The Board has an unprecedented 
number of railroad line construction proposals currently under review. 
These 14 proposals vary in size and scope, ranging from less than 1 
mile to 280 miles of new rail line. The associated environmental review 
work is significant The Board granted final approval in its decision in 
STB Finance Docket No. 33407, ``Dakota, Minnesota & Eastern Railroad 
Corporation Construction into the Powder River Basin'', for a railroad 
to construct a 280-mile rail line into the Powder River Basin subject 
to extensive environmental mitigation conditions. This case represented 
a major multi-year effort on the part of the Board to address the 
complexities of a major rail construction case. Demands on the Board to 
conduct environmental reviews for such transactions continue to grow, 
and these activities require significant resources to complete.
    Other line transaction activity is expected to remain constant 
through fiscal year 2007 as more carriers continue to sell unprofitable 
or marginally profitable lines as an alternative to service 
abandonment. The Board continues to see a number of line acquisitions 
by both small carriers and noncarriers as the larger rail carriers 
continue to restructure their rail systems.
    Regarding non-rail matters, the Board has pending before it one 
pipeline rate dispute and one water carrier dispute, in addition to one 
water carrier dispute that has been decided by the Board and is now 
under court review. The Board's pipeline work is expected to remain 
constant as the pending case moves forward. The Board's intercity bus 
merger and pooling workload are projected to remain constant through 
fiscal year 2007; as is the Board's noncontiguous domestic water trade 
rate case activity. The Board expects to devote the same level of 
staffing resources to work on cases involving motor carrier ratemaking 
antitrust immunity through fiscal year 2007.

                                SUMMARY

    The Board's budget request would ensure the resources needed for 
the Board to continue to implement its responsibilities expeditiously 
and effectively as Congress intends. I appreciate the opportunity to 
submit this statement for the record and would be happy to respond to 
any questions that the committee may have about the Board's fiscal year 
2007 budget request.
                                 ______
                                 
         Prepared Statement of the Federal Election Commission

    Mr. Chairman, Ranking Member Murray, and members of the committee, 
it is my privilege to present the Federal Election Commission's (FEC's) 
fiscal year 2007 appropriation request. To begin, on behalf of the 
agency, I thank you for last year's appropriation. Your bipartisan 
support of the FEC budget has enabled us to continue to implement the 
Bipartisan Campaign Reform Act of 2002 (BCRA), which amended the 
Federal Election Campaign Act of 1971. We have used those funds to 
continue a process of constantly seeking to improve the FEC's operation 
in all three of its core missions: disclosure, enforcing compliance 
with the law, and operation of the presidential matching funds system. 
Despite some financial belt-tightening in fiscal year 2006, we can see 
a measurable improvement in the FEC's ability to meet its core 
functions.
    Our fiscal year 2007 appropriation request is for $57,138,000, an 
increase of $2,985,000 or 5.51 percent over our enacted fiscal year 
2006 appropriation. This increase will permit the agency to continue 
its current functions while meeting statutorily mandated salary and 
benefit increases. This year, the FEC is seeking only a modest increase 
over its fiscal year 2006 budget of $54,153,000 ($54,700,000, less the 
fiscal year 2006 across-the-board rescission). The fiscal year 2007 
request represents a continuation of fiscal year 2006 funding levels, 
adjusted for inflation and salary and benefit increases. As such, it 
represents essentially a Current Services request for fiscal year 2007, 
with no additional funds or staff for new programs or initiatives. I am 
pleased to report this request conforms to the President's fiscal year 
2007 budget request for the FEC. We have provided detailed support for 
this request in our fiscal year 2007 budget justification.
    I would also like to note that our fiscal year 2007 request sets 
the agency's authorized personnel level at 375 FTE, a decrease of 16 
FTE from our previous authorized level of 391. Although the agency is 
authorized for 391 FTE in fiscal year 2006, we found it necessary to 
reduce staffing in order to handle the increased cost of operations and 
to fund some non-recurring expenses in fiscal year 2006. As spelled out 
in our fiscal year 2006 Management Plan, the FEC's projected FTE 
utilization for fiscal year 2006 will be approximately 380 FTE. In 
fiscal year 2007, we estimate that an FTE level of 375 will enable us 
to maintain operations at the current service level and absorb the full 
cost of the fiscal year 2007 COLA.
    Generally, the Commission submits a package of legislative 
recommendations to the President and the Congress in March. However, 
this year the district court's decision in Shays v. FEC required the 
Commission to rewrite some portion of nine of its previous rules in a 
condensed timeframe. Therefore, the annual review of legislative 
recommendations will be submitted at a later date. In the meantime, 
there is one legislative change that the Commission unanimously decided 
to include in its fiscal year 2007 budget request to Congress.
    We are seeking statutory authority to charge and use registration 
fees for FEC-hosted conferences. The Commission has always relied on 
effective outreach and our informational programs to reduce violations 
due to lack of understanding of the law. These programs, such as the 
800 informational line, the campaign finance workshops and seminars, 
and the campaign guides and brochures, have all received high marks 
from the election community, the media, and the public. Unfortunately, 
due to budget constraints we found it necessary to cancel our campaign 
finance workshops and seminars for 2006. In order to preserve these 
conferences in the future, we are seeking legislative authority to 
charge and use registration fees to help offset the costs of these 
conferences. If legislative authority is not granted, the Commission 
will require additional appropriated funds in order to host future 
conferences.
    Over the past few years, the FEC has achieved several major 
successes, while also seeing a steady improvement in its operations. 
These significant achievements include meeting statutory and court 
deadlines for implementing BCRA, successfully defending legal 
challenges to the constitutionality of BCRA, and settling the largest 
enforcement case in the history of the agency. In addition, the agency 
has expanded and invigorated its compliance program and improved the 
timeliness of reporting. These successes are the result of FEC efforts 
and support from our Congressional oversight committees.
    I now will provide a brief overview of the FEC's three core program 
areas and relate those areas to the agency's fiscal year 2007 budget 
request.

                           DISCLOSURE PROGRAM

    The FEC's disclosure program reviews, compiles, and places 
candidate and political committee campaign finance reports and 
information on the public record, primarily through the FEC's extensive 
electronic databases. The disclosure program is also responsible for 
educating the public and practitioners about the Federal campaign 
finance laws and their application. Over one-third of the agency's 
staff (143.4 FTE), are involved in our Disclosure program. This 
includes staff from the Public Records Office, Information Technology 
Division, Reports Analysis Division, Press Office, Information Office, 
and attorneys from the Office of General Counsel (OGC) who formulate 
proposed regulations and draft responses to advisory opinion requests.
    A key objective of the Disclosure program is to improve the web 
accessibility of FEC information. Via the FEC's website at www.fec.gov, 
the public can conduct detailed searches of candidate and political 
committee reports, closed FEC enforcement matters, and the agency's 
advisory opinions. The website also provides access to the most up-to-
date campaign guides and brochures, past and current regulations, 
litigation materials, and agenda documents. Beginning this year, the 
FEC has made audio file podcasts of meetings available for download 
within 48 hours of meetings.
    The Disclosure program provides education outreach to the public 
and regulated community through campaign finance conferences and 
seminars, through a toll-free help line, and through the FEC's public 
records room. Our campaign finance conferences are crucial to the 
overall success of our Disclosure program, and it is imperative that we 
receive the statutory authority explained above in order to host these 
conferences without taking funds away from other core programs.
    Improvements in productivity, aided by information technology (IT) 
enhancements, have enabled the FEC to keep pace with the large 
increases in Federal campaign finance activity during recent election 
cycles. Campaign financing has skyrocketed since 1976, when the FEC 
regulated the $310 million in disbursements by Federal candidates and 
committees in the first publicly-funded Presidential election. For the 
2004 Presidential and Congressional elections, the FEC regulated the 
disbursement of approximately $4.8 billion--an increase of more than 
1,500 percent in just eight Presidential election cycles. With your 
help, we are building an impressive system capable of handling our IT 
needs well into the future. This system offers the capability of 
instantly updating our campaign finance database and expanding the 
types of information collected. As you are aware, however, this system 
is expensive. Our fiscal year 2007 budget request for IT funding is 
$6.5 million. This is the minimum amount required for IT projects. It 
keeps the ``lights on'' and supports the basic IT mission only. It 
forgoes some upgrades and desirable improvements. In future fiscal 
years we will require additional resources to complete necessary IT 
infrastructure upgrades and to make needed improvements in our 
disclosure and review functions. We do, however, plan to apply any 
savings realized through the course of the fiscal year to our IT 
programs.
    With the passage of legislation mandating electronic filing of 
campaign finance reports, we are seeing benefits of improved 
timeliness. Since the institution of electronic filing, the median time 
to process detailed information from all documents received has 
improved from 11 (2000 cycle) to 6 (2002 cycle) to 2 days (2004 cycle) 
from receipt of the disclosure reports by the Commission. Due to both 
the enhanced use of technology and management initiatives, the FEC is 
processing and reviewing disclosure reports more rapidly than ever, 
despite the huge increase in the amount of campaign finance funds and 
information to be processed and disclosed. This provides voters with 
more accurate and timely disclosure information prior to an election, 
enabling them to make an informed decision when it comes to the sources 
and uses of campaign funds by the candidate.

                           COMPLIANCE PROGRAM

    Obtaining voluntary compliance with Federal campaign finance laws 
is the foundation of the FEC's mission and central to its strategic and 
performance plans. An effective and comprehensive enforcement program 
is, however, an essential complement to any voluntary compliance 
effort.
    Nearly one-half of Commission resources in the proposed fiscal year 
2007 budget are dedicated to ensuring compliance with the law. In 
fiscal year 2007, we anticipate assigning over 175 FTE to compliance, 
including enforcement, supervisory, and support staff from OGC, 
Information Technology Division, Reports Analysis, and the Audit 
Division. In recent years, the administrative fine program and 
alternative dispute resolution program have been added to the 
Commission's compliance program.
    Together with the standard enforcement program, these three 
compliance programs allow the FEC to handle significantly more cases 
than it did several years ago. These programs have allowed the FEC to 
activate more cases, close more cases with substantive action, resolve 
cases that would otherwise have been dismissed, and generally enforce 
the law in a more thorough and efficient manner, while preserving the 
Commission's legal resources for more complex enforcement matters.
    The standard enforcement program, which is the responsibility of 
the Office of General Counsel, deals with the most complex cases and 
the most significant violations of the law. The General Counsel has 
undertaken a number of management and organizational initiatives in the 
last 5 years to increase the efficiency of processing matters under 
review (MURs), and those efforts have resulted in a more current 
caseload and significantly higher civil penalties. Despite a caseload 
that now involves the most factually and legally complex cases, MURs 
have been closed on average 35 percent faster in fiscal year 2005 than 
in fiscal year 2003, and a greater percentage of the assigned (or 
active) caseload now involves allegations arising from the most recent 
election cycle (i.e., 2003-2004). The administrative fine and 
alternative dispute resolution programs have helped to speed the 
resolution of less serious violations of the law.
    Overall, the compliance program has become more effective, as well 
as more efficient. In 1991, prior to the introduction of the 
administrative fine and alternative dispute resolution programs, the 
FEC assessed civil penalties totaling $534,000. By fiscal year 2004, 
approximately 4 years after the implementation of the administrative 
fine and alternative dispute resolution programs, that figure had grown 
to $3.46 million. Thus far in fiscal year 2006, the FEC has assessed 
civil penalties and fines totaling $5.302 million, including a single 
$3.8 million civil penalty, the largest in the history of the agency. 
Fiscal year 2006 marks the seventh consecutive year with more than $1 
million in civil penalties.
    The alternative dispute resolution (ADR) program affords both the 
FEC and the respondents the opportunity to resolve cases more rapidly 
with a focus on ensuring future compliance with the law. Since the 
inception of the program on October 1, 2000, through September 30, 
2005, the ADR Office concluded agreements with respondents and formally 
closed 214 cases, 150 with substantive action (70 percent). These 214 
cases were generally closed within 6 months of referral to the ADR 
program. The ADR Office has negotiated approximately $310,000 in civil 
penalties since fiscal year 2001. In fiscal year 2005 alone, civil 
penalties negotiated through ADR totaled $154,500. The administrative 
fine program has closed 1,223 cases since fiscal year 2000 and assessed 
civil penalties totaling $2,309,454 in cases of late and non-filed 
reports. In fiscal year 2005, cases were closed on average 201 days 
from when the reports were due to be filed at the FEC.
    Finally, in the audit track of the compliance program, we are 
pleased to report that the agency has sufficient resources to enable it 
to initiate 40 to 45 audits ``for cause'' for the 2006 election cycle. 
Further details on the compliance program are contained in the fiscal 
year 2007 Budget Justification.

                         PUBLIC FUNDING PROGRAM

    The Commission also administers the Presidential public funding 
program. During fiscal year 2007, approximately 55 FTE from the Audit 
Division, Office of General Counsel, and Information Technology 
Division will be directly involved in this program. Their 
responsibilities will include completing the audits of the remaining 
two candidates who received matching funds for the 2004 election, and 
the two general election candidate committees, for a total of four 
Presidential audits continuing from the 2004 cycle. In addition, they 
will be preparing for the 2008 Presidential election cycle by replacing 
the sampling software used to process matching funds requests and 
updating the Commission's ``Guideline for Presentation in Good Order''. 
The Guideline sets forth the uniform format required for the 
presentation of matching funds requests and specifies the quality of 
content standard that must be met.
    On a related matter, we believe it is appropriate to bring to your 
attention the potential shortfall in the Presidential Public Funding 
Program. There was a brief shortfall in the February primary matching 
payments for the 2004 Presidential election, which was restored the 
following month with the February deposits to the Fund. This was the 
only shortfall for the 2004 cycle. We did not experience a major 
shortfall for the 2004 Presidential election because several major 
candidates decided not to take Federal matching funds for the 2004 
primaries. This may change, however, in future elections. The Treasury 
Department maintains the matching fund account, which is comprised of 
money derived from a taxpayer check-off system. Shortfalls in 1996, 
2000, and 2004 occurred for several reasons. First, the Treasury 
Department does not consider expected election-year check-off proceeds 
to be available when calculating payout resources on January 1 of the 
election year. Second, while payouts under the program have been 
adjusted upward, due to inflation, the $3 check-off amount has not been 
increased since 1993. Third, the number of taxpayers participating in 
the check-off has been declining. Fourth, the ``front-loading'' of 
primaries and caucuses, which puts a premium on early fundraising, has 
resulted in a high demand for matching payments early in the election 
year. Finally, the eligibility requirements for matching funds have not 
been adjusted since 1974, and many candidates can qualify for public 
funding as a result. Absent legislative action, the shortfall problem 
will recur in future elections.
    The foregoing summarizes the FEC's fiscal year 2007 budget request. 
For a more detailed review of this request, I would urge members of the 
committee to consult our budget justification, which includes charts 
delineating how our budget request would be allocated and how it 
compares to previous years. It also demonstrates how the FEC has 
developed and used strategic and performance planning.
    Again, I thank you, Mr. Chairman and the committee, for your 
continued support and the opportunity to present our fiscal year 2007 
budget request.
                                 ______
                                 
    Prepared Statement of Terrence L. Bracy, Chair, Morris K. Udall 
                               Foundation

    Mr. Chairman, members of the subcommittee, thank you for the 
opportunity to present testimony regarding the fiscal year 2007 budget 
of the Morris K. Udall Foundation. We have previously submitted our 
Congressional Justification and met with the subcommittee's staff to 
answer their questions regarding our programs and budget.
    The Foundation has two major program areas, supported by two 
distinct appropriations funds: First, the U.S. Institute for 
Environmental Conflict Resolution (the U.S. Institute), supported by a 
combination of annual appropriations and fees charged for services; and 
second, the Education Programs, supported by the annual interest from a 
Trust Fund (invested solely in Treasury obligations).
    The President's budget requests $700,000 for the Institute in 
fiscal year 2007. The Institute anticipates generating an estimated 
$3.1 million in gross revenues in fiscal year 2007, of which an 
estimated $2.4 million will fund extramural mediation services and 
$700,000 will be applied to intramural costs. The Institute will 
continue to work toward maximizing its revenues from collection of fees 
for its services. An additional $750,000 will be applied from the 
remainder of the Institute's original appropriation for capitalization 
expenses.
    The President's budget requests no new appropriation for the Trust 
Fund. The Foundation education programs are expected to have a total 
budget of $1.6 million in fiscal year 2007, which includes $1.5 million 
in interest and $100,000 in carryover from fiscal year 2006. This 
funding is expected to allow the Foundation to maintain current 
Education Programs in fiscal year 2007, including 80 scholarships of 
$5,000 each and a grant of $296,000 to the Udall Center for Studies in 
Public Policy, as required by the Foundation's enabling legislation.
    The Foundation's budget details are thoroughly discussed in our 
Congressional Justification. In this testimony, I would like to focus 
on some of the programmatic highlights at the Udall Foundation over the 
last year.
    The U.S. Institute for Environmental Conflict Resolution continues 
to be recognized as a significant resource for assistance in resolving 
and preventing environmental conflicts involving Federal agencies. In 
November 2005, the Office of Management and Budget and Council on 
Environmental Quality jointly issued a memorandum directing all Federal 
agencies to increase the effective use of environmental conflict 
resolution and build institutional capacity for collaborative problem 
solving. The policy memorandum encouraged agencies to draw on the 
services of the U.S. Institute to assist in resolving disputes, as 
appropriate, and to help review strategies for increasing the use of 
environmental conflict resolution by those agencies. The U.S. Institute 
is coordinating an interagency forum of senior agency staff that will 
oversee implementation of the policy memo.
    In addition, the U.S. Institute has continued to provide conflict 
resolution and training services around the country. A substantial 
amount of work has been with the Federal Highway Administration--for 
example, the Institute has provided conflict resolution services in 
connection with a FHWA project in Oregon (the West Eugene Parkway), and 
it also has conducted workshops to strengthen FHWA efforts to work with 
State, local and tribal governments. One workshop focused on Federal 
and State consultation with American Indian Tribes, as required by the 
National Historic Preservation Act, bringing together the Tennessee 
Division of FHWA, the Tennessee Department of Transportation, and 11 
federally recognized Tribes. Additional customized workshops are 
expected to strengthen Federal and State agencies' efforts to 
successfully meet agency coordination and cooperation mandates of the 
Transportation Equity Act for the 21st Century (TEA-21), Section 1309: 
``Environmental Streamlining'' and Executive Order 13274: 

``Environmental Stewardship and Transportation Infrastructure Project 
Reviews''.
    The Institute recently completed one of the few successful 
mediations on timber issues in the United States, helping the parties 
to resolve a lawsuit challenging a timber sale in Oregon. The 
settlement provided for the Bureau of Land Management to continue with 
logging on 75 percent of the original 152 acres planned for sale and 
canceled logging on the rest, preserving old growth habitat. One 
innovation of the settlement was an agreement that community 
representatives can ride along with contract administrators during 
logging activities and visit post-harvested sites. The agreement is 
also important as a possible prototype for other settlements--at 
present, about 80 percent of proposed Forest Service timber sales are 
involved in litigation nationwide.
    Another area of increasing activity for the Institute has been in 
customized training for Federal agency personnel in the use of 
collaborative processes to resolve conflicts. For example, Institute 
staff designed and led training in multi-party negotiation and conflict 
management for the U.S. Air Force. This training was first delivered in 
April at the Air War College in Alabama. The Air Force plans to use 
alternative dispute resolution more systematically in environmental and 
land-use disputes, with the goal of reducing dispute resolution cycle 
times and avoiding unnecessary dispute resolution costs. The Air Force 
already has reported saving time and much of the cost of litigating 
contract disputes through use of ADR, while achieving results at least 
equal to those expected from litigation.\1\
---------------------------------------------------------------------------
    \1\ Report to the Secretary of the Air Force on the Air Force 
Alternative Disputes Resolution Program, January 2005. The Air Force 
ADR Program said data through fiscal year 2004 showed ADR resolves 
disputes in less than half the time, on average, compared with 
litigation through trial, and avoided much of the cost of full 
litigation, including the government's liability for interest on 
contractor claims. Early resolution through ADR also meant less 
disruption to Air Force programs and to the Air Force's working 
relationships with contractors, the report said.
---------------------------------------------------------------------------
    The Education Programs of the Udall Foundation are also thriving. 
The Foundation continues to draw the highest quality applicants for its 
scholarships, fellowships, and internships. A total of 836 college 
scholarships have been awarded through fiscal year 2006 to students 
from all 50 States and 259 colleges. The Native American Congressional 
Internship Program has placed 126 interns from 87 tribes in 
Congressional offices, the Executive Office of the President, and high-
placed offices at the Departments of Interior, Education and Defense. 
Beginning in August 2006, the Foundation is planning a year-long 
``Celebration of Public Service'' to mark the 10th anniversary of its 
Education Programs. As part of this effort, current and former 
scholars, fellows and interns will initiate and implement public 
service projects all around the country.
    Native Nations Institute, a joint project of the Udall Foundation 
and the University of Arizona, has conducted executive education 
sessions for more than 1,700 councilors, presidents and senior managers 
from more than 340 Indian nations over the last 5 years and has reached 
many more through conference presentations. In partnership with the 
Harvard Project on American Indian Economic Development, NNI has 
developed the leading research on tribal economic development, 
leadership and self-determination. NNI has maintained program levels in 
fiscal year 2006 due to a transfer from the fiscal year 2006 Udall 
Foundation Trust Fund appropriation (as authorized by Congress in 
Public Law 109-115); in fiscal year 2007, NNI will receive no 
additional funding from the Foundation but will utilize $176,000 in 
carryover from fiscal year 2006 and an estimated $62,000 in fees to 
continue the Native American internships and the executive education 
program. NNI will continue to seek other funding, including grants from 
public and private organizations.
    I am pleased to report to the subcommittee that the Foundation 
received an unqualified ``clean'' audit opinion again for fiscal year 
2005, and no material inadequacies were identified by the independent 
auditor, Clifton, Gunderson, LLP. As in prior years, I want to assure 
the chairman and members of the subcommittee that the Foundation has 
taken extraordinary steps to keep down administrative expenses and get 
the most value out of its limited funds.
    Thank you for the opportunity to provide testimony. We look forward 
to working with you and your staff on fiscal year 2007 appropriations.
                                 ______
                                 
    Prepared Statement of Kenneth D. Wade, Chief Executive Officer, 
    Neighborhood Reinvestment Corporation dba NeighborWorks America

    Neighborhood Reinvestment Corporation, now doing business as 
NeighborWorks America, is pleased to submit this testimony for the 
record, on behalf of the NeighborWorks system. This system includes 
NeighborWorks America and 240 nonprofit, community-based organizations 
that comprise the NeighborWorks network. In fiscal year 2005, we served 
over 4,000 communities and generated over $2.4 billion in direct 
investment.

                  OVERVIEW OF THE NEIGHBORWORKS SYSTEM

    To help more Americans seize opportunities to build wealth, 
strengthen their communities and realize the dream of home ownership, 
we work on three basic fronts:
  --NeighborWorks America headquarters and training agency;
  --Our national NeighborWorks network of nonprofit community 
        development organizations; and
  --Financial backing through Neighborhood Housing Services of America.
    For nearly 30 years, the NeighborWorks System has proven to be an 
increasingly effective and efficient vehicle for generating significant 
private-sector resources for community revitalization and affordable 
housing. The NeighborWorks System relies on public-private 
partnerships, the leveraging of Federal funding, and flexible revolving 
loan funds to achieve results. Innovations that are generated in 
response to community needs are a hallmark of the NeighborWorks System. 
We were borne out of a real and present community need for more private 
sector investment in decaying urban areas in the 1970's and continue to 
nimbly address real and present community needs today.

NeighborWorks America
    NeighborWorks America evolved from a 1972 effort by the Federal 
Home Loan Bank Board to increase thrift-industry lending in declining 
neighborhoods. Recognizing the model's effectiveness in community 
development and turning around urban blight, Congress chartered 
NeighborWorks America as a public nonprofit organization in the Housing 
and Community Development Amendments of 1978 (Public Law 95-557).
    Today NeighborWorks America:
  --As the Nation's largest certifier of high-quality home ownership 
        education counselors, creates a national force of home 
        ownership and financial literacy education counselors that have 
        educated and empowered 500,000 Americans nationwide.
  --Fuels local innovation with a powerful battery of community 
        development training, research, managerial advice, turnaround 
        specialists and an aggressive brokering of business and 
        government partnerships.
  --Maintains high performance standards for its NeighborWorks member 
        organizations through rigorous and thorough audits to ensure 
        accountability and results.
  --Empowers underserved populations and regions of the Nation. When 
        comparing total lending activity, the NeighborWorks network 
        serves four times as many minorities as conventional lenders 
        and twice as many as served by government agencies (as a 
        percentage of the total clients served).
  --Ensures continued responsiveness to local needs through sound 
        dependable capital loan funds that have invested $2.5 billion 
        in communities in the last 5 years alone.
  --Challenges predatory lending with the twin tools of education and 
        customized, responsible lending.
The NeighborWorks Network
    In the early 1970's, NeighborWorks America founded the 
NeighborWorks network, a group of community-based nonprofits that has 
evolved from a few organizations to more than 240 members active in 
more than 4,000 communities across the country. NeighborWorks 
organizations operate in our Nation's largest cities, suburban 
neighborhoods and rural areas across all 50 States, Puerto Rico and the 
District of Columbia. No matter what their location, NeighborWorks 
organizations are responsive and effective, because they function as 
partnerships of local residents, lenders and other business leaders, 
and representatives from local government. NeighborWorks network 
results include:
  --forging private-sector partnerships that revitalize blighted 
        communities to create an infusion of job retention and economic 
        development strategies to local economies;
  --providing full-service affordable rental housing that provides 
        citizens with much more than a roof over their heads;
  --creating home ownership incentives that help individuals realize 
        the American dream and build wealth for their families and 
        communities;
  --educating communities about strategies that improve safety and 
        attract wealth-building opportunities.
Neighborhood Housing Services of America (NHSA)
    Flexible financing enables NeighborWorks organizations to be 
nimble, competitive and effective. Neighborhood Housing Services of 
America works in partnership with NeighborWorks America to meet special 
secondary market needs of NeighborWorks organizations and their 
clients. The primary mission of NHSA is to operate a specialized 
secondary market created to replenish the revolving loan funds and 
capital pools of local NeighborWorks organizations. As such, it has 
become an important tool for challenging predatory lenders.

                PROJECTED OUTCOMES FOR FISCAL YEAR 2007

    This is a time of unprecedented challenges and opportunities in 
housing and community development. NeighborWorks America is in a prime 
position to deliver results.
    An appropriation of $120 million will allow the NeighborWorks 
system to:
  --Award 8,300 training certificates in community development and 
        housing; home ownership and community lending; home ownership 
        education and counseling; construction, production, real estate 
        and housing management; nonprofit management and leadership; 
        and economic development, revitalization and community building 
        to practitioners throughout the country.
  --Generate $20 in other investment for every $1 appropriated to 
        NeighborWorks America, for a total reinvestment of over $2.4 
        billion in American communities.
  --Provide affordable housing and counseling to more than 180,000 
        individuals or families living in 4,000 communities by 240 
        organizations the comprise the NeighborWorks network.
  --Increase financial fitness education in underserved markets to 
        build better money management skills that position families to 
        build assets and achieve financial independence.
  --Secure and expend $85 million in social investments in support of 
        affordable housing loans.
    For fiscal year 2006, NeighborWorks America received an 
appropriation of $118 (minus an across-the-board rescission). The 
proposed increase for fiscal year 2007 of $2 million will further 
NeighborWorks America's work to create and sustain minority home 
ownership through grants to NeighborWorks organizations, as well as 
continue to allow NeighborWorks America to attract and retain qualified 
and competent staff in community development.

                    PRIORITIES FOR FISCAL YEAR 2007

    In developing the Corporation's fiscal year 2007 budget, 
NeighborWorks America is setting more aggressive expectations for the 
NeighborWorks system. NeighborWorks America has always worked to be 
good stewards of the funds that Congress has entrusted to us, and the 
Corporation continues to diligently work to maximize our efficiency and 
effectiveness. In order to meet these expectations, NeighborWorks 
America and the NeighborWorks system will:
  --Leverage strategic partners and resources to stay on the forward 
        edge of housing and community development needs;
  --Monitor the efficiency and results of the NeighborWorks network 
        through financial and performance reviews;
  --Fuel network innovation that can be applied across the Nation; and,
  --Build skills and performance in the housing and community 
        development field.

Leverage Strategic Partners and Resources
    Historically, the success of the NeighborWorks System has far 
exceeded its visibility. In fiscal year 2007, NeighborWorks America 
will continue its efforts to enhance the visibility of NeighborWorks by 
launching a public awareness and branding campaign: ``NeighborWorks 
America--Transforming Lives and Strengthening Communities.'' The 
campaign will unite the corporation with the national network it 
supports--240 NeighborWorks organizations across 50 States. 
Neighborhood Reinvestment is adopting the name ``NeighborWorks 
America'' as its public trade name. A resolution of the Board of 
Directors directing the Corporation to launch this public awareness and 
branding campaign passed unanimously on September 20, 2004.
    More awareness of NeighborWorks America will help us serve more 
communities, creating a force of empowered consumers and engaged 
communities. NeighborWorks America will promote several tools to 
empower neighbors to maximize their financial position, to become 
informed homebuyers and savvy homeowners whose home values grow and 
provide equity. As NeighborWorks America, united with our national 
network under one name and a singleness of purpose, we will become a 
more visible and powerful national force for change.

Increase the Efficiency and Results of the NeighborWorks Network
    Our scale and history allows NeighborWorks America and its 
affiliated NeighborWorks network to be responsive and innovative, 
successfully navigating the rocky terrain of the current housing and 
community development landscape. To keep pace with the breakneck and 
challenging changes in the current environment, we will:

            Demand Accountability and Results
    NeighborWorks America is committed to promoting and maintaining a 
network of productive, well-managed, nonprofit housing and community-
development corporations that deliver high quality services responsive 
to local needs and have a measurable impact on the communities they 
serve.

            Conduct Rigorous and Thorough Audits and Reviews of 
                    NeighborWorks System
    As part of its responsibility to be a strong steward of Federal 
funding and protect the investment of other partners and the reputation 
of the NeighborWorks network as a whole, NeighborWorks America uses a 
rigorous and thorough audit and review of all NeighborWorks programs 
and organizations. Those who don't measure up are given a defined time 
period to turnaround or leave the network. We demand high-performance 
and results.
    Through a system of continuous monitoring, we assess the risks 
faced by each NeighborWorks organization with a thorough collection and 
analysis of programmatic and financial data.

            Measure the Success of the Community Development Field
    As stewards of taxpayer money and advocates for our most needy 
neighbors, we must make sure our investments are working in ways that 
truly make a difference. It's not good enough to talk about simple 
counts of housing units produced or dollars leveraged. We must be 
willing to hold ourselves accountable for results. If banks and 
actuaries can refine their investment and insurance packages with 
increasing accuracy and sophistication, we also must find new ways to 
measure the impact of our work. This year NeighborWorks America will 
begin using the Success Measures Data System as one important tool to 
help answer the question: ``Are we making a difference?'' This state-
of-the-art program can measure dividends such as changes in safety, 
property values, levels of civic engagement and the quality and 
performance of schools and healthcare, helping us to work smarter in 
serving the real and present needs in our communities.
    The development of this index has been encouraged by OMB through 
its Program Assessment Rating Tool (PART) process. Federal Reserve 
Chairman Alan Greenspan cited Success Measures as a model tool for 
providing ``objective and quantifiable standards to assess community 
development programs.''

            Improve Efficiency and Coverage of Underserved Areas
    The efficacy of the NeighborWorks system is measured in 
productivity, more efficient use of resources and more responsive 
service delivery. In many underserved areas, the most effective growth 
strategy is to expand the reach and/or programmatic services of an 
existing network member or to facilitate a merger of two organizations 
to create one powerful organization with greater impact and efficiency.
    We receive far more applicants to become NeighborWorks members than 
we charter. Through a careful affiliation process, NeighborWorks 
America ensures that before any organization is chartered as a 
NeighborWorks entity, it is sound and productive; led by a board of 
directors reflective of the community it serves; and committed to a 
mission with goals, values, programs and accomplishments compatible 
with the focus and priorities of the NeighborWorks network.

            Invest in What Works
    Responsible, responsive real-estate development and lending 
requires dependable equity capital grants. NeighborWorks America 
provides our network with this critical gap funding and equity, 
allowing NeighborWorks organizations to make loans for home purchase, 
property rehabilitation and small business loans.
    NeighborWorks America also provides grants to NeighborWorks 
organizations to address a range of community needs, such as financial 
fitness education, home ownership counseling and education, development 
of affordable rental property, loans for improving safety, and much 
more.

Fuel an Engine of Innovation
    The structure of the NeighborWorks network facilitates 
collaborative learning to harness all the practical knowledge picked up 
on the ground and in our research. Initiatives that allow NeighborWorks 
organizations to learn directly from each other include: the 
NeighborWorks Campaign for Home Ownership, the NeighborWorks 
Multifamily Initiative, the NeighborWorks Rural Initiative, and the 
NeighborWorks Insurance Initiative and its National Insurance Task 
Force.
    To help organizations stay on the forward edge of business 
practices and community development, we deploy several strategies:

            Topflight Expertise and Coaching
    NeighborWorks America deploys a team of experts to provide 
NeighborWorks organizations with the expertise and coaching needed to 
continue to serve resident needs.
    This on-call team provides help in six areas:
  --Organizational development;
  --Resource development and marketing;
  --Community revitalization and business planning;
  --Management systems (including technology and financial management);
  --Single-family housing and lending; and
  --Real-estate development and management.

            Championing Home Ownership Opportunities
    NeighborWorks America has worked for the past 20 years on expanding 
home ownership opportunities. Over the past 5 years, while access to 
credit has become easier, access to appropriately-priced mortgages 
continues to adversely and inordinately affect minority, female-headed 
households and immigrant families. The NeighborWorks network's 
financial literacy and homebuyer education efforts work to increase 
access to the best-priced mortgage for each consumer. The NeighborWorks 
System provides home ownership opportunities in a number of important 
and highly effective ways.
  --67 percent of those assisted by the NeighborWorks Campaign for Home 
        Ownership are low- or very low-income households. Only 25 
        percent of the clients of conventional mortgage lenders have 
        low or very low incomes.
  --51 percent of the households assisted by the NeighborWorks Campaign 
        for Home Ownership are ethnic minorities, compared to only 25 
        percent of the clients served by conventional mortgage lenders 
        are minorities.
  --46 percent of the buyers assisted by the NeighborWorks Campaign for 
        Home Ownership are female, compared to only 21 percent of the 
        clients of conventional mortgage lenders.

            The NeighborWorks Campaign for Home Ownership
    The NeighborWorks Campaign for Home Ownership is a joint effort of 
government, banks, the insurance industry, secondary markets, the real-
estate community and others, coordinated by NeighborWorks America in 
conjunction with more than 158 community-based NeighborWorks 
organizations. Since 1993, the combined efforts of the Campaign have 
created more than 90,300 new homeowners (the majority of whom are low- 
and moderate-income minority families) and provided counseling to more 
than 538,300 individuals. As a result, $9.05 billion has been invested 
in many of America's distressed communities. The campaign provides 
resources and education for homeowners and empowers those for whom the 
American dream is thought out of reach.

            HomeOwnership Centers
    To date, NeighborWorks America has supported the development of 
nearly 100 NeighborWorks HomeOwnership Centers throughout the Nation. 
These Center are one-stop shops for a broad range of home ownership 
services available to low- and moderate-income families including 
unbiased advice, counseling, training, referrals to partners such as 
lenders, real-estate agents, inspectors, contractors, and special 
financial assistance to income-qualified buyers. The Centers can also 
help existing homeowners with housing rehabilitation advice and 
assistance along with maintenance training. Financial counseling to 
avoid credit problems, loan delinquencies and foreclosures is also 
available.
    NeighborWorks America expects to add at least 10 percent more 
HomeOwnership Centers in fiscal year 2007. On average, after becoming 
fully operational, each HomeOwnership Center will produce over 100 new 
homeowners per year and counsel over 375 families per year.

            Minority Home Ownership Strategies
    Between 2003 and 2007 the Campaign for Home Ownership set a goal to 
reach 30,000 minority homeowners. This goal also helps support the 
White House's Minority Home Ownership Initiative. Through 2005, the 
Corporation has developed and implemented a series of strategies to 
meet this goal. Among the strategies are development of an online 
searchable database called ``Winning Strategies'' that documents 
innovative strategies successfully used to promote minority home 
ownership in local communities; promoting expansion of financial 
education with new partners such as churches, schools and employers; 
working through NeighborWorks Center for Home Ownership Education and 
Counseling (NCHEC) to initiate new partnerships to develop training and 
certification classes on home ownership education that will be offered 
regionally and nationally; hosting national symposia on minority home 
ownership issues, education and counseling, and promoting stronger 
partnerships between nonprofits and real-estate agents, credit unions 
and employers.

NeighborWorks Home Ownership Activities for Fiscal Year 2007
    In fiscal year 2007, the NeighborWorks System will continue to 
focus attention on helping qualified lower-income families and 
individuals purchase, maintain and stay in their homes for the long 
term. Our plans include:
  --Delivering new training classes on ``Reaching Underserved 
        Homebuyers'' that will continue to be offered regularly at the 
        NeighborWorks Training Institutes;
  --Designing a new ``minority marketing toolbox'' in 2005 that will 
        include templates, tools and marketing materials to help local 
        NeighborWorks organizations implement enhanced marketing 
        efforts to attract more minority customers as potential 
        homebuyers;
  --Promoting expansion of financial education and home ownership-
        education programs with new partners such as churches, schools 
        and employers.

            Financial Literacy and Education to Help Avoid Predatory 
                    Lending
    Predatory lending tactics are at an all-time high, particularly 
those preying on minority families, immigrants, and financially less-
sophisticated borrowers. Too often bad actors encourage homeowners to 
pursue inappropriate debt consolidation, refinancing schemes, home 
improvement, or home equity loans that threaten the assets that the 
NeighborWorks System has worked so hard to help them acquire. 
NeighborWorks America just added a new course to its training 
curriculum to help combat predatory lending. The class filled up 
immediately and given this ballooning need, we are working to 
accommodate more.
    Other strategies we use to combat predatory lending include:
  --A Financial Fitness Program that prepares families to build sound 
        finances and be aware of predatory tactics. The Corporation 
        developed standards, adapted and created training materials, 
        trained trainers to initiate this comprehensive program, and 
        supports its growth;
  --The addition of 10 Financial Fitness sites in fiscal year 2007 to 
        expand the reach of financial education efforts across the 
        network;
  --A new consumer training curriculum for ``Refinancing Your Home'' 
        that can be offered to assist existing homeowners in making 
        smarter choices when considering the multitude of options in 
        refinancing their home;
  --A new consumer training curriculum on ``Buying a Manufactured 
        Home'' to help consumers who are considering buying 
        manufactured homes; and
  --A study on the cost/benefit of providing pre-purchase counseling to 
        consumers.

            Support the Center for Foreclosure Solutions
    We need to prevent foreclosures earlier--before a family even 
thinks of buying a home. NeighborWorks America's approach is to provide 
education and counseling at every stage--pre- and-post-ownership. We 
want to empower individuals, their families, their communities and 
their economies to be on a path of continued wealth creation. Informed 
consumers can leverage better service, lower costs and a more 
transparent, accountable lending and real estate industry.
    Over the past 10 years, there have been dramatic increases in high-
risk lending, growing job instability and excess consumer debt 
obligations that are all trademarks of susceptibility to foreclosures. 
NeighborWorks America has established the Center for Foreclosure 
Solutions (CFS) to research and test home ownership preservation 
efforts.
    Our NeighborWorks affiliate--Chicago Neighborhood Housing 
Services--is blazing trails for other organizations across the Nation. 
Chicago NHS teamed up with city officials and 20+ lenders to reduce 
geographically concentrated foreclosures that leave neighborhood blocks 
riddled with vacant homes. The Home Ownership Preservation Initiative 
(HOPI) provides counseling to financially strapped owners and 
assistance in working with lenders to discuss refinancing, lowering 
interest rates and modifying payment plans. Over the past 2 years, the 
HOPI campaign prevented 940 foreclosures through innovative outreach 
and counseling efforts.
    In fiscal year 2007, NeighborWorks America will expand the work of 
HOPI to establish a national model to address concerns about growing 
foreclosure problems. Other national and local partners are critical to 
successfully addressing these problems.
    The goals of the Center for Foreclosure Solutions include market 
penetration in 15 markets with a phase roll-out approach focusing on 
key foreclosure hotspots, telephone counseling 24 hours, 7 days a week 
through a national, third-party intermediary, and implementation of a 
national and local targeted media and public relations campaign to 
reach delinquent and at-risk homeowners.

            Rural America
    The NeighborWorks network has become increasingly active in rural 
communities around the country. Today, 77 out of 240 chartered 
NeighborWorks organizations--about 30 percent of the network--serves 
rural populations, across 39 States and Puerto Rico. As a result of a 
series of growth and programmatic innovations, the number of rural 
Americans assisted by the network is expected to increase to 50 percent 
in the next few years. The needs of rural homeowners and renters differ 
in many aspects from those in urban or suburban areas. In many States, 
rural areas have the highest rate of substandard housing, the highest 
poverty rate, and median incomes often 35 percent or less than the 
median incomes of urban residents. Unfortunately, rural areas 
traditionally have lacked the financial resources for home financing.
    In fiscal year 2007, NeighborWorks America will seek new 
affiliations with community-based organizations serving rural 
communities and will boost the capacity of existing NeighborWorks 
organizations to significantly increase their rural service areas to 
include high-priority under-served populations.
    Hurricane Katrina has demonstrated the importance of coordinating 
relief efforts. In addition to new and expanded NeighborWorks charters, 
the Corporation will partner with at least three regional capital 
intermediaries based in perennially under-served rural regions. The 
NeighborWorks System will provide access to customized training event, 
including place-based Training Institutes in areas such as the Gulf and 
Appalachia; equity capital to leverage targeted investment in housing 
and community economic development, and at least partial liquidity for 
those investments through the Corporation's national partnerships.
    During fiscal year 2007, the Corporation will also launch at least 
six pilot sites for community economic development projects in rural 
markets. The pilot project will be designed to strengthen communities 
through job creation, retention and enhancement strategies.
    This aggressive growth strategy is designed to increase 
NeighborWorks America's overall production in rural communities from 
$500 million in direct investments and 16,000 individuals served in 
fiscal year 2005 to $750 million in direct investments and 24,000 rural 
Americans served by the end of fiscal year 2007.

            Areas Affected by Natural Disasters
    The NeighborWorks System (NeighborWorks America, related Capital 
Corporations such as Neighborhood Housing Services of America and 
affiliated local NeighborWorks organizations) along with the 
Corporation's national partners are well-positioned to play a 
significant role in rebuilding the areas of the Gulf Coast region 
affected by Hurricane Katrina. This nationwide network has access to 
skilled housing and community development experts who will apply their 
expertise to the affected are in a number of ways:
  --Contractors and construction managers who can do a triage of work 
        on existing properties to determine which properties can be 
        rehabilitated and which should be demolished;
  --Real estate developers who know how to take an idea and turn it 
        into a reasonably-priced quality constructed house or 
        subdivision;
  --Mortgage lenders who can originate and underwrite loans;
  --Counselors on credit and housing issues, who can assist residents 
        through complex processes involved with property rehabilitation 
        and/or mortgage financing;
  --Contractors who are knowledgeable of various Federal, State and 
        local programs and funding sources that may be available;
  --Organizers who can help provide hope to the affected families and 
        communities, and mobilize volunteers in the rebuilding efforts; 
        and,
  --Resource development professional who have a proven track record in 
        soliciting private-sector contributions in support of 
        rebuilding efforts.

            Affordable Rental Opportunities
    The desire to own a home is strong across all socioeconomic groups, 
but not everyone is adequately prepared, and the strongest communities 
offer multiple housing options. Therefore it remains important to have 
viable rental housing--especially units that allow a safe, stable 
environment--with rents affordable enough for occupants to accumulate 
savings. Tomorrow's first-time buyers are renters today.
    A major focus of NeighborWorks Multifamily Initiative, which 
provides affordable rental housing, has been on strengthening aging 
property portfolios that may be suffering a weakness in cash flow. Our 
expert coaches and analysts suggest operational improvements, and 
explore creative ways to restructure financing, with an eye to 
improving cash flow across the entire portfolio.
    NeighborWorks America also promotes more opportunities to increase 
the supply of affordable rental homes. In 2004, the Corporation was 
able to use the special set-aside of $5 million for multifamily housing 
to promote mixed income rental homes that truly serve their communities 
by providing more than just sound housing.
    NeighborWorks organizations in our Learning Center Consortium 
provide after-school care, job training, health care, parenting classes 
and much more. NeighborWorks America has commissioned a study to 
measure the impact on the difference made on the kids and their 
families in the form of dropout rates, GPA, attendance rate, and job 
retention.

Build Skills and Performance in the Housing and Community Development 
        Field
            NeighborWorks Center for Home Ownership Education and 
                    Counseling
    NeighborWorks is the Nation's largest certifier of high-quality 
home ownership educators and counselors, working to empower consumers 
to make the biggest investment of their lives a successful one. 
Although the value of home ownership education and counseling to 
homebuyers is supported by research and is increasingly recognized as a 
powerful tool to promote neighborhood revitalization, the quality is 
uneven and the coverage insufficient. There are few national 
certification standards, limited continuing-education requirements for 
trainers and counselors, gaps in coverage across the Nation, and a lack 
of quality control for home ownership education and counseling--ranging 
from intensive, multi-day curriculum and standards to ``sham'' 
counseling programs that lure potential buyers into predatory loan 
deals. There is also a dearth of well-trained educators and counselors 
to meet the growing national need.
    To address these concerns, NeighborWorks America, through the 
nationally recognized NeighborWorks Training Institute, has launched 
the NeighborWorks Center for Home Ownership Education and Counseling 
(NCHEC) to create a national force of high-quality home ownership and 
financial education counselors. To date these counselors have helped 
more than 500,000 Americans gain critical financial literacy skills and 
make the most of home ownership.
    NCHEC aims to increase the number of home ownership educators and 
counselors trained and certified through the NeighborWorks Training 
Institute from 700 to more than 2,000 per year--indirectly ensuring the 
education and counseling of several million individuals and families by 
2007. NCHEC has already provided over 3,800 training certificates a 
year in more than 20 courses in home ownership, education, counseling 
and lending.
    In the fall of 2004, the Department of Housing and Urban 
Development awarded NeighborWorks America $7.75 million over 2 years to 
train and certify HUD-approved housing counselors around the country 
through NCHEC. In addition to expanded home ownership and community-
lending training offered at the NeighborWorks Training Institutes, 
NCHEC has partnered with other intermediaries, State-wide counseling 
collaboratives, and NeighborWorks organizations to offer trainings in 
local settings around the country.

            NeighborWorks Training Institutes
    For more than 15 years, NeighborWorks America has been providing 
outstanding community development training in the country through its 
NeighborWorks Training Institutes, which are held four to five times a 
year in different cities throughout the United States. In recent years, 
NeighborWorks America has begun taking its NeighborWorks Training 
Institute courses to local markets in the form of ``place-based 
trainings'' conducted in collaboration with local and regional 
partners. NeighborWorks America has also offers an Advanced 
Practitioner Program (APP) for seasoned community development 
practitioners and board members.

                               CONCLUSION

    Let me close by thanking the subcommittee for the opportunity to 
brief you on our work, and the results generated by NeighborWorks 
America's congressional appropriation. The NeighborWorks System and 
NeighborWorks America's congressional appropriation represents a 
precious asset for 240 community development organizations and more 
than 4,000 communities across America. With our leveraging of dollars, 
NeighborWorks has been efficient and effective in ensuring the maximum 
impact of our Federal appropriation. Congress has allowed NeighborWorks 
America to be flexible and responsive to local needs; as a result, 
families and communities are stronger and more self-reliant.
    NeighborWorks America is committed to continuing to build healthy, 
strong and safe communities all across America. Your continued support 
is vital to us in accomplishing this goal.
                                 ______
                                 
Prepared Statement of the Honorable Steven R. Blust, Chairman, Federal 
                          Maritime Commission

    Mr. Chairman and members of the subcommittee, thank you for this 
opportunity to present the President's fiscal year 2007 budget for the 
Federal Maritime Commission.
    The President's budget for the Commission provides for $21,474,000 
for fiscal year 2007. This represents an increase of 5.8 percent, or 
$1,180,000, over our fiscal year 2006 appropriation. This budget 
provides for 132 work-years of employment.
    Our fiscal year 2007 budget request contains $15,691,000 for 
salaries and benefits to support the Commission's programs. This is an 
increase of $1,178,000 over our fiscal year 2006 appropriation. This 
includes all salaries, including those for employees hired in fiscal 
year 2006, promotions, within-grade increases, and an anticipated cost 
of living adjustment. The funding includes annualization of the fiscal 
year 2006 cost of living adjustment increase, and an anticipated 2.2 
percent fiscal year 2007 cost of living adjustment. Further, it 
includes funds to hire two critical staff: a Commissioner's Counsel and 
an attorney for our Office of Consumer Affairs and Dispute Resolution 
Services.
    Official travel has been straight-lined at our fiscal year 2006 
level of $237,000. Travel remains an essential aspect of our effort to 
provide better service to the ocean transportation industry and to 
accomplish our oversight duties more effectively. We are committed to 
working within our straight-lined travel funding to ensure that our 
expanded outreach and compliance programs are fully supported, in 
addition to providing appropriate travel funds to support all other 
program efforts.
    Administrative expenses have increased $2,000 net over fiscal year 
2006, to $5,546,000. The Commission is planning for a small increase in 
rent to accommodate rental rate increases in our field offices, as well 
as an increase to fund Homeland Security charges. Other administrative 
expenses will be incurred in fiscal year 2007 to support increases in 
our customary business expenses, such as maintaining government and 
commercial contracts, and for items such as telephones, postage, and 
supplies. These increases are partially offset by a reduction of 
$157,000 for furniture and equipment.
    Just as in previous years, the Commission's budget contains 
primarily non-discretionary spending. These items represent the basic 
expenses any organization faces in order to conduct its day-to-day 
operations, and are crucial to allow us to meet the responsibilities 
Congress has entrusted to the agency. This budget request therefore 
represents a modest increase over the current year appropriation, 
primarily to address anticipated cost increases over current year 
expenses.
    As you know, Mr. Chairman, the Commission is responsible for the 
regulation of oceanborne transportation in the foreign commerce of the 
United States. Since 1916, the Commission and its predecessor agencies 
have effectively administered Congress' directives for the ocean 
transportation industry, and its long-standing expertise and experience 
have been recognized by Congress, as well as by the industry the 
Commission oversees, courts, and other nations. Working with the 
industry, we have developed a regulatory system that allows for 
necessary oversight with minimal disruption to the efficient flow of 
U.S. imports and exports. I would like to highlight for you some of the 
significant activities in which the Commission is involved.
    Last year, I advised you of the Commission's rulemaking proceeding 
to allow non-vessel-operating common carriers (``NVOCCs'') to enter 
into confidential service arrangements with their shipper-customers. As 
you will recall, NVOCCs otherwise in compliance with the licensing, 
financial responsibility, and tariff publication requirements of the 
Shipping Act are now permitted to enter into confidential NVOCC Service 
Arrangements, or NSAs, with their shipper customers in lieu of 
publishing their rates in a publicly-available tariff, provided that 
the NSA is filed confidentially with the Commission and the essential 
terms are published in the NVOCC's tariff. This new regulation is 
consistent with those regulations governing service contracts between 
ocean common carriers and their shipper customers, and we anticipate 
that it will result in greater competition in the shipping industry.
    Originally the exemption rule did not allow NVOCCs or shippers 
associations with NVOCC members to participate in NSAs as shippers. We 
were concerned about the potential antitrust implications of such 
arrangements. Some of those concerns were ameliorated after issuance of 
a judicial decision last fall, and the Commission determined that it 
could remove these limitations. Two or more NVOCCs are still prohibited 
from jointly offering a single NSA, as we believe this might run 
counter to recent judicial interpretations which construe the antitrust 
provisions of the Shipping Act in a manner we believe to be much 
broader than what was envisioned by Congress, this Commission, and 
indeed even the industry. I indicated last year that we would continue 
to work with the industry to address this issue. In fulfillment of this 
obligation, the Commission requested the comments of industry 
participants on potential ways to authorize joint NSAs by multiple 
NVOCCs. The Commission received numerous comments in late 2005, and is 
presently evaluating them.
    As of mid-April 2006, 300 original NSAs had been filed--by 57 NVOCC 
filers--out of 355 NVOCCs who are registered to be able to offer NSAs. 
That means that only slightly more than 10 percent of all NVOCCs have 
registered to offer NSAs, and fewer than 2 percent have taken advantage 
of the new contracting option. It will take some time for new business 
processes, skills and recognition of benefit to converge into a new 
market; however, I forecast a substantial growth in the use of NSAs in 
the future as the industry becomes more familiar with these agreements.
    As part of the Commission's enforcement and ocean transportation 
intermediary oversight functions, as well as the ombudsman services 
provided by the Office of Consumer Affairs and Dispute Resolution 
Services, the Commission recently commenced a formal investigation 
against nine household goods moving companies operating in violation of 
the Shipping Act. The Commission's preliminary investigation indicated 
that these companies were unlawfully doing business as unlicensed 
NVOCCs without proof of financial responsibility or published tariffs, 
and were engaging in conduct that created risks of significant 
financial harm to the public. On January 17, 2006, the U.S. District 
Court for the Southern District of Florida granted the Commission's 
motion for a preliminary injunction against four of the companies and 
three of the individuals named as respondents in the proceeding. The 
injunction, which prohibits these respondents from operating in 
violation of the Shipping Act, will remain in effect pending the 
completion of the Commission's investigation.
    The Court injunction and the Commission's formal investigation are 
based on more than 250 consumer complaints. Some examples of those 
complaints include failure to deliver cargo and refusal to return the 
pre-paid ocean freight; loss of the shipper's cargo; charging the 
shipper for marine insurance never obtained; withholding cargo until 
the shipper pays a higher rate than the one originally quoted; 
misleading the shipper as to the cargo's whereabouts; and finally, 
making the release of cargo dependent upon the shipper paying a second 
carrier or warehouse for transportation and warehousing already pre-
paid to respondents. As most of the injuries of which we are aware 
involve shippers' personal household possessions, the Commission 
considers it especially important that every effort be made to prevent 
the respondents from injuring anyone else. At the moment, the 
proceeding is before the Commission's administrative law judge and we 
will seek additional injunctions as warranted.
    Last year, I advised you about the agency's public outreach 
initiative involving a series of informational seminars hosted by the 
Commission's Area Representatives and other Commission personnel at 
various locations around the country. These seminars continue to be 
successful in creating a forum for enhanced dialogue between the 
industry and the Commission. As you may recall, we also started a 
program where we have invited representatives from various segments of 
the industry to brief our staff on current issues and concerns 
affecting the ocean transportation industry. Thus far, we have met with 
representatives from the ocean transportation intermediary, passenger 
vessel and vessel operator communities, as well as shippers, marine 
terminal operators, and port authorities. We are in the process of 
planning more informational briefings for 2007 with other segments of 
the maritime industry, including Federal agencies. One Federal agency, 
the Maritime Administration, briefed Commission staff last March, and 
the U.S. Customs and Border Protection is scheduled to brief our agency 
in June about the Automated Commercial Environment trade processing 
system. I am confident that these briefings will provide the Commission 
and its staff with a greater awareness and understanding of the most 
current issues facing the maritime community.
    The Commission continues to address restrictive or unfair foreign 
shipping practices under section 19 of the Merchant Marine Act, 1920 
(``Section 19''); the Foreign Shipping Practices Act of 1988 
(``FSPA''); and the Controlled Carrier Act of 1978. Section 19 empowers 
the Commission to make rules and regulations to address conditions 
unfavorable to shipping in our foreign trades; FSPA allows the 
Commission to address adverse conditions affecting U.S. carriers in our 
foreign trades that do not exist for foreign carriers in the United 
States. Under the Controlled Carrier Act, the Commission can review the 
rates of government-controlled carriers to ensure that they are not 
below a level that is just and reasonable.
    In my statement last year, I advised you of several pending 
proceedings related to shipping conditions in China. In particular, the 
Commission was investigating whether Chinese laws and regulations might 
discriminate against and disadvantage U.S. vessel operators and NVOCCs 
with regard to a variety of maritime-related services. As you know, in 
December of 2003, the United States, through the Secretary of 
Transportation, and his Chinese counterpart, the Minister of 
Communications, signed a bilateral maritime agreement which appeared to 
address many of the concerns raised by the Commission, including issues 
affecting vessel operators, NVOCCs, and other industry interests. That 
agreement became effective with the exchange of diplomatic notes in 
April of 2004.
    Subsequently, the Commission requested comment from the industry on 
whether the commitments made in the bilateral agreement, which would 
have relieved the impediments to U.S. companies identified by the FMC, 
were being honored.
    The issues we raised were adequately addressed, and the Commission 
terminated the formal proceeding investigating these Chinese practices 
on April 21, 2005. Informally, we continue to receive positive feedback 
from the U.S. industry in this regard. Another U.S.-flag carrier has 
entered the U.S.-China trade and has opened offices in two cities in 
China. Matson Navigation's first vessel in the Ningbo-Shanghai-Long 
Beach express service called in Ningbo on February 21, 2006. As always, 
we will continue to monitor practices around the world to determine 
whether formal action is warranted.
    Lastly, the Commission recognizes that its oversight of ocean 
common carriers, ocean transportation intermediaries, including ocean 
freight forwarders and NVOCCs, and marine terminal operators, is an 
important element in the effort to protect our Nation's seaports. We 
are continuing our efforts to combat unlawful participation in the U.S. 
ocean transportation system by ensuring that all entities engaged in 
the U.S. foreign commerce are in compliance with the requirements of 
the statutes we administer. The Commission has met with the Office of 
Naval Intelligence, the Department of Homeland Security and the 
Department of Transportation to discuss information sharing and other 
possible FMC contributions to maintaining a safe and efficient maritime 
transportation system. The Commission's regulation of operators of U.S. 
marine terminals ensures that they follow just and reasonable 
practices, and that they do not unreasonably prefer or prejudice any 
person or unreasonably discriminate against carriers using their 
facilities. While our oversight is limited to the regulation of such 
commercial practices, we make every effort to work closely with other 
agencies to share information in this area. Moreover, the Commission is 
a member of the Committee on the Marine Transportation System, the 
inter-agency group created by this administration to carry out a joint 
strategic plan that ensures that the U.S. marine transportation system 
achieves the expansion goals necessary to support the level of traffic 
anticipated in the 21st Century in a secure, environmentally sound and 
coordinated manner for all stakeholders. We also continue to exchange 
information with the U.S. Customs Service through a Memorandum of 
Understanding. As the Commission continues to refine its role in the 
safeguarding of our national security, we stand ready to provide our 
technical expertise and assistance to all groups that are on the front 
lines of securing our ports and vessels.
    Mr. Chairman, I hope that my comments have served to give you a 
clear indication of the important work to be accomplished by the 
Federal Maritime Commission. I respectfully request favorable 
consideration of the President's budget for the Commission so that we 
may continue to perform our vital statutory functions in fiscal year 
2007.
                                 ______
                                 
   Prepared Statement of Mark V. Rosenker, Acting Chairman, National 
                      Transportation Safety Board

    Chairman Bond, Ranking Member Murray, and members of the 
Subcommittee on Transportation, Treasury, the Judiciary, Housing and 
Urban Development, and Related Agencies, the National Transportation 
Safety Board appreciates the opportunity to present testimony on its 
appropriations request for fiscal year 2007.
    The National Transportation Safety Board is an agency with the 
critical mission of ensuring the safety of the traveling public through 
transportation accident investigation and special study of 
transportation safety concerns. The Safety Board investigates aviation, 
pipeline, rail, hazardous material, marine, and highway accidents. The 
Board also conducts highly technical laboratory examinations and 
analyses of voice and data recorders and physical evidence recovered in 
accident investigations. The Board determines the probable cause of the 
transportation accidents and makes safety recommendations to prevent 
similar accidents from happening again. We address these 
recommendations to the agencies, organizations, and companies that are 
best able to make improvements. The Board's investigators serve as U.S. 
accredited representatives as specified in international treaties for 
aviation accidents outside U.S. borders involving U.S.-registered 
aircraft or involving aircraft or major components of U.S. manufacture. 
Beyond our national and international accident investigation work, the 
Board works closely with State governments to transform our safety 
recommendations into laws that save lives.
    I assure you that we work hard to manage well the people and 
resources of the Safety Board to perform our critical mission. During 
last year's appropriations cycle, the committee expressed concerns 
about the distribution and management of agency resources. Over the 
last year we have made considerable progress to improve the mission 
focus of the Safety Board.
    Recent leadership changes at the Safety Board have been 
significant. In March 2005, Joe Osterman began serving as the Board's 
Managing Director, its highest-ranking career leader. Mr. Osterman is 
effectively leading a highly talented management team. Over the past 
year, the Board has changed personnel in 14 of the top 24 leadership 
positions. Highly qualified and experienced professionals, from both 
inside and outside the Board, fill these important positions. Some 
noteworthy new members of the team are Dr. Jack Spencer, the Director 
of our Office of Marine Safety, and Colonel Gary Halbert, our General 
Counsel. Dr. Spencer, an MIT-educated naval architect, comes to us from 
the private sector, and Mr. Halbert--an accomplished attorney and 
aviator--recently retired from the U.S. Air Force. Both have hit the 
ground running and are making important contributions to the Board. 
Also, we are currently recruiting for a Chief Information Officer who 
will join the agency's management team with the responsibility of 
managing the agency's information infrastructure. We are improving our 
performance management system throughout the agency; and, most 
importantly, we are refocusing our efforts on leadership, internal 
communication among staff and the Board members, external 
communications with our committees and the public, and dedication to 
the Board's mission.
    The Safety Board has reinvigorated its focus on the timely 
completion of investigations and the production of accident reports. We 
have increased production of reports, with safety recommendations by 50 
percent, without compromising the quality that is the hallmark of 
Safety Board investigations and reports. Since this time last year, the 
Board has considered and adopted 21 investigation or safety reports in 
public meetings and conducted two public hearings. Moreover, our 
leadership team is on track to improve this record even further. A 
dozen of next year's Board products have been scheduled, and three 
public hearings and one safety forum have been proposed for the Board's 
consideration. We are focused on the mission. Furthermore, our 
leadership team is improving the management of the agency. In each of 
the last 3 fiscal years, timely and accurate NTSB financial statements 
have received clean audit opinions from the Department of 
Transportation Inspector General. The Board now has a strategic plan, 
and we are working closely with the Government Accountability Office to 
examine our management practices to determine where we can make 
additional improvements.
    The Safety Board also has heard clearly the concerns regarding the 
NTSB Academy. The building is the site of our training center, but it 
also houses the Board's Mid-Atlantic Aviation Safety Regional Office, 
the reconstruction of the TWA flight 800 wreckage (an important 
training tool) and a laboratory. Finally, it serves as the continuity-
of-operations site for the Board as well as for other government 
agencies. In the fiscal year 2006 appropriations for the Board, this 
committee acknowledged the Academy's benefit in sharing accident 
investigation best practices with the broader transportation community; 
however, the committee also believed that the functions of the Academy 
should be secondary to the Board's core mission of accident 
investigation. The committee directed the Board to reduce the 
investigator workforce hours at the Academy so that critical 
investigative responsibilities would not suffer because accident 
investigators were diverted to Academy teaching assignments. The 
committee encouraged the Board to more boldly and directly cover the 
cost of the Academy using authority to impose and collect fees for the 
Academy's services. (Consistent with the committee's direction, we have 
redirected our approach.) The Board now looks at the Academy as an 
integral adjunct to the core investigative mission, concentrating on 
the Academy's unique ability to develop and sustain innovative and 
state-of-the-art training courses that support, not supplant, accident 
investigation and safety activities.
    I would like to provide a brief overview of some of the major 
accidents, reports, and activities of the Safety Board in each mode of 
transportation, and also touch on the important work of other major 
offices during this past year.
    Marine Safety.--The Safety Board initiated five marine accident 
investigations in fiscal year 2005 including the sinking of the 
uninspected passenger vessel Sydney Mae II in Oregon in September 2005. 
Board investigators led the investigation of a fire on board the 
passenger vessel Lady Baltimore in Baltimore, Maryland, and also a fire 
on the small passenger vessel Express Shuttle II in Port Richy, 
Florida, in October 2004. The Board also investigated accidents 
involving two foreign ships: the Norwegian Dawn, a Bahamian flag 
passenger vessel en route to New York that suffered heavy weather 
damage, and the Malaysian flag bulk carrier Selendang Ayu that went 
aground in the Aleutians.
    The Board completed four marine investigations in fiscal year 2005. 
These included the collision of the U.S. Navy submarine USS Greenville 
and the Japanese vessel Ehime Maru off the coast of Hawaii, the 
passenger vessel Taki Tooo, the Staten Island Ferry Andrew J. Barberi, 
and the Alaskan Marine Highway System ferry Leconte.
    Aviation Safety.--The Safety Board initiated five major domestic 
aviation accident investigations in fiscal year 2005, including the 
crash of a Northwest Airlink regional jet that killed both crewmembers 
during a repositioning flight in Jefferson City, Missouri. Just 5 days 
later, the Board launched a second go-team to Missouri to investigate 
an accident involving an American Connection commuter flight that 
crashed on approach to Kirksville causing 13 fatalities. A go-team also 
was launched to Houston, Texas, in November to investigate an accident 
involving a Gulfstream jet that was en route to pick up former 
President Bush for a foreign speaking engagement. Two other accidents 
involving corporate jets occurred in February: one was taking off from 
Teterboro, New Jersey; the other was carrying Circuit City executives 
to Pueblo, Colorado.
    The Board launched investigators to assist on 17 foreign accidents 
in fiscal year 2005, including the crash of a military Boeing 737 
charter in Kabul, Afghanistan. August was an extremely busy month for 
foreign investigations--the Board launched investigators to a Sikorsky 
S-76 helicopter accident in Tallin, Estonia, and launched investigators 
to assist in airline accident investigations in Canada, Greece, 
Venezuela, and Peru.
    The Board completed four major investigations in fiscal year 2005: 
American Airlines flight 587 in-flight separation of the vertical 
stabilizer in Belle Harbor, New York; Air Sunshine in-flight engine 
failure near Treasure Cay, Bahamas; Federal Express hard landing and 
gear collapse in Memphis, Tennessee; and Executive Airlines crash 
during landing near San Juan, Puerto Rico. During this time, the Board 
also issued two important aviation safety studies: ``General Aviation 
Activity Reporting Requirements'' and ``General Aviation Weather 
Accidents''.
    Regional investigators initiated 1,862 general aviation accident 
investigations in fiscal year 2005, and initiated 132 investigations 
involving commercial (not GA accidents) operations. Regional 
investigators completed 2,132 investigations during this period. The 
Board also published annual reviews of aircraft accident data for air 
carrier and general aviation operations.
    Railroad, Pipeline, and Hazardous Materials.--In fiscal year 2005, 
the Safety Board launched teams to investigate 13 railroad accidents 
and 2 pipeline and hazardous material accidents. These included a 
launch to Graniteville, South Carolina, in which a freight train 
diverted at full speed onto an industrial siding where it subsequently 
crashed into a standing train, releasing chlorine gas that killed nine 
people and resulted in the evacuation of more than 5,400 people. The 
Board completed eight railroad and three pipeline and hazardous 
materials accident investigation reports and one pipeline safety study 
in fiscal year 2005. The accidents included a tank car explosion in 
Freeport, Texas, that occurred during chemical off-loading operations 
and the derailment of an Amtrak train in Flora, Mississippi.
    Highway Safety.--The Safety Board launched investigators on 6 major 
highway investigations and 31 other investigations during fiscal year 
2005. Those included a 14-fatality motorcoach rollover accident in 
Turrell, Arkansas; a motorcoach that struck an overpass in Alexandria, 
Virginia, while the driver was talking on a cell phone; two accidents 
causing 5 fatalities in which gasoline tankers overturned (one near the 
Pentagon in Arlington, Virginia, and the other in Davie, Florida); a 
school bus collision with a trash truck in Arlington, Virginia, in 
which 2 children were killed; and the tragic motorcoach fire in Wilmer, 
Texas, that killed 23 elderly passengers during the Hurricane Rita 
evacuation.
    Five major reports were completed in fiscal year 2005, including 
reports on two accidents 7 months apart at a Border Patrol security 
checkpoint in North Hudson, New York, killing 4 and injuring 54; an 
accident involving a motorcoach that struck the rear of a parked 
tractor-trailer near Tallulah, Louisiana, killing 8; and another 
accident in which a motorcoach crossed a highway median in a rainstorm 
striking an SUV and killing 7 in Hewitt, Texas. In addition, the office 
of Highway Safety also completed a special investigation report for the 
Board on ``Medical Oversight of Non-Commercial Drivers'' that 
highlighted the dangers of seizures and other medical issues uncovered 
during the investigations of four accidents that resulted in 8 
fatalities and 27 injuries. The Board also completed a report on the 
effectiveness of driver's education programs that involved a public 
hearing on an accident in Belgrade, Montana, that killed a driver's 
education instructor and three students.
    Safety Recommendations.--The most important result of an accident 
investigation are the safety recommendations that help prevent future 
accidents. Our recommendation acceptance rate was over 82 percent in 
2005. We currently have 850 open safety recommendations of which 62 
percent are to operating administrations of the Department of 
Transportation and the U.S. Coast Guard in the Department of Homeland 
Security.
    In fiscal year 2005, the Safety Board issued 84 safety 
recommendations and closed 142, 111 of which were closed with an 
acceptable response. In aviation, 29 were successfully closed, as were 
37 in highway, 8 in pipeline and hazardous materials, 10 in marine, and 
27 in rail. The Board also updated its Most Wanted List of critical 
safety recommendations targeted to Federal regulators and States that, 
if implemented, will make the most dramatic impact on safety. The Most 
Wanted List contains 56 recommendations directed to Federal recipients, 
and 9 directed to the States. Additionally, the Safety Board conducted 
more than 20 meetings and legislative briefings in 10 States to promote 
Safety Board recommendations.
    Some examples of successfully implemented recommendations include 
tougher surveillance of rapidly growing air carriers, revised 
lubrication intervals and pilot checklist procedures for horizontal 
stabilizer trim systems on DC-9 and MD-80/90 and B-717 aircraft, new 
regulations upgrading safety requirements for 9- to 15-passenger vans, 
a requirement that steel pipe used in construction pipelines must have 
adequate toughness to prevent brittle fracture, and improved crew 
resource management training for railroad employees.
    NTSB Academy (Training Center).--Fiscal year 2005 marked the first 
full year of operational experience on site for the Academy. During the 
year, the Academy expanded course offerings and received accreditation 
from the International Association for Continuing Education Training, 
allowing continuing education credits to be given to students who meet 
the required criteria. Also, as a result of the direction provided in 
the Board's appropriations, the philosophical approach for the Academy 
has changed significantly and investigative resources are used for 
Academy programs have been sharply curtailed. The focus of the NTSB 
Academy is to support the accident investigation mission of the Safety 
Board and promote transportation safety in the following ways:
  --Improving the quality of NTSB accident investigations through 
        technical training and instruction;
  --Improving the effectiveness of NTSB staff through skill development 
        instruction;
  --Improving the efficiency and effectiveness of NTSB accident 
        investigations by communicating lessons learned, sharing 
        accident investigation techniques, and fostering the exchange 
        of new ideas and experience among organizations that 
        participate in NTSB investigations as parties and the broader 
        transportation safety community;
  --Providing a forum for instruction, outreach, and advocacy on issues 
        relevant to the transportation safety community;
  --Providing a facility for advanced laboratory and research activity; 
        and
  --Utilizing its high-quality training resources to facilitate 
        transportation disaster response programs, collaborative 
        instruction with partner agencies, and other compatible 
        activities.
    Summary.--Included in the President's fiscal year 2007 budget for 
the National Transportation Safety Board is a provision that would 
rescind the $1.998 million balance in the Board's no-year emergency 
fund and make that sum available in the Board's fiscal year 2007 1-year 
appropriation account. In addition, the President's budget proposal 
would make up to $5 million of the 1-year appropriation available until 
expended, thus allowing the Board to set aside up to $5 million of the 
appropriation for extraordinary expenses, such as those that normally 
would be covered by the emergency fund.
    Should the Congress approve this provision, the Safety Board would 
anticipate initially reserving some portion of its appropriations to 
ensure that a minimum amount would be available for carry over for 
emergency expenses. Any additional amounts that are available at year-
end would also be carried over for this purpose. Because establishing 
an adequate pool of money for emergency expenses would likely take 
several years to accomplish, this provision would necessarily need to 
be included in the Board's appropriation language for subsequent fiscal 
years as well.
    As the Acting Chairman of the National Transportation Safety Board, 
I am very proud of the men and women with whom I work. Other countries 
have adopted our model, and many countries ask for the Safety Board's 
assistance. The employees at the Board are considered to be the best in 
the business, and prove it every day. What surprises many people is the 
size of the agency. Currently the Board has only 399 employees. Of this 
number, 283 employees are investigators or are mission-critical to an 
accident investigation. Seventy percent of our budget is used for 
employee compensation and benefits, 15 percent for fixed expenses (such 
as office space, telephones, etc.) and 15 percent for everything else 
including travel to accident sites, accident investigation services, 
and lab equipment replacement and upgrades. I appreciate very much that 
the Appropriations Committee has had to make difficult choices in the 
last several years. This year's appropriation, which was held to last 
year's funding level, was further reduced by a 1 percent across-the-
board rescission. In addition, the cost of the annual pay increase had 
to be absorbed in the reduced appropriation. As a result, we reduced 
our FTE level by 15 and have not been able to replace some key staff.
    The Safety Board faces significant challenges. Although the Board 
has executed a human capital forecast this year to realign our existing 
resources to continue to meet critical mission needs, the Board will 
find increasing challenges in some critical areas. Advances in 
transportation technologies, increases in our necessary involvement in 
foreign aviation accident investigations, and the sheer complexity of 
many recent accident investigations will stretch thin our employee 
resources. The Board has been very careful with its appropriated funds, 
but we will have difficulty sustaining the high standards we demand of 
ourselves without sufficient funding. In fiscal year 2005, we have made 
demonstrable improvements in the management, financial fitness, and 
mission focus of the NTSB. I would like to request that the 
subcommittee consider the Board's critical mission and our future needs 
for additional professionals to continue the fine work of the Safety 
Board. In 2004, there were more than 44,000 fatalities in 
transportation accidents, and we know that Congress shares our belief 
that more can be done to prevent these fatalities. I would like to 
thank the subcommittee for your continued support of the Safety Board.
                                 ______
                                 
    Prepared Statement of Honorable Patrick E. McFarland, Inspector 
              General, the Office of Personnel Management

    Mr. Chairman and members of the subcommittee, thank you for 
providing me with this opportunity to discuss the President's fiscal 
year 2007 request for appropriations for the Office of the Inspector 
General. The total request for the Office of the Inspector General is 
$17,764,000 which is $452,000 below the amount enacted in fiscal year 
2006. Of this amount, $1,598,000 is from the salaries and expenses/
general fund and $16,166,000 is from the trust funds. These resources 
are requested to perform our core functions which include:
  --Conduct audits of agency programs and operations, primarily 
        carriers participating in the Federal Employees Health Benefits 
        Program (FEHBP), associated information systems, and internal 
        agency operations and financial systems;
  --Provide investigative oversight of the OPM-administered employee 
        benefit programs; and
  --Issue administrative sanctions, including debarments, suspensions, 
        and civil monetary penalties, to health care providers who pose 
        a financial risk to the FEHBP itself or a health care risk to 
        persons who receive health insurance coverage through the 
        FEHBP.
    The Office of the Inspector General recognizes that oversight of 
the retirement and health and life insurance trust funds administered 
by OPM is, and will remain, its most significant challenge. These trust 
funds are among the largest held by the United States Government. Their 
assets totaled $715.8 billion in fiscal year 2005, their receipts were 
$85.1 billion, and their annual outlays were $94.4 billion. The amounts 
of their balances are material to the integrity of the government's 
financial position. I continue to allocate the vast majority of the 
Office of the Inspector General's efforts and resources to trust fund 
oversight, and we remain fully committed to trust fund activities.
    OPM makes outlays from the retirement trust funds in the form of 
payments to millions of annuity recipients. The health insurance trust 
fund provides payments to approximately 270 health insurance plans 
nationwide. In turn, the health insurance carriers pay millions of 
claims for services filed by their enrollees and health care providers. 
We have shown through our investigations and audits that such health 
insurance payments may be at risk through improper, inaccurate or 
fraudulent claims.
    We are obligated to Federal employees and annuitants to protect the 
integrity of their earned benefits. Our audit and criminal 
investigative work reduces losses due to fraud and improper payments 
and recovers misspent funds whenever possible. We have a special 
obligation to the Federal agencies and the American taxpayers who 
provide the majority of the funding.
    The Office of the Inspector General has achieved an impressive 
record of cost effectiveness. Audits and criminal investigations of the 
OPM administered trust fund programs have resulted in significant 
financial recoveries to the trust fund and commitments by program 
management to recover additional amounts. Since fiscal year 1992, these 
recoveries and commitments total approximately $1.2 billion which is 
approximately $10 of positive financial impact for each direct program 
dollar spent. During fiscal year 2005, the positive financial impact 
exceeded $121.7 million, and current estimates for fiscal year 2006 and 
fiscal year 2007 are $130 million and $115 million respectively. In 
addition, we believe that audits and criminal investigations provide a 
significant deterrent against future instances of fraud, waste, and 
abuse.
    With the additional resources received over the past few years, the 
Office of the Inspector General has established 21 investigative field 
offices. We have determined that the most effective deployment of 
investigative staff is to locate them in areas of the country where 
FEHBP and retirement benefits are more concentrated. Experience has 
shown that criminal investigators located in these areas often work in 
cooperation with other law enforcement entities similarly located 
resulting in additional criminal leads and better protection of OPM 
programs. In many instances, criminal investigators located outside of 
Washington, DC work exclusively on cases referred to them by local 
authorities. During fiscal year 2005, investigative work resulted in 38 
arrests, 43 indictments, and 20 convictions and we are projecting 
similar outcomes in fiscal years 2006 and 2007.
    During fiscal year 2007, we will continue to conduct audits of 
pharmacy benefit managers (PBMs). The premiums paid for prescription 
drug coverage have risen exponentially over the last 10 years and 
allegations against PBMs have also increased. It is estimated that 
approximately $6 billion was paid during 2004 in prescription drug 
premiums to experience-rated carriers by the Office of Personnel 
Management and Federal employees. This represents approximately 26 
percent of experience-rated carrier premiums paid for health benefits 
coverage for Federal employees and annuitants.
    Also during fiscal year 2007, we will further our development of a 
data warehouse of health benefits claims. A data warehouse offers the 
best opportunity for detecting erroneous health benefit payment 
transactions by medical providers, insurance carriers and subscribers 
by accumulating all benefit claims for all fee-for-service insurance 
carriers in a single data repository. This effort will enhance our 
current claims reviews by enabling the auditors to target certain types 
of potential claim payment errors on a program-wide rather than on a 
plan-by-plan basis. This will provide a significant improvement in our 
audit efficiency and effectiveness by offering us the opportunity to 
address significant issues one time only, instead of multiple times per 
year and to recover overcharges to the program when appropriate.
    The data warehouse also provides information enabling our criminal 
investigative staff to react quickly to criminal investigative leads. 
For example, the OIG investigators are able to determine the potential 
program risks associated with an identified provider or subscriber 
fraud allegation, and take appropriate action in a matter of hours 
instead of the days or weeks currently required.
    Our administrative sanctions program has continued to improve its 
effectiveness in protecting FEHBP and its enrollees against 
untrustworthy health care providers. This program enforces the FEHBP 
sanctions statute, which authorizes suspension or debarment of 
providers on the basis of 18 different categories of violations. The 
most frequently-encountered violations represent criminal convictions 
or loss of professional licensure. The highest priority sanctions cases 
involve providers who are the subject of investigation by our Office of 
Investigations. We have also developed a state-of-the-art capability to 
obtain sanctions-related information online and integrate it into our 
decision-making processes. With the nature and extent of electronically 
accessible information constantly growing, we are now able to identify 
violations involving providers nationwide who are directly associated 
with FEHBP as members of preferred provider organization networks and 
or who have actually submitted claims to FEHBP carriers. We select 
cases for action on the basis of the seriousness of the provider's 
violations and the risks that the provider poses to the FEHBP and its 
subscribers. We currently have over 29,350 active debarments and 
suspensions in effect.
    Thank you for this opportunity to present my resource request for 
fiscal year 2007.
                                 ______
                                 
Prepared Statement of the Honorable Linda M. Springer, Director, Office 
                        of Personnel Management

    Mr. Chairman and members of the subcommittee, I appreciate the 
opportunity to submit for the record a statement addressing the 
appropriations request for the Office of Personnel Management (OPM) for 
fiscal year 2007.
    As you know, OPM provides a variety of products and services to the 
nearly 1.8 million employees in the Federal Government. Some of our 
products and services include managing health insurance for 
approximately 8 million current and former Federal employees and their 
families, administering retirement services for over 2 million retirees 
from all branches of government, completing 90 percent of background 
investigations, and administering career development programs. As the 
OPM Director, I am committed to successfully delivering on our 
responsibilities on a timely basis. In short, I believe the American 
citizens and the Federal civilian workforce expect us to get things 
done, and our fiscal year 2007 budget request will allow us to do just 
that.

                OPM'S NEW STRATEGIC AND OPERATIONAL PLAN

    Mr. Chairman, operational planning and budgeting go hand in hand, 
and the OPM process is no exception. For an organization to fulfill its 
mission, it is first necessary to have a clear understanding of that 
mission, with supporting strategic objectives and operational goals. 
These goals must be accompanied by strong oversight and accountability 
in order to reach optimal performance.
    With these principles in mind, we recently reassessed the agency's 
goals and priorities, with an eye toward creating a more transparent 
and accountable OPM. This planning process was guided by an advisory 
group consisting of executives and senior General Schedule employees 
with OPM knowledge and expertise. During these meetings, the advisory 
group reviewed draft strategic objectives and goals, identified 
important program needs and milestones, and played a critical role in 
the development of the resultant plan.
    During the planning process, I also reached out to other resources 
for input, including members of Congress, the Chief Human Capital 
Officers Council Executive Committee, union leadership, and the Office 
of Management and Budget.
    The result is OPM's new Strategic and Operational Plan, which 
begins with a concise mission statement--to ensure the Federal 
Government has an effective civilian workforce. While this plan 
complies with the Government Performance and Results Act of 1993, it 
differs markedly from previous OPM plans and other Federal agency plans 
as well. This is intentional. Its goals are straightforward and readily 
identifiable, with each being action-oriented and beginning with a 
verb. Each goal also has a date by which it will be accomplished. The 
plan's 170 goals are included in the OPM Senior Executives' performance 
agreements. This means that, under the new SES performance-based pay 
system, executive compensation is directly linked to successful 
execution of the plan's goals. The bottom line is this--program 
performance will remain subject to high level management attention to 
ensure achievement.
    The new plan was developed concurrently with our 2007 budget 
request. The budget priorities you have seen in the Congressional 
Budget Justification can be traced back to program priorities in our 
new plan. This means that accomplishing the goals of the plan is 
realistic as long as the funding request is sustained.
    We are requesting $36.6 billion to carry out our mission in fiscal 
year 2007. Of this total, $36.4 billion is requested for mandatory 
programs and $255.7 million for discretionary activities. The 
discretionary request reflects $238 million for Salaries and Expenses--
including transfers from the Trust Fund Accounts of $126.9 million--and 
$17.7 million for the Office of the Inspector General. The total 
discretionary request reflects a net increase of $17.2 million compared 
to the fiscal year 2006 enacted level.
    Highlights of the request are discussed below.

           RETIREMENT CLAIMS PROCESSING AND BENEFITS PROGRAMS

    OPM's request includes funding to improve the services it delivers 
to Federal employees, annuitants, and their families through the 
retirement and insurance programs. Most notably, we will reduce the 
time needed to process claims for benefits submitted by retiring 
Federal employees to an average of 30 days. This represents a 
significant improvement over the timeliness reported for fiscal year 
2005--80 days for employees retiring under the Civil Service Retirement 
System (CSRS), and 93 days for those under the Federal Employees' 
Retirement System (FERS).
    The budget requests an additional $26.7 million in No-Year Trust 
funds for the Retirement Systems Modernization (RSM) Project. These 
funds will allow OPM to continue the conversion of millions of paper 
retirement records to electronic data and contract for the information 
technology needed for the system. RSM is the core strategy to meet 
OPM's long-term customer service, business, and financial management 
goals for the retirement program. As RSM is implemented, OPM will 
authorize new retirement benefits within 5 or fewer days (for 17 
percent of all claims in fiscal year 2008 and 49 percent in fiscal year 
2009). RSM will also improve the accuracy of retirement claims from 90 
percent (CSRS) and 93 percent (FERS) to between 95 percent and 97 
percent, respectively.
    RSM implementation is scheduled for 18 to 36 months from contract 
award. During this period, OPM will need experienced Legal 
Administrative Specialists (claims processors) to provide subject 
matter expertise and advice as the effort progresses. The fiscal year 
2007 budget provides the flexibility to support RSM implementation 
while maintaining timeliness and accuracy in processing retirement 
claims.
    For the Federal Employees Health Benefits Program (FEHBP), OPM will 
continue to negotiate and contract with private insurance companies 
that offer a broad range of health insurance benefits, including high-
deductible health plans with Health Savings Accounts and consumer-
driven health plan options. Customers can make informed health 
insurance decisions by several means: OPM-sponsored health plan 
brochures and Web site postings, health plan customer satisfaction 
survey results, Web-based comparison/decision tools, and the Health 
Plan Employer and Data Information Set. OPM will continue to carry out 
tough negotiations with health carriers to contain premium hikes and 
maintain benefit levels, and continue to provide, improve, and expand 
tools so customers can make informed health insurance decisions. In 
addition, OPM will continue to maintain the competitiveness of the 
insurance programs by implementing the new dental/vision benefits 
required by Public Law 108-496.

                HUMAN RESOURCES MANAGEMENT (HRM) REFORM

    In fiscal year 2007, OPM will pursue policy initiatives that 
continue to reform human resources management in Federal agencies. We 
will work with the Departments of Homeland Security (DHS) and Defense 
(DOD) to ensure the reforms underway link pay to performance. At the 
same time, OPM will work with other agencies engaged in Alternative 
Personnel Systems to assess the lessons learned from various 
modernization efforts. OPM is uniquely positioned to apply lessons 
learned from modernization efforts undertaken at DHS and DOD to the 
rest of the Federal workforce.
    Mr. Chairman, in the last half-century, the Federal workforce has 
changed significantly, and the old personnel system has not kept pace. 
According to the 2004 Federal Human Capital Survey (FHCS), for example, 
only 27 percent of Federal employees believe steps are being taken to 
deal with poor performers, and only 29 percent believe differences in 
performance are recognized in a meaningful way. Little of an employee's 
current compensation is based on performance or mission accomplishment. 
The fiscal year 2007 request will allow OPM to deliver this needed 
human resources modernization.
    The fiscal year 2007 budget will also allow OPM to maintain the 
competitiveness of Federal employee benefits by promoting affordable 
options within the Federal Employees Health Benefits Program, such as 
health savings plans, explore ways to refine market adjustments to 
Federal pay, and provide Federal employees with opportunities, 
benefits, and service delivery that compare favorably with other 
employers. For instance, OPM will continue to develop new workforce 
recruitment strategies and tools, and further improve the hiring 
process.
    OPM will assess the results of its strategic human resources policy 
activities by analyzing data collected from the FHCS and Federal 
Benefits Survey to be issued in 2006 and by continuing to track and 
report the extent to which agencies use innovations such as hiring 
flexibilities, teleworking, and student loan repayments. The results of 
these surveys will provide broad Government-wide indicators on the 
status of Federal human capital, which will benefit lawmakers, 
managers, and employees--and enable OPM to assess its performance in 
terms of delivering new human resources policies and issuing ongoing 
policy guidance as needed.

            IMPLEMENTING HUMAN CAPITAL STANDARDS FOR SUCCESS

    OPM will use requested funds to engage Federal agencies in 
implementing Human Capital Standards for Success, and other best 
practices in human capital management, in keeping with the Merit System 
Principles, veterans' preference, and other standards. OPM's success 
will be measured by the number of agencies that meet the Human Capital 
Standards for Success. At the beginning of fiscal year 2006, 11 of the 
26 agencies reporting under the President's Management Agenda Scorecard 
met these standards, up from 8 in 2005, and zero in 2003. An additional 
14 agencies have made significant progress toward achieving these 
standards. As a result, more than 99 percent of the Federal civilian 
workforce is employed by agencies that have made significant progress 
toward meeting these standards.
    OPM expects continued improvement in 2006 and 2007 as it 
strengthens these standards and engages more agencies to fully adopt 
them. Also, OPM expects Federal agencies to make hiring decisions more 
quickly and implement improved and documented succession plans. In 
addition, OPM anticipates Federal employees to be better trained for 
their jobs and to be held accountable for their performance as agencies 
implement improved performance management systems.
    Through the Compliance Program, OPM will continue audit, review, 
and oversight activities to ensure agencies comply with Merit System 
Principles and veterans' preference, and to ensure whistleblower 
protection and other rights and privileges are honored and protected. 
OPM will strengthen this program by implementing a human capital 
accountability system that holds agencies accountable for adhering to 
these principles, laws, and rules, as well as the human capital best 
practices referenced above.

                    HUMAN RESOURCES LINE OF BUSINESS

    In 2007, OPM will continue to be a leader in the President's 
Management Initiative for Expanding Electronic Government and has 
included $8,349,000 in its request for this purpose. The requested 
resources will support the Human Resources Line of Business (HR LOB) 
and Enterprise Human Resources Integration (EHRI). HR LOB will continue 
to identify and document common functional, technical, and data 
requirements consistent with Federal human resources policies. It will 
work toward the establishment of Federal and private sector Shared 
Service Centers to meet these requirements. During 2007, the EHRI 
project will continue to modernize how the Federal Government 
maintains, stores, protects, and transmits human resources transactions 
and resulting information.

                      SECURITY-RELATED ACTIVITIES

    The fiscal year 2007 request includes funding for a number of 
important security-related activities. OPM will implement Homeland 
Security Presidential Directive 12 (HSPD-12), Policy for a Common 
Identification Standard for Federal Employees and Contractors, which 
was signed by the President on August 27, 2004. This mandates the 
circulation of a Federal standard for a secure and reliable form of 
identification for Federal employees and contractors. HSPD-12 
requirements will enhance OPM's strategic goal of improving security 
and emergency actions throughout the agency. Our request also contains 
funds for security upgrades at OPM field offices across the country. 
These funds will be used to address critical vulnerabilities and 
correct the most serious problems identified during field evaluations. 
Failure to correct these deficiencies compromises the security of our 
employees.

                    OFFICE OF THE INSPECTOR GENERAL

    OPM's discretionary request includes a total of $17.8 million for 
the Office of the Inspector General (OIG) to carry out its audit, 
investigative, and oversight responsibilities. This amount reflects a 
net decrease of $452,000 (2.2 percent) in general funds from the 2006 
appropriated resources. The trust funds annual level is unchanged from 
2006 and will enable the OIG to continue its investigative oversight of 
the Federal Employees Health Benefits Program and the Civil Service 
Retirement System/Federal Employees' Retirement System programs, to 
audit FEHBP plans and carrier information systems, and to continue its 
prescription drug audit plan, established in 2005.

                             REVOLVING FUND

    OPM also provides a variety of ongoing services that are financed 
by other agencies through our revolving fund. These services include 
providing one-stop access to high-quality e-Training products and 
services; offering professional development and continuous learning for 
Federal managers and executives; providing employment information and 
assessment services; automating other agencies' staffing systems; 
providing examining services when requested by an agency; providing 
technical assistance and consulting services on all facets of HRM; 
testing potential military personnel for the Department of Defense 
where it is cost-effective for OPM to do so; managing the selection, 
coordination, and development of Presidential Management Fellows; and 
conducting investigations for all employees to determine whether they 
are suitable for employment, as well as more in-depth investigations 
for employees whose positions require a security clearances. For those 
ongoing revolving fund responsibilities, the fiscal year 2007 budget 
includes an estimated $1 billion in obligations and 2,786 FTE to be 
financed through payments for OPM's services by other agencies.

                       MANDATORY PAYMENT ACCOUNTS

    Since OPM serves as the ``employing agency'' for Federal 
annuitants, the OPM budget request also includes, as always, mandatory 
appropriations to fund the government contributions to the health 
benefits and life insurance programs for those individuals.
    A ``such sums as may be necessary'' appropriation is requested for 
each of these accounts because of the mandatory nature of those 
payments. For the approximately 1.9 million annuitants participating in 
the Federal Employees Health Benefits Program, we estimate that about 
$8.8 billion will be needed to pay the government's share of the cost 
of coverage. That represents an increase of $560 million over fiscal 
year 2006. We estimate that, for the 500,000 annuitants under age 65 
who elect post-employment life insurance coverage, an appropriation of 
$39 million will be required.
    Also, as mandated by the financing system established in 1969 by 
Public Law 91-93, liabilities resulting from changes (principally pay 
raises) since that year that affect retirement benefits must be 
amortized over a 30-year period. For that purpose, we are requesting a 
``such sums as may be necessary'' payment to the Civil Service 
Retirement and Disability Fund in the amount of $27.5 billion dollars. 
This represents an increase of $350 million to cover the service cost 
of the Civil Service Retirement System, which is not funded by and for 
active employees.

                               PAY RAISE

    Finally, the President's budget proposes an overall average 
civilian Federal pay increase of 2.2 percent--the same overall average 
increase as proposed for the military. This amount is equal to the full 
increase in the Employment Cost Index for the 12-month period ending in 
September 2005. It is designed to preserve the relative position of the 
Federal Government in the overall labor market.
    The budget includes a legislative proposal that would provide the 
President with the flexibility to allocate a portion of the 2.2 percent 
pay increase to special rate increases for specific groups of employees 
(by occupation, location, or grade level) for which recruitment or 
retention efforts are or may become significantly handicapped.
    This proposal is designed to send a signal that the Federal pay 
adjustment process should be ``smarter''--i.e., more strategic and 
market-sensitive. This new flexibility cannot be exercised without 
congressional approval of the proposed legislation. It would be used 
only if the government has sufficient data to support the need for such 
pay increases in response to demonstrated recruitment/retention 
problems and OPM determines its readiness to implement.
    Thank you again for the opportunity to provide for the record a 
discussion of OPM's budget request. I would be pleased to provide any 
additional information the subcommittee may need.
                                 ______
                                 
     Prepared Statement of the U.S. Merit Systems Protection Board

    Chairman Bond, Ranking Member Murray and members of the 
subcommittee, thank you for the opportunity to submit this statement 
for the record on the fiscal year 2007 appropriations request for the 
U.S. Merit Systems Protection Board (MSPB or ``the Board'').
    An independent quasi-judicial agency, MSPB employs 227 employees in 
its Washington, DC headquarters, 6 regional and 2 field offices. The 
Board has two statutory missions. The first mission is to adjudicate 
employee appeals of personnel actions such as removals, suspensions, 
furloughs, and demotions; employee complaints filed under the 
Whistleblower Protection Act, the Uniformed Services Employment and 
Reemployment Rights Act, and the Veterans Employment Opportunities Act; 
Special Counsel complaints of prohibited personnel practices and Hatch 
Act violations; and appeals of administrative decisions affecting an 
individual's rights or benefits under the Civil Service Retirement 
System or the Federal Employees' Retirement System. The Board's second 
statutory mission is to conduct studies of the Federal civil service 
and other Federal merit systems in the Executive Branch.

                        OVERVIEW OF THE REQUEST

    The Merit Systems Protection Board is a small agency that uses 
approximately 79 percent of its appropriation for personnel costs and 
approximately 20 percent of its appropriation for fixed expenses, such 
as space rent and utilities. We are requesting $36,531,000 in 
appropriated funds and a reimbursement limitation of $2,579,000 from 
the Civil Service Retirement and Disability Trust Fund to support the 
operations of the agency. This request represents a $1,287,000 increase 
over the fiscal year 2006 funding level, taking into account the 
government-wide rescission. This increase covers the built-in cost 
increases for pay raises and space rent as well as the costs of 
relocating the San Francisco Regional Office because the current space 
is not compliant with current earthquake standards.

  FISCAL YEAR 2005 ACCOMPLISHMENTS WITH FISCAL YEAR 2007 OUTLOOK (BY 
                            BUDGET ACTIVITY)

Adjudication
    In fiscal year 2005, the Board did an outstanding job, at both the 
regional and headquarters levels, in adjudicating cases in a timely 
manner. During fiscal year 2005, the administrative judges in the 
regional and field offices issued approximately 6,800 initial 
decisions, with an average case processing time of 92 days.
    At the headquarters level, the Board members issued approximately 
1,600 decisions, most of which were on petitions for review of 
decisions issued by the administrative judges. The Board has reduced 
its inventory of outstanding cases by 48 percent. The average case 
processing time for adjudicating petitions for review of initial 
decisions was 265 days in fiscal year 2005. All this was accomplished 
with no loss of quality, despite the growing complexity of the law and 
the changing makeup of the Board. The Court of Appeals for the Federal 
Circuit left unchanged 94 percent of the Board decisions that were 
appealed to the Court.
    The Board expanded its Mediation Appeals Program (MAP) to include 
all regional and field offices and completed mediation training for new 
mediators. Of the 105 cases that were processed through MAP, 83 
mediations were completed. Settlements were reached in 40 of the 83 
cases mediated for a success rate of 48 percent.
    Both the Department of Homeland Security (DHS) and the Department 
of Defense (DOD) have issued final regulations to implement their new 
personnel systems. While Congress granted both agencies the option of 
establishing an alternative process to adjudicate their employee 
appeals, both decided to continue to have the Merit Systems Protection 
Board adjudicate these appeals. All aspects of the Board's operations 
will be affected by these new procedures. The regulations of both 
departments have been challenged in the courts. We expect to see a 
resolution to the court actions soon.
    It should be noted that, while the new DHS and DOD systems require 
the Board to revise its procedural regulations, the Board will still be 
adjudicating appeals from DHS and DOD employees under several laws 
(e.g., the Whistleblower Protection Act, Uniformed Services Employment 
and Reemployment Rights Act and Veterans Employment Opportunities Act) 
under procedures that are applicable to all other agencies subject to 
the Board's jurisdiction.
    As the agency begins adjudicating appeals under the new DOD and DHS 
regulations with the faster processing times, it is important that the 
agency have the staffing and administrative resources to process 
appeals involving all other agencies in a timely manner.
    Approximately 198 FTE, or about 84 percent of the approximately 236 
FTE, have been allocated to the Board's adjudication function for 
fiscal year 2007.

Merit Systems Studies and Oversight
    The Board issues 6 study reports and 4 newsletters annually. Our 
studies and reports are based on objective, independent research using 
established scientific methods. To ensure the value of our products and 
the effective use of government resources, we work closely with 
research groups from the Government Accountability Office, the Office 
of Personnel Management, and the National Academy of Public 
Administration to share research agendas and expand the peer reviews of 
our work. Reports of the Board's studies are directed to the President 
and the Congress and are distributed to a national audience of human 
resource practitioners and professional organizations.
    Recent study reports include: ``Contracting Officer 
Representatives: Managing the Government's Technical Experts to Achieve 
Positive Contract Outcomes (2006)''; ``Designing an Effective Pay for 
Performance Compensation System (2006)''; ``Reference Checking in 
Federal Hiring: Making the Call (2005)''; ``Building a High-Quality 
Workforce: The Federal Career Intern Program (2005)''; and 
``Probationary Period: A Critical Assessment Opportunity (2005)''.
    In addition to these reports, the Board completed its latest Merit 
Principles Survey (MPS) in 2005. MSPB has conducted the MPS every 3-5 
years for the past two decades. Each administration of the MPS assesses 
the degree to which Federal agencies adhere to the merit principles, 
tracks the incidence of prohibited personnel practices in Federal 
agencies, and gathers information to support other OPE research 
studies. The MPS 2005 was the first MPS administered via the World Wide 
Web. Nearly 37,000 full-time civilian Federal employees completed the 
MPS during the summer and fall of 2005. The Board's Office of Policy 
and Evaluation is currently analyzing the data from this survey and 
preparing a report for release by the end of fiscal year 2006.
    The new DHS and DOD personnel systems will affect about half of the 
Federal civil service employees, resulting in the biggest change since 
the Civil Service Reform Act was passed in 1978. To facilitate the 
accomplishment of MSPB's statutory mission of studying the health of 
the civil service system, the Board will be gathering baseline data 
about how the personnel systems in these agencies are currently 
working. This data will then be compared with similar data after the 
new systems have been operational for approximately 2 years.
    This function will use approximately 12 FTE, or about 4 percent of 
the approximately 236 FTE, the Board is projected to use in fiscal year 
2007.

Management Support
    The management support function, which will use approximately 26 
FTE, or 11 percent of the 236 estimate in fiscal year 2007, provides 
the information resources management, human resources management, 
budget, finance, procurement, equal employment opportunity, travel, 
space, and property management services for the agency.
    In the area of information technology, the Board upgraded its wide 
area network (WAN) infrastructure to improve response time and to 
support the increasing traffic of electronic documents between the 
headquarters and regional offices. In fiscal year 2006, we started 
piloting wireless broadband technologies that enable high-speed access 
for MSPB staff from any major metropolitan area.
    The Board's Office of Information Resource Management (IRM) began 
an impact analysis study on the transition to IPv6, as directed by OMB 
(See OMB Memorandum No. M-05-22). This OMB memorandum requires the 
agency's network backbone to be capable of passing IPv6 traffic by June 
30, 2008. This IPv6 project will require careful planning, staff 
training, hardware upgrade, and possible system changes and budget 
implications over the next several years in order for us to prepare for 
a smooth transition to meet all of OMB's requirements.
    IRM has also increased its computer security in accordance with the 
Federal Information Security Management Act. In fiscal year 2002 and 
fiscal year 2003, IRM developed security plans, analyzed risks, 
prepared contingency plans, upgraded servers and system software, 
installed additional monitoring and access controls, and tested 
recovery plans. In fiscal year 2004 and 2005, IRM made further 
enhancements to IT security, following the recommendations of the 
independent auditors and improvements identified from risk assessments 
and penetration tests. These enhancements included updating of 
policies, clarification of the role of program offices in IT security, 
implementation of a centralized anti-virus server and spam filtering 
software, improvements in internal network security, annual security 
awareness training, and additional testing of contingency plans. IRM 
will continue to make further enhancements to IT security and comply 
with FISMA guidelines.
    The Board has implemented several technology initiatives such as e-
Appeal that will expedite case processing and adjudication. Through e-
Appeal, individuals may file appeals online. Another innovation 
provides all Board members with electronic access to complete case 
files. As a result, Board members can analyze case records and issue 
decisions while on official travel.
    As previously stated, the Board is requesting funds to cover the 
costs of relocating the San Francisco Regional Office because the 
current space is not compliant with current earthquake standards.

                               CONCLUSION

    I am honored to serve as Chairman of the Merit Systems Protection 
Board. My staff and I are mindful of the need for all Federal agencies 
to exercise fiscal restraint in this tight budgetary environment. We 
have been, and will continue to serve as, careful stewards of the 
public resources that have been entrusted to us for the purpose of 
carrying out our statutory missions. The Board and its staff continue 
to work diligently to maintain the reputation for efficiency, 
effectiveness, and fairness it has earned over its long history. We 
appreciate the support we have received from our appropriations 
committees and welcome the opportunity to continue our partnership in 
service to the American public.
                                 ______
                                 
     Prepared Statement of the U.S. Election Assistance Commission

                              INTRODUCTION

    Thank you Mr. Chairman and members of the subcommittee for the 
opportunity to submit testimony regarding the work of the U.S. Election 
Assistance Commission (EAC) and its budgetary needs to continue 
assisting the States in implementing the Help America Vote Act of 2002 
(HAVA) and the National Voter Registration Act of 1993 (NVRA) in fiscal 
year 2007 .
    EAC is a bipartisan commission consisting of four members: Paul 
DeGregorio, chairman; Ray Martinez III, vice chairman; Donetta 
Davidson; and Gracia Hillman. In addition to the four commissioners, 
EAC employs 19 full-time staff persons.


    HAVA instructs the EAC to develop and update national voluntary 
voting system guidelines and manage the Federal Government's first 
voting system certification program. EAC is also charged with assisting 
the 50 States, four territories and the District of Columbia in 
implementing provisional voting, updated and upgraded voting equipment, 
State-wide voter registration lists, administrative complaint 
procedures, and voter identification requirements and procedures.
    Under the NVRA, the EAC develops the National Voter Registration 
form, collects information for Congress and advises States of their 
responsibilities. Below is a discussion of each EAC program and the 
financial and human resources needed in fiscal year 2007 for EAC to 
continue its work in improving the administration of Federal elections.
    The following four program areas reflect the agency's mandates 
under HAVA: (1) distribution and management of HAVA funds; (2) aiding 
in the improvement of voting systems; (3) national clearinghouse of 
election information; and (4) guidance and information to the States. 
EAC conducts its activities in these program areas in an efficient and 
cost effective manner to ensure maximum value of the funds appropriated 
to the agency by the U.S. Congress.

               DISTRIBUTION AND MANAGEMENT OF HAVA FUNDS

    Congress appropriated more than $3,000,000,000 to help States meet 
the requirements of HAVA and improve the administration of Federal 
elections. All HAVA sections 101, 102 and 251 funds appropriated have 
been distributed. The tables located on EAC's website (Title II 
Requirements Payments & Early Money) show the disbursement of funds by 
category and fiscal year. The graphic below shows the funds distributed 
to each State, including funds distributed by the Department of Health 
and Human Services under Section 261 of HAVA.


Responsible Stewardship of HAVA Funds
    Now that the election reform funding has been distributed, EAC is 
working to ensure that States are good stewards of these Federal funds. 
To monitor the use of these funds, EAC issues guidance and answers 
questions on the appropriate use of HAVA funds, reviews reports 
submitted by the States and territories on expenditure of the funds, 
and conducts assessments and audits of the States.

Appropriate Uses of HAVA Funds
    HAVA specifically limits the use of funds distributed under the 
various funding programs. These uses include purchasing voting 
equipment to replace punch card or lever voting systems, implementing 
provisional voting, purchasing equipment and software to build State-
wide voter registration databases, as well as various activities aimed 
at improving the administration of Federal elections. To help clarify 
the appropriate uses of HAVA funds, EAC and GSA applied OMB Circulars 
A-87, A-102, and A-133. In addition, EAC provided guidance and 
information on the appropriate use of HAVA funds in response to 
questions from the States. Even with these resources, EAC must answer 
questions daily from the 50 States, four territories and the District 
of Columbia about allowable expenses under HAVA.
    EAC requires that States, territories and the District of Columbia 
report their uses of HAVA funds. In the second quarter of each year, 
States report on their use of both Title I and Title II funds. The 
Title II report includes: (a) a list of expenditures for each category 
of activities described in Title III; (b) the number and types of 
voting equipment obtained with the funds; and (c) an analysis and 
description of the activities funded to meet HAVA requirements and how 
such activities conform to the State plan. Title I reports require 
States to (1) disclose, in separate reports for section 101 and 102 
funds, the financial activity for the previous calendar year on a 
Standard Form 269; and (2) provide the same detail on the expenditures 
that is required for the reports on Title II requirements payments. EAC 
conducts a detailed review of each report to validate that the 
expenditure of funds met the requirements of HAVA and was in accordance 
with plans filed by the State or territory. The States' Title I and 
Title II reports are available to the public upon request.

Auditing
    Section 902 of HAVA gives EAC and other HAVA granting agencies the 
authority to conduct regular audits of HAVA funds. EAC's audit activity 
will be conducted through EAC's Office of the Inspector General (OIG), 
which currently consist of two types of reviews to determine if the 
States are exercising sufficient controls and using the funds 
distributed under HAVA for appropriate purposes. One is an assessment 
of procedures each State uses to administer and monitor HAVA funds, as 
well as a review of certain critical elements such as whether the State 
has maintained sufficient matching funds. On a concurrent track, OIG 
will commission audits of several States each year to more fully review 
the State's internal controls, processes, procedures, and transactions 
to ensure compliance with Government Auditing Standards.
    In addition to EAC's regular audits, HAVA also provides for two 
other means of extraordinary audit authority--(a) funds are subject at 
least once during the term of the program to an audit by the 
Comptroller General; and (b) section 902(b)(6) of HAVA allows EAC to 
conduct a ``special audit'' or ``special examination'' of the funds 
that are subject to regular audit under Section 902(b)(1). This special 
audit authority covers every HAVA program, including funds distributed 
under Title I, Title II, and programs administered by the Department of 
Health and Human Services. If EAC determines that a special audit is 
warranted, by vote of the Commission, EAC will refer the matter to the 
OIG for review.
    The OIG currently employs 1 full-time staff person. Two additional 
persons have been provided to EAC by the Department of Interior via a 
Memorandum of Understanding (MOU). These persons are responsible for 
conducting the majority of the State assessments discussed above, 
monitoring outside contracts for audits, reviewing EAC's internal 
operations, and coordinating investigations of complaints, as 
necessary.

Financial and Human Resources Needs for Management of HAVA Funds in 
        Fiscal Year 2007
    In fiscal year 2006, EAC has budgeted $2.5 million for these 
activities. Of that, $1.65 million is allocated to the OIG for auditing 
the use of HAVA funds and assessing State controls. At this level of 
funding, EAC anticipates that it will be able to fund the MOU for the 
two persons provided by the Department of Interior, conduct assessments 
of four or five States, and begin four or five full audits of States. 
The remaining $550,000 is budgeted for management activities such as 
reviewing reports submitted by the States, answering questions related 
to the proper use of HAVA funds, and reviewing States' indirect cost 
proposals. Three full time equivalents (FTE) and two staff persons via 
MOU with the Department of Interior currently serve these functions.
    In fiscal year 2007, EAC anticipates allocating the same amount of 
funding and personnel to this function, including pay and non-pay 
adjustments ($2.6 million). At this rate, EAC will be able to continue 
assessing and auditing States at the rate projected for fiscal year 
2006. Availability of personnel will depend on the willingness of the 
Department of Interior or other agencies to continue providing 
assistance through an MOU. It is essential that EAC maintain the 
current level of staff support (5 persons), either through FTE or MOU 
in order to assure that the use of HAVA funds is monitored 
appropriately.

              AIDING IN THE IMPROVEMENT OF VOTING SYSTEMS

    One of the most enduring effects of HAVA will be the change in 
voting systems used throughout the country. All major HAVA funding 
programs can be used by States to replace outdated voting equipment. 
HAVA also provides for the development and maintenance of testable 
standards against which voting systems can be evaluated. It also 
provides for Federal certification according to these standards. EAC is 
responsible for and committed to improving voting systems through these 
vital programs.

Voluntary Voting System Guidelines
    One of EAC's most important mandates is the testing, certification, 
decertification and recertification of voting system hardware and 
software. Fundamental to implementing this key function is the 
development of updated voting system guidelines, which prescribe the 
technical requirements for voting system performance and identify 
testing protocols to determine how well systems meet these 
requirements. EAC along with its Federal advisory committee, the 
Technical Guidelines Development Committee (TGDC), and the National 
Institute of Standards and Technology (NIST), work together to research 
and develop voluntary testing standards.
    On December 13, 2005, EAC adopted the first iteration of the 
Voluntary Voting System Standards (VVSG). This document was an initial 
update to the 2002 Voting System Standards focusing primarily on 
improving the standards for accessibility, usability and security. 
These testing guidelines also incorporated standards for reviewing 
voting systems equipped with voter verifiable paper audit trails 
(VVPAT) in recognition of the many States that now require this 
technology. VVSG also establishes the testing methods for assessing 
whether a voting system meets the guidelines.
    Significant work remains to be done to fully develop a 
comprehensive set of standards and testing methods for assessing voting 
systems and to ensure that they keep pace with technological advances. 
In fiscal year 2007, EAC along with TGDC and NIST, will revise sections 
of the VVSG dealing with software, functional requirements, independent 
verification, and security and will develop a comprehensive set of test 
suites or methods that can be used by testing laboratories to review 
any piece of voting equipment on the market.

Accreditation of Voting System Testing Laboratories
    HAVA Section 231 requires EAC and NIST to develop a national 
program for accrediting voting system testing laboratories. The 
National Voluntary Laboratory Accreditation Program (NVLAP) of NIST 
will provide for the initial screening and evaluation of testing 
laboratories and will perform periodic re-evaluation to verify that the 
labs continue to meet the accreditation criteria. When NIST has 
determined that a lab is competent to test systems, the NIST director 
will recommend to EAC that a lab be accredited. EAC will then make the 
determination to accredit the lab. EAC will issue an accreditation 
certificate to the approved labs, maintain a register of accredited 
labs and post this information on its website.
    In July 2005, NVLAP advertised for the first class of testing 
laboratories to be reviewed under the NVLAP program and accredited by 
EAC. Five laboratories have applied for the accreditation program. Pre-
assessments of these laboratories began in April 2006 and formal review 
will proceed thereafter. NVLAP anticipates that those laboratories will 
be reviewed and those that are eligible to be recommended for 
accreditation will be delivered to EAC in fall 2006.
    Because testing of voting systems cannot be delayed, there must be 
some interim review and accreditation of laboratories. In late 2005, 
EAC invited laboratories that were accredited through the National 
Association of State Election Directors (NASED) program as Independent 
Testing Authorities (ITAs) to apply for interim accreditation. All 
three ITAs have applied for interim accreditation. Interim 
accreditation reviews by EAC contractors will begin in the Spring 2006. 
ITAs will be accredited on an interim basis until the first class of 
laboratories is accredited through the NVLAP process. After that time, 
all testing labs must be accredited through the NVLAP evaluation 
process.

Voting System Certification
    In 2006, EAC is assuming the duty of certifying voting systems 
according to national testing standards. Previously, NASED qualified 
voting systems to both the 1990 and 2002 Voting System Standards. EAC's 
certification process will constitute the Federal Government's first 
efforts to standardize the voting system industry. EAC's program will 
encompass an expanded review of voting systems. It will utilize testing 
laboratories and EAC technical reviewers. The program will also include 
assessments of quality control, field monitoring, vendor registrations, 
and enhanced public access to certification information.
    Historically, voting system qualification has been a labor 
intensive process. In 6 months, NASED received 38 separate voting 
system test reports for review and qualification. All requests must be 
received, processed and monitored while the testing laboratory is 
assessing compliance. Once a test report is produced, technical 
reviewers must analyze the reports prior to recommending systems for 
certification. Based upon the NASED data, this process will take 
anywhere from 4 to 120 hours per report. In addition, EAC's enhanced 
testing and certification program will require reviewers to evaluate 
voting system technical data packages prior to testing, which will take 
an additional 4 to 20 hours per voting system.

Financial and Human Resources Needs for Fiscal Year 2007
    In fiscal year 2006, EAC has budgeted $3.95 million for its work to 
aid in improving voting systems used throughout the country. Of that 
amount, $2.772 million is transferred to NIST for its research for and 
support of the TGDC. The remaining $1.178 million is dedicated to the 
development, implementation, and operation of a voting system 
certification program and laboratory accreditation program. EAC 
currently employs one FTE to support all of these functions. In 
addition, EAC anticipates hiring several contractors to serve as 
technical reviewers in the voting system certification program and one 
contractor to assist with the development of the VVSG and 
administration of the voting system certification and laboratory 
accreditation programs.
    In fiscal year 2007, EAC has requested $6.421 million, which 
represents an increase of $2.471 in this program. Of that amount, $4.95 
million, which includes an increase of $2.178 million, will go to NIST 
to complete work on the VVSG prior to the 2008 presidential election. 
The needed work includes updating and revising the testing standards 
and the development of testing protocols to assess whether a voting 
system meets the standards. The remaining $1.471 million will be 
applied to administering the voting system certification, voluntary 
voting system guidelines, and laboratory accreditation programs. This 
includes an increase of $293,000 to hire two additional FTE to manage 
the day-to-day operations of the voting system certification and 
laboratory accreditation programs, including work to assess vendor 
facilities and processes to assure that quality control provides 
equipment that is consistent with the caliber of the samples that are 
certified under the EAC program.

             NATIONAL CLEARINGHOUSE OF ELECTION INFORMATION

    HAVA establishes EAC as a national clearinghouse of election 
information, which means EAC studies and makes research available on a 
range of issues including best practices in election administration, 
hours and places for voting, and election data. EAC has conducted 
extensive research on a variety of topics related to election 
administration, has begun an ongoing process of collecting election 
related data, and has compiled election-related resources such as 
statutes and regulations. This information is presented to the election 
community and to the public through the EAC's website as well as 
through formal reports on studies and data collections. Through this 
clearinghouse, EAC positions itself as a primary source of information 
about Federal elections.

Research and Study
    HAVA requires EAC to conduct a number of studies and provides 
considerable discretion to research other election administration 
issues to assist States in their efforts to improve election reform. 
EAC uses its Federal advisory committees to assist in prioritizing 
research topics that are important to and that will assist election 
officials. In 2006, EAC will produce guidance, best practices and 
reports on recruiting, training and retaining poll workers; usability 
of ballots and information provided to voters; procedures for counting 
and recounting ballots; provisional voting; voter identification; voter 
fraud and intimidation; as well as launching a legal resources database 
that will provide election officials and the public with access to 
election laws and regulations from each of the 50 States. In addition, 
EAC will also issue election management guidelines as a companion to 
the VVSG.
    In fiscal year 2007, EAC will focus on completing the research 
required by HAVA on the use of social security numbers in voter 
registration, standards for internet voting, and the possibility of 
postage-free absentee voting. EAC will also collect and analyze data 
from the 2006 Federal elections including voter turnout, absentee 
voting, voter registration and military and overseas citizen voting. 
The 2006 Election Day Survey will provide comprehensive data indicating 
the progress States have made in implementing HAVA.

EAC's Website as a Clearinghouse
    Using EAC's website as its main means of transmitting information 
to the public is a useful, accessible and cost-effective tool. As its 
studies, guidance and best practices are completed, EAC will have an 
increasing amount of information to store and display through its 
website. EAC will also use the website to provide information about the 
voting system standards and certification program. EAC currently has a 
memorandum of understanding with the General Services Administration 
for its information technology (IT) support including servers to 
maintain EAC data. In addition, EAC contracts for the hosting and 
maintenance of its website. To accommodate the expanding clearinghouse, 
EAC will need to expand its IT capabilities by either enhancing its 
contracts for web services and IT support or by considering bringing 
those services in-house.

Financial and Human Resources Needs for Fiscal Year 2007
    In fiscal year 2006, EAC budgeted $2.5 million for its research and 
study. In fiscal year 2007, EAC anticipates spending $2.13 million on 
required research projects, data collection and analysis, development 
of best practices documents, and expansion and maintenance of its 
technical resources to host a clearinghouse on its website.

                 GUIDANCE AND INFORMATION TO THE STATES

    HAVA established EAC to provide guidance and assistance to the 
States on implementation of the law and transferred to EAC the 
responsibility of implementing the National Voter Registration Act 
(NVRA). EAC has provided valuable guidance to the States on what HAVA 
means, implementing the law, and appropriate use of HAVA funds. In 
fiscal year 2007, EAC will continue that work by developing election 
management guidance, expanding on its voter registration data base 
guidance, and by updating and revising the NVRA regulations and 
national voter registration form. The election management guidance is a 
comprehensive companion document to the VVSG that will assist States in 
managing an election from receipt of voting equipment to the reporting 
of results to the canvass or recount that follows. EAC's continued work 
on voter registration databases will focus on studying the appropriate 
use of security measures, verification of voter information using 
appropriate matching protocols, and sharing information with other 
State agencies and, ultimately, with other States. EAC will address 
issues involving voter registration using the Federal form by updating 
the NVRA regulations and the Federal registration form.

Financial and Human Resources Needs for Fiscal Year 2007
    EAC has budgeted $750,000 in fiscal year 2006 for these activities. 
In fiscal year 2007, EAC anticipates spending $1.2 million on providing 
guidance and assistance to the States.

                             ADMINISTRATION

    The administration objective represents the efforts of EAC, 
internally or through contracts and MOUs, to support the mission and 
work of this agency and meet the HAVA-imposed mandates. These costs 
include rent, equipment, supplies, human resources functions, finance 
and budget, computers, telephones, publication, and printing. This 
objective includes maintaining the leadership and support staff for the 
agency. Charges for salaries and benefits for the Commissioners and 
non-programmatic support staff are included in this category. In 
addition, the administrative objective includes supporting the efforts 
of EAC's two Federal advisory committees, the Board of Advisors and 
Standards Board. Between these two boards there are 147 members who 
meet at least once in each fiscal year to fulfill their 
responsibilities under HAVA. The leadership of these Boards meets more 
frequently, approximately once each quarter.

Financial and Human Resources Needs for Fiscal Year 2007
    In fiscal year 2006, EAC has budgeted $4.4 million for these 
activities. In fiscal year 2007, EAC anticipates spending a similar 
amount, including pay and non-pay adjustments ($4.55 million).

                               CONCLUSION

    In the first 2 years of EAC's existence, the main focus was 
expeditiously completing the distribution of more than $3 billion in 
HAVA funds to the States to purchase voting equipment and implement 
other election administration improvements. During this time, EAC also 
adopted the 2005 Voluntary Voting System Guidelines within the HAVA-
prescribed 9-month timeframe. The completion of these activities 
generates a new set of related priorities: (1) monitoring and auditing 
the use of HAVA funds; (2) making sure the VVSG keep pace with 
technology by updating them periodically, especially in the areas of 
security and usability; and (3) establishing the Federal Government's 
first voting system certification program.
    Consequently, EAC will direct more funding in fiscal year 2007 to 
its audit program, the VVSG and the certification program.


    EAC will also continue to conduct research about election 
administration issues and make that information available to election 
officials to assist them in making policy decisions at the local level. 
EAC will assure that all HAVA funds are used properly to effectuate the 
required election reforms.
    The EAC appreciates the opportunity to provide this testimony 
regarding our needs for fiscal year 2007. If you have any questions 
regarding these activities and allocations of funding, we will be happy 
to address them.
                                 ______
                                 
Prepared Statement of William A. Chatfield, Director, Selective Service 
                                 System

    Chairman Bond and members of this subcommittee, it is an honor for 
me as Selective Service Director to present once again the President's 
fiscal year 2007 Appropriations request of $24,255,000 for the agency. 
This Congress and successive administrations under both parties have 
acknowledged the wisdom of maintaining Selective Service as a hedge 
against unforeseen threats and a relatively low-cost insurance policy 
against underestimating any threat our Armed Forces might face in a 
still-dangerous world.
    This agency is as determined as ever to carry out the mission 
Congress has given us, no matter how austere the budget climate shaped 
by the requirements of homeland security and other priorities listed in 
the President's January 31, 2006, State of the Union Address. To 
achieve this balancing act of advancing the mission while accepting 
budgetary realities will require creativity and discipline. I welcome 
the challenge, and appreciate the opportunity to share my vision for 
Selective Service with you today.
    Personnel reductions at Selective Service have come from planned 
attrition and will not involve a reduction-in-force. Meanwhile, the 
agency will continue to employ more state-of-the-art information 
technologies and public outreach to accomplish its statutory mission of 
raising nationwide registration compliance by eligible young men while 
preserving maximum customer service. Satisfying our goals will assure a 
Selective Service that is beyond reproach while meeting the needs of 
its primary customer, the Department of Defense.

                            WHAT WE DO TODAY

    Selective Service is in business to perform two unique functions. 
Should the Congress and the President authorize a return to a military 
draft, the agency can conduct a draft that is efficient, fair, and 
accepted by the public. It is also ready to administer a program of 
alternative community service for men who are classified as 
conscientiously opposed to military service.
    Additionally, each and every day Selective Service continues its 
close partnership with the Department of Defense by providing direct 
support to Armed Forces recruiting and accessions processing. 
Specifically, Selective Service provides names of registrants to the 
Secretary of Defense for recruiting purposes, in accordance with a 
provision in the Military Selective Service Act. Approximately every 1 
to 2 weeks, information about Armed Forces opportunities for Regulars, 
National Guard, and Reserves and a business reply card are enclosed 
with our registration acknowledgment that the Selective Service sends 
to each new registrant. For calendar year 2005, these contacts totaled 
over 2.2 million young men. Consequently, the Defense Department 
benefits by ``piggy-backing'' on our routine mailings which generate 
actual recruiting leads. And it reimburses us for the additional costs 
in accordance with the Economy Act.
    Beyond its compliance with the Military Selective Service Act and 
providing these tangible services, the agency also promotes an 
intangible national benefit. For present and future generations of 
America's young men, Selective Service is a very critical link between 
society-at-large and today's volunteer military. It is a reminder that, 
as Americans, every young man is personally responsible to ``provide 
for the common defence'' in the time-honored tradition of preceding 
generations.

                           AREAS OF EMPHASIS

    To foster a greater public reception of the agency's new approach 
to its traditional missions, I have approved an augmenting approach to 
harness the power, passion, and patriotism of air shows to our core 
mission of raising registration compliance by young men.
    My vision for Selective Service is to present the agency in huge, 
open community venues across the Nation, highlighting authentic 
American heroes, and promoting public service and patriotic themes 
appealing to multiple generations. Air shows are the second most 
attended spectator events in America, and attract a high concentration 
of registration-age men. I am convinced that funding and implementing 
this approach will result in a substantial increase in registration 
compliance, the surest path to assuring Americans that any future draft 
will be fair and equitable. We are conducting this pilot effort by 
absorbing the less than $300,000 expense out of our fiscal year 2006 
budget. No new money is involved.
    The value of this effort presented itself after several months of 
assessing the agency's capabilities, priorities, and missions. These 
events will complement other agency activities directed at conforming 
to the President's Management Agenda.
    I would point to three endeavors that I believe satisfy 
administration and Congressional charges to Federal agencies to evolve 
into performance-based organizations.
    Organizational Adjustments.--The agency continues the process of 
internal review and analysis it undertook in fiscal year 2004. As part 
of this comprehensive ``bottom-up review,'' Selective Service is 
restructuring. This will empower the agency to satisfy its missions 
more efficiently and to bring Selective Service to full mobilization 
more effectively in the event of a return to conscription. 
Additionally, full-time civilian staffing has been reduced, and all 
full-time military officers eliminated. Also, the number of part-time 
military officers has decreased. I am convinced benefits accrued from 
strategic management of human capital, competitive sourcing, improved 
financial performance, expanded e-Government, and better integration 
between budget and performance will substantially increase agency 
efficiency in its core and support processes. Be assured that each of 
my changes and staffing decisions is being driven by practical, cost-
conscious considerations grounded in greater customer service.
    Registration Compliance.--Here the air shows will play an important 
role in 2006 and possibly beyond. Although Selective Service has 
reversed the decline in registration compliance from a high of 98 
percent in 1991 to a low of 87.7 percent in 2000, anything less than 
100 percent compliance constitutes a challenge. Only when all eligible 
young men are equally vulnerable will any future draft be considered 
completely fair and equitable. The public would believe, rightly so, 
that not everyone who should be in the manpower pool is accounted for; 
and therefore those who are registered have an increased chance of 
being called for involuntary service.
    Our final accounting for calendar year 2005 indicates about 93 
percent of eligible men (ages 18 to 25) are registered. Keeping this 
rate high is very important because I believe a compliance rate of less 
than a healthy 90-plus percent would contribute to a lack of public 
confidence in our ability to administer a fair and equitable draft. The 
compliance rate of for ``on-time'' registration of men turning 18 
continues at 76 percent.
    Naturally, our priority is to maintain an increasing registration 
compliance rate. We appreciate the subcommittee's support in ensuring 
that our work over the past decade continues, and our successes satisfy 
our congressional mandate to raise and maintain favorable registration 
compliance. Since public trust in Selective Service is at stake, I will 
use every resource to continue proven positive trends in compliance. In 
addition to our outreach air shows effort, Selective Service intends in 
pursuit of that goal to:
  --(a) Continue to develop and distribute public service broadcast 
        messages to low compliance markets, together with printed 
        materials. To support this effort, we have distributed new 
        radio public service announcements in English and Spanish. 
        These high-quality products have been praised by listeners 
        around the country. In calendar year 2005 and so far this year, 
        the agency has secured commercial airings representing 82,036 
        worth of free airings, a commercial airtime value of more than 
        $5.1 million. These airings are in markets with no or optional 
        driver's license supporting legislation and cost Selective 
        Service only the expense of development, replication and 
        distribution. Public service broadcast messaging by Selective 
        Service is a very efficient method of raising public awareness 
        of the legal registration obligation, especially among those 
        who most need access to governmental benefits linked to 
        registration such as minorities. Support of the President's 
        budget request guarantees that this effective and efficient 
        outreach effort continues and America's youth are reminded of 
        their civil responsibility.
  --(b) Carry on routine updating of the interactive Selective Service 
        pages on the World Wide Web (www.sss.gov) where online 
        registration, database verification, the ability to file 
        changes of information, and to review a wealth of other agency 
        information are available to anyone with access to the 
        Internet. For fiscal year 2005, 81.2 percent of registrations 
        reached Selective Service through electronic means, an increase 
        of more than 2 percent over 2004. Electronic registrations are 
        more cost-effective than processing paper registrations and 
        provide better customer service. We are also placing links to 
        our site with other Federal, State and local agencies, schools, 
        and assorted organizations to enhance public education and 
        facilitate customer responsiveness.
  --(c) Profit from an increasing number of States which link obtaining 
        a driver's license or State I.D. card to the Selective Service 
        registration requirement. These State and territorial laws 
        currently provide Selective Service with an average of nearly 
        71,000 registrations per month. As of this month, 34 States, 
        three territories, and the District of Columbia have laws 
        enacted. These jurisdictions represent 63 percent of the 
        national 18-year-old male registrant population. We continue to 
        work closely with additional States where such legislation is 
        pending to provide technical expertise. Data electronic 
        exchanges are the most cost-effective, timely, user-friendly, 
        and technology-simple registrations available. Selective 
        Service is committed to aid the remaining 16 States in 
        implementing this easy method to protect their young men's 
        eligibility for State and Federal benefits and programs. This 
        program has been a valuable tool to reach not only all eligible 
        registrants, but also has enabled a more customer-friendly 
        system.
    Information Technology (IT).--The agency has applied new 
initiatives to the traditional way it does business. Support of the 
President's request will allow Selective Service to continue to 
modernize its core and support processes. We are pleased with the 
returns generated by these IT investments. The agency has turned to 
information technology because it is a force multiplier to offset 
reduced staffing and constrained dollars. It permits this small agency 
to examine how it does business, how it might improve its IT 
architecture, both hardware and software, and to have the support 
structure necessary to advance its operations. I am committed to 
investing in IT because I know that it enhances customer service, 
increases productivity, compensates for limited human and fiscal 
resources, and establishes the technological framework to administer 
well a fair and equitable draft. The agency has no choice but to keep 
pace with IT applications in the Federal Government and society-at-
large.

                          FOCUSED YET FLEXIBLE

    While there has been much dialogue among the public, private 
groups, the media, and academia concerning a future draft, 
volunteerism, homeland security, and national service, the Selective 
Service System remains focused on its missions. It manages its 
volunteer board members, is prepared to administer programs of 
alternative community-based service for men classified as conscientious 
objectors, and updates its conscription plans and registration 
procedures. All these efforts are aimed at being ready to conduct a 
fair and equitable classification procedure to determine who should 
serve when not all can serve during an emergency. To ensure fairness 
and equity, each Selective Service board is a gathering of civic-minded 
men and women reflecting the racial, cultural and ethnic diversity of 
the young men in the communities it serves. Through these volunteers, a 
unique bond has been formed at the grass roots with young American men, 
society-at-large, and the U.S. Armed Forces. Through the Selective 
Service structure, every American community plays a positive role in 
providing for the common defense. In short, this agency has extensive 
practical experience in identifying, contacting and classifying people 
to participate in a national security or a community service program. 
Selective Service can lend its expertise and ample experience to any 
appropriate task directed.

                                CLOSING

    Mr. Chairman, Selective Service stands prepared to perform its 
time-tested responsibilities, when directed. The fiscal year 2007 
appropriation request of $24,255,000 will be invested prudently in one 
of the Nation's important security assets in an increasingly dangerous 
and ambiguous world. The president's request is adequate to provide a 
compact, cost-efficient civilian structure capable of expansion in a 
crisis; to provide manpower to the U.S. Armed Forces as required; and 
to do it fairly, equitably, and within the necessary timeframes. 
Additionally, this funding will allow outreach to minority and out-of-
the-mainstream youth, better privacy protections in our contacts with 
the public, and improvements in our registration compliance rates. All 
these outcomes will advance the guidance of the Congress, satisfy our 
statutory mandate, and maintain the high registration compliance rates 
so painstakingly raised over the last decade. Selective Service is 
staying the course, ever watchful for opportunities to improve. It 
remains an active partner in the national preparedness community.
    Thank you, Mr. Chairman. I would be pleased to answer your 
questions.
                                 ______
                                 
                       NONDEPARTMENTAL WITNESSES

    [Clerk's note.--The following testimonies were received by 
the Subcommittee on Transportation, Treasury, the Judiciary, 
Housing and Urban Development, and Related Agencies for 
inclusion in the record. The submitted materials relate to the 
fiscal year 2007 budget request.
    The subcommittee requested that public witnesses provide 
written testimony because, given the Senate schedule and the 
number of subcommittee hearings with Department witnesses, 
there was not enough time to schedule hearings for 
nondepartmental witnesses.]

                Prepared Statement of Independent Sector

    Independent Sector appreciates the opportunity to comment on fiscal 
year 2007 Federal appropriations for Internal Revenue Service 
activities.
    Independent Sector is a nonprofit, nonpartisan membership 
organization committed to strengthening, empowering, and partnering 
with nonprofit and philanthropic organizations in their work on behalf 
of the public good. Our coalition of more than 500 nonprofit 
organizations, foundations, and corporate philanthropy programs 
collectively represents tens of thousands of charitable groups as well 
as millions of donors and volunteers serving a wide range of causes in 
regions across the country. We have worked since our inception to 
assist our member organizations to meet the highest standards of 
ethical practice, accountability, and effectiveness.
    We write today in support of increased funding of the Internal 
Revenue Service's enforcement budget and urge you to appropriate, at a 
minimum, the level requested by the President.
    Increased resources for IRS tax law enforcement would:
  --Continue Congress' recent efforts to restore the IRS enforcement 
        program;
  --Help protect the integrity and credibility of the charitable sector 
        by providing resources to audit organizations' annual returns 
        and deter and penalize wrongdoers; and
  --Foster greater compliance by funding additional education of 
        charitable organizations about existing tax law.
          continue restoration of the irs enforcement program
    During the late 1990's resources for IRS tax law enforcement 
activities declined dramatically. According to testimony by IRS 
Commissioner Mark Everson before this committee in April 2004, between 
1997 and 2001 the total number of revenue agents, revenue officers, and 
criminal investigators each declined by over 25 percent.\1\ During the 
same period the number of IRS examinations of tax-exempt annual returns 
dropped by 22 percent, while the number of returns filed increased by 
19 percent.\2\ Explaining the consequences of these circumstances in a 
March 2005 letter to Senate Finance Committee Chairman Charles 
Grassley, Commissioner Everson wrote that, ``This decline, combined 
with the significant growth of the tax-exempt sector . . . created 
opportunities for noncompliance.'' \3\
---------------------------------------------------------------------------
    \1\ Commissioner of Internal Revenue Mark W. Everson, Written 
Statement, Senate Committee on Appropriations, Subcommittee on 
Transportation, Treasury and General Government, Hearing on Internal 
Revenue Fiscal Year 2005 Budget Request, at 2 (April 7, 2004).
    \2\ Government Accountability Office, ``Tax-Exempt Organizations: 
Improvements Possible in Public, IRS, and State Oversight of 
Charities'' (GAO-02-526) at 21-22 (April 2002).
    \3\ Commissioner of Internal Revenue Mark W. Everson letter to 
Chairman Charles E. Grassley, Senate Committee on Finance, p. 3, 
available at http://www.senate.gov/finance/hearings/other/
Letter%20from%20Everson.pdf (March 30, 2005).
---------------------------------------------------------------------------
    We applaud the recent increased investments Congress has made 
toward restoring IRS enforcement activities. In addition to conducting 
audits of individuals, corporations, and tax-exempt organizations and 
collecting due revenue, this funding has permitted the IRS to undertake 
critical investigations into areas of concern in the tax-exempt sector, 
including abuses by credit counseling agencies and nonprofit 
compensation practices, and provide valuable guidance educating tax-
exempt organizations about their obligations under current law.
    We believe, however, that still more needs to be done. The 
Government Accountability Office noted in a statement for the record 
before this committee in April 2006 that ``. . . tax law enforcement 
continues to be included on our list of high-risk Federal programs. 
This is due, in part, to the persistence of a large tax gap.'' \4\ 
Commissioner Everson noted in his March 2005 letter to Chairman 
Grassley that the IRS continues to ``struggl[e] with yearly increases 
in the number of applications for tax exemption.'' \5\
---------------------------------------------------------------------------
    \4\ Government Accountability Office, ``Internal Revenue Service: 
Assessment of the Interim Results of the 2006 Filing Season and Fiscal 
Year 2007 Budget Request'' (GAO-06-499T), at 1 (April 27, 2006).
    \5\ Commissioner of Internal Revenue Mark W. Everson letter to 
Chairman Charles E. Grassley, supra at p. 3.
---------------------------------------------------------------------------
    The administration has emphasized the need for continued oversight 
resources, requesting in the President's fiscal year 2007 Federal 
budget an increase of $137 million over fiscal year 2006 to sustain 
fiscal year 2006 enforcement initiatives. The IRS Oversight Board has 
recommended an even greater funding increase--$368 million over fiscal 
year 2006--as part of a broader effort to address the tax gap. The 
recently approved Senate fiscal year 2007 Budget Resolution proposes an 
increase of $500 million.

  ADDITIONAL IRS ENFORCEMENT FUNDING WILL HELP PRESERVE THE PUBLIC'S 
    TRUST IN THE CHARITABLE SECTOR AND FOSTER GREATER COMPLIANCE BY 
                        CHARITABLE ORGANIZATIONS

    Our country's expansive network of charitable organizations 
provides vital services in such fields as health, education, social 
assistance, community development, and the arts. Charities depend upon 
the generosity of Americans--their gifts of time and money--to achieve 
these missions. These gifts are fueled by the confidence that they are 
used for the purposes for which they were intended. Indeed, this public 
trust is essential to maintaining a viable and vibrant nonprofit 
sector, and preservation of that trust depends upon a combination of 
vigorous self-regulation by the sector and effective enforcement of the 
law.
    In recent years, media stories have revealed increased instances of 
abuse by taxpayers using charitable organizations for personal gain and 
individuals claiming excessive contributions. Although few in number, 
these occurrences threaten to cripple the charitable sector by eroding 
the public's confidence. IRS Commissioner Mark Everson encapsulated 
this threat in testimony before this committee in April 2005, ``[i]f we 
do not act expeditiously, there is a risk that Americans will lose 
faith in our Nation's charitable organizations. If that happens, 
Americans will stop giving and those in need will suffer.'' \6\
---------------------------------------------------------------------------
    \6\ Commissioner of Internal Revenue Mark W. Everson, Written 
Statement, Senate Committee on Appropriations, Subcommittee on 
Transportation, Treasury, the Judiciary, Housing and Urban Development, 
and Related Agencies, Hearing on Internal Revenue Fiscal Year 2006 
Budget Request, at 8 (April 7, 2005).
---------------------------------------------------------------------------
    At the encouragement of the chairman and ranking member of the 
Senate Finance Committee, owing in large measure to these reports, 
leading members of the charitable community convened the Panel on the 
Nonprofit Sector in October 2004 to consider and recommend actions to 
improve the transparency and accountability of charitable 
organizations. Over the next 9 months, over 5,000 individuals 
participated in the Panel's efforts, making comments on the best 
methods for providing legitimate oversight of the sector while 
protecting the independence crucial to its ability to remain innovative 
and effective.
    The Panel submitted its ``Final Report to Congress and the 
Nonprofit Sector'' \7\ in June 2005 recommending more than 120 actions 
to be taken by charitable organizations, Congress, and the IRS. A key 
recommendation is to increase resources allocated to the IRS for 
oversight of charitable organizations as well as overall tax 
enforcement.
---------------------------------------------------------------------------
    \7\ Panel on the Nonprofit Sector, ``Strengthening Transparency, 
Governance, and Accountability of Charitable Organizations: A Final 
Report to Congress and the Nonprofit Sector,'' available at http://
www.nonprofitpanel.org/final/Panel_Final_Report.pdf (June 2005).
---------------------------------------------------------------------------
    As noted by the Panel, effective oversight of the charitable sector 
requires vigorous enforcement of the law. Education of charitable 
organizations about changes in Federal and State laws and reporting 
requirements is also critical to increasing compliance. During the past 
20 years, however, funding for IRS oversight of exempt organizations 
has remained essentially constant while the sector has nearly doubled 
in size and become even more complex. While recognizing the fiscal 
challenges facing Congress, the Panel emphasized ``that, without 
adequate resources for oversight and enforcement, those who willfully 
violate the law will continue to do so with impunity.'' \8\
---------------------------------------------------------------------------
    \8\ Id. at 25.
---------------------------------------------------------------------------
    In addition to continuing recent efforts to restore the overall IRS 
enforcement program, increased resources for IRS oversight would help 
protect the integrity and credibility of our Nation's charitable sector 
by providing resources to audit organizations' annual returns and deter 
and penalize wrongdoers. Moreover, it would foster greater compliance 
over the long term by making possible increased education of charitable 
organizations about existing tax law.

                               CONCLUSION

    Following a significant decline in resources, the Internal Revenue 
Service has made great strides toward restoring its tax law enforcement 
program. This achievement is due in large measure to recent actions by 
Congress to appropriate increased funding to IRS oversight. We applaud 
and appreciate this effort.
    However, we echo recommendations by Commissioner Everson, the GAO, 
and others that additional resources are necessary to enable the IRS to 
continue to ensure effective oversight of the charitable sector and 
enforcement of our tax laws while also maintaining taxpayer service. We 
urge you to support the enforcement capacity of the IRS by increasing 
the agency's fiscal year 2007 enforcement budget.
    We thank you for consideration of these comments.
                                 ______
                                 
                   Prepared Statement of Easter Seals

EASTER SEALS PROJECT ACTION (ACCESSIBLE COMMUNITY TRANSPORTATION IN OUR 
                                NATION)

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

                        PROJECT ACTION OVERVIEW

    The Transportation appropriations process initiated Project ACTION 
in 1988 by providing funding to the Federal Transit Administration to 
undertake this effort with Easter Seals. We are indeed grateful for 
that initiative and the ongoing strong support of this subcommittee in 
subsequent years.
    Following its initial round of appropriations, Congress authorized 
assistance to Project ACTION in 1990 with the passage of ISTEA, 
continued the authorization in 1997 in TEA-21 and reauthorized the 
project in 2005 as part of SAFETEA-LU. The strong interest and support 
of all members of Congress has been greatly appreciated by Easter Seals 
as it has pursued project ACTION's goals and objectives.
    Since the project's inception, Easter Seals has administered the 
project through a cooperative agreement with the Federal Transit 
Administration. Through steadfast appropriations support, Easter Seals 
Project ACTION has become the Nation's leading resource on accessible 
public transportation for people with disabilities. The current project 
authorization level is $3 million, and Easter Seals is pleased to 
request the appropriation of that sum for fiscal 2007.
    The strength of Easter Seals Project ACTION is its continued 
effectiveness in meeting the congressional mandate to work with both 
the transit and disability communities to create solutions that improve 
access to transportation for people with disabilities of all ages and 
to assist transit providers in complying with transportation provisions 
in the Americans with Disabilities Act (ADA).
    The activities of the project are guided by input from a national 
steering committee that includes representatives from transportation 
and disability organizations. Easter Seals Project ACTION has worked 
effectively with the Department of Transportation under four 
Presidents, and numerous Department of Transportation (DOT) Secretaries 
and Federal Transit Administration (FTA) Administrators. Today, Project 
ACTION is working closely with Secretary Mineta and the FTA. Secretary 
Mineta, who worked on the original authorization of Project ACTION, has 
worked closely with us since taking over DOT.
    Easter Seals Project ACTION was also heavily featured in the 
President's New Freedom Initiative Progress Report released in 2004. 
This demonstrates how closely the administration is working with 
Project ACTION to reach our shared goal of a safe, accessible, 
reliable, efficient and affordable transportation for and by citizens 
with disabilities at the local, State, regional and national levels 
throughout the United States.

                SUPPORT FOR EASTER SEALS PROJECT ACTION

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

       EASTER SEALS PROJECT ACTION WORKING AT THE COMMUNITY LEVEL

    Among the programs pursued by the project in the recent period have 
been efforts aimed at increasing community capacity to meet the 
transportation needs of people with disabilities. For instance, in 
2001, Easter Seals Project ACTION initiated the first Mobility Planning 
Services (MPS) Institute. The latest Institute will take place in April 
of this year and approximately 25 communities will take place in the 2-
day event. The teams are representing localities across the country 
including Thomas Jefferson District, VA; Harford County, MD; Montgomery 
County, PA; Aiken County, SC; Santee Wateree Region, SC; Jacksonville, 
FL; Louisville, KY; Ann Arbor, MI; Genesee County, MI; Lake County, OH; 
Polk County, MN; Washburn County, WI; Capital Area Region, TX; Valencia 
County, NM; Spearfish, SD; Orange County, CA; Fairbanks County, AK; and 
Multnomah-Clackamas-Washington Counties, OR. This was the fourth group 
of communities to go through the MPS training. The first three groups 
of communities remain active and working with Project ACTION to 
continue their work at the community level. To participate in the 
Institute, each community had to identify a leadership team to attend 
the training. The leadership team had to consist of representatives 
from transit providers, disability service providers and disability 
advocacy organizations. This team approach will assure that all 
stakeholders are involved in implementing MPS. The greatest success so 
far of the MPS concept has been that it provides the disability 
community and the transportation industry an opportunity to develop 
tools for working together where in the past there had often been a 
lack of communication and in some cases even animosity. By implementing 
MPS, communities do a better job of meeting the transportation needs of 
people with disabilities and therefore better meet the transportation 
needs of all residents. Communities that participate in MPS receive 
ongoing in-depth technical assistance from Project ACTION staff ranging 
from access to Project ACTION materials to on-site training and 
facilitation by Project ACTION staff.

         EASTER SEALS PROJECT ACTION WORKING AT THE STATE LEVEL

    Project ACTION has partnered with the FTA on several initiatives 
designed to increase the capacity of States to support accessible 
transportation for people with disabilities.
    A good example of this collaboration is the work that Project 
ACTION is doing with the FTA to support the success of the multi-
Federal Department ``United We Ride'' initiative. Project ACTION helped 
facilitate a national meeting in March of 2003 of Governor-appointed 
representatives from State Departments of Labor, Transportation, 
Education and Health and Human Services. Forty-six States and 
territories participated in this forum that was one of five elements of 
an FTA effort to bring together Federal and State agencies to help 
identify, plan and alleviate barriers to human service transportation 
coordination. Project ACTION is assisting in the dissemination of the 
FTA developed Framework for Action planning process guide to help 
States and communities build and operate coordinated transportation 
systems and is providing technical assistance on its use throughout the 
country.

       EASTER SEALS PROJECT ACTION WORKING AT THE NATIONAL LEVEL

    Some of the materials that Easter Seals Project ACTION has 
developed over the years include:
  --A toolkit for assessing bus stop accessibility;
  --A guide for employment professionals working with people with 
        disabilities on how to solve transportation issues that serve 
        as a barrier to employment;
  --A public transportation curriculum for children with disabilities 
        in grade 8-12; and,
  --A guide to transportation resources in rural communities for people 
        with disabilities.
    All resource materials available from Easter Seals Project ACTION 
activities are available free of charge through the Project ACTION 
clearinghouse on the Project ACTION website: www.projectaction.org.
    As mentioned, Project ACTION staff also are involved in 
continuously providing technical assistance to transit providers, 
nonprofit human service organizations, people with disabilities, and 
the general public. The forms of technical assistance provided are 
provided based on the determination of what would be the most helpful 
in the situation being addressed. Assistance from Project ACTION ranges 
from the delivery of basic information in the form of brochures from 
our national clearinghouse to telephone, e-mail, participation in the 
training program and on single or ongoing on-site work.

            CONTINUING NEED FOR EASTER SEALS PROJECT ACTION

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

                        FISCAL YEAR 2007 REQUEST

    In order to continue the outstanding work of Easter Seals Project 
ACTION, Easter Seals national headquarters respectfully requests that 
$3 million be allocated in fiscal 2007 to the Department of 
Transportation for project activities.
    Mr. Chairman, thank you for the opportunity to present this 
testimony to the subcommittee. Your efforts have improved the 
accessibility of transportation for persons with disabilities and the 
ability of the transportation community to provide good service to all 
Americans. Easter Seals Project ACTION looks forward to continuing to 
work with you toward the pursuit of these objectives.
                                 ______
                                 
               Prepared Statement of the Skokomish Tribe

    My name is Gordon James. I am Chairman of the Skokomish Tribe of 
Washington State. The Skokomish Indian Reservation is a rural community 
located at the base of the Olympic Peninsula with a population of over 
1,000 people. The Skokomish Tribe appreciates the work of the 
subcommittee and asks that you provide $2.1 million from the Department 
of Transportation, Federal Lands Highway Fund for the Skokomish Tribe 
Highway 101 Improvements and Parkway Access Infrastructure Project. The 
Tribe requests this funding for construction and improvements on 
Highway 101 and the access road leading to the site of the Tribe's 
planned community housing development.

                          BACKGROUND AND NEED

    The need for housing in the Skokomish community is great. We 
currently have 91 families with no available housing. Of the existing 
housing stock, nearly half is within the 100-year floodplain. Flooding 
has already caused damage to 40 percent of the Reservation's septic 
systems, resulting in serious community health concerns and 
environmental damage, such as dissolved oxygen in the Hood Canal. 
Because it is in the floodplain, Federal funds are not available to 
rehabilitate this housing.
    To meet this need, the Tribe has been working for the past 9 years 
to plan and develop a safe, practical and culturally relevant housing 
development for tribal members. The Tribe recently purchased 160 acres 
and will soon begin construction on the Skokomish Community Housing 
Development. The development will eventually contain 138 homes and will 
be constructed in three phases. Phase 1, which will entail construction 
of 30 homes and the necessary infrastructure to support them, will be 
constructed over the next 2 years. (Please see Attachment 3: Estimate 
for Skokomish Master Plan for a detailed budget for the housing 
development.)
    The funding requested for fiscal year 2007 will support the road 
improvements necessary to complete Phase 1. Highway 101 passes near the 
development site, but the access road leading to the site is a small 
logging road used for access to an adjacent State park. In order to use 
it as a residential area, the access road must be drastically improved. 
In addition, because the access road leaves the highway at a corner, 
substantial infrastructure improvement will be needed to improve the 
line of sight and make the road safe for frequent use. This includes, 
for example, constructing a retaining wall, widening the highway and 
adding a left turn lane. In addition to its use as an access road for 
the Tribe's housing development, this road will also offer improved 
access to the State park.

                           STATUS OF PROJECT

    Over the past year and a half, the Tribe has acquired land and 
developed a master plan for construction of a tribal housing 
development. On April 1, 2006, construction will begin on the 
infrastructure for Phase 1 of the development (the first 30 homes), 
including the water and wastewater facilities. The Washington 
Department of Transportation has issued a permit so that construction 
can begin even without an asphalt road. However, improvement to U.S. 
Highway 101 and the access road will be critical to both the 
construction process and the eventual use of the development. We 
anticipate that Phase 1 will be completed within 2 years. Once Phase 1 
is completed, tribal members can begin moving into the first 30 homes. 
Phases 2 and 3 will involve subsequent expansion of the development. 
Funding from the fiscal year 2007 HUD budget will enable the Tribe to 
complete the road improvements necessary for Phase 1. Funds for the 
housing have been secured from other sources.
    The total project cost is $2.1 million for road improvements 
(highway improvement and parkway access). These improvements will be 
undertaken during Phase 1 of the project, which we estimate will be 
completed in approximately 2 years. Of this, at least $1.1 million will 
be expended during fiscal year 2007. This amount includes the items 
listed in Part A of Attachment 2: Parkway, Highway 101 to West Side of 
Phase 1 & 2 (parkway access). It also includes the cost of Construction 
Surveying and Engineering & Administration listed in Part B: Highway 
101 Improvements (costs necessary to begin surveying for Highway 101 
improvements). For additional information please see Attachment 2: 
Estimate for Highway 101 Improvements and Parkway Access.

                    STATE, LOCAL AND FEDERAL SUPPORT

    The Tribe has broad Federal and State support for its housing 
development project. For Phase 1, the Tribe has secured a Community 
Development Block Grant from HUD for water and wastewater and is 
pursuing a grant/loan from the USDA for additional infrastructure 
costs. Infrastructure funding will also come from HUD's Indian 
Community Development Block Grant program and from the Indian Health 
Service. Washington's Community Trade and Economic Development Council 
will contribute money from its revolving fund for housing.
    In addition to these financial commitments, the project is 
supported by the Washington Department of Transportation, the Public 
Utility Department and various financing institutions, and all these 
Federal and State entities participate in regular planning meetings 
with the Tribe.
    For the reasons described above, the Skokomish Tribe supports full 
funding of the Federal Lands Highway Fund and requests a special 
appropriation of $2.1 million to support this project. We appreciate 
the opportunity to present testimony on these important infrastructure 
needs. If we can provide any additional information, please contact the 
Tribe or our Counsel.
    Attachments.--(1) Letter from Chairman James; (2) Estimate for 
Highway 101 Improvements and Parkway Access; (3) Estimate for Skokomish 
Master Plan; and (4) Phase 1 Design diagram. This diagram shows a 
proposed dual access road that would serve both the housing development 
and the adjacent State park. We are working closely with the State to 
ensure that both sites are served by the improved access road. 




                                 ______
                                 
 Prepared Statement of the California Industry and Government Central 
                California Ozone Study (CCOS) Coalition

    Mr. Chairman and members of the subcommittee, on behalf of the 
California Industry and Government Central California Ozone Study 
(CCOS) Coalition, we are pleased to submit this statement for the 
record in support of our fiscal year 2007 funding request of $500,000 
from the Department of Transportation for CCOS. These funds are 
necessary for the State of California to address the very significant 
challenges it faces to comply with new national ambient air quality 
standards for ozone and fine particulate matter. The study design 
incorporates recent technical recommendations from the National Academy 
of Sciences (NAS) on how to most effectively comply with Federal Clean 
Air Act requirements.
    First, we want to thank you for your past assistance in obtaining 
Federal funding for the Central California Ozone Study (CCOS) and 
California Regional PM10 /PM2.5 Air Quality Study 
(CRPAQS). Your support of these studies has been instrumental in 
improving the scientific understanding of the nature and cause of ozone 
and particulate matter air pollution in Central California and the 
Nation. Information gained from these two studies is forming the basis 
for the 8-hour ozone, PM2.5, and regional haze State 
Implementation Plans (SIPs) that are due in 2007 (ozone) and 2008 
(particulate matter/haze). As with California's previous SIPs, the 
2007-2008 SIPs will need to be updated and refined due to the 
scientific complexity of our air pollution problem. Our request this 
year would fund the completion of CCOS to address important questions 
that won't be answered with results from previously funded research 
projects.
    To date, our understanding of air pollution and the technical basis 
for SIPs has largely been founded on pollutant-specific studies, like 
CCOS. These studies are conducted over a single season or single year 
and have relied on modeling and analysis of selected days with high 
concentrations. Future SIPs will be more complex than they were in the 
past. The National Academy of Sciences (NAS) is now recommending a 
weight-of-evidence approach that will involve utilizing more broad-
based, integrated methods, such as data analysis in combination with 
seasonal and annual photochemical modeling, to assess compliance with 
Federal Clean Air Act requirements. This will involve the analysis of a 
larger number of days and possibly an entire season. In addition, 
because ozone and particulate matter are formed from some of the same 
emissions precursors, there is a need to address both pollutants in 
combination, which CCOS will do.
    Consistent with the new NAS recommendations, the CCOS study 
includes corroborative analyses with the extensive data provided by 
past studies, advances the state-of-science in air quality modeling, 
and addresses the integration of ozone and particulate pollution 
studies. In addition, the study will incorporate further refinements to 
emission inventories, address the development of observation-based 
analyses with sound theoretical bases, and includes the following four 
general components: Performing SIP modeling analyses, 2005-2011; 
Conducting weight-of-evidence data analyses, 2006-2008; Making emission 
inventory improvements, 2006-2010; Performing seasonal and annual 
modeling, 2008-2011.
    CCOS is directed by Policy and Technical Committees consisting of 
representatives from Federal, State, and local governments, as well as 
private industry. These committees, which managed the San Joaquin 
Valley Ozone Study and are currently managing the California Regional 
Particulate Air Quality Study, are landmark examples of collaborative 
environmental management. The proven methods and established teamwork 
provide a solid foundation for CCOS.
    For fiscal year 2007, our Coalition is seeking funding of $500,000 
from the DOT through Highway Research funds. DOT is a key stakeholder 
in air quality issues because Federal law requires that transportation 
plans be in conformity with SIPs. Billions of dollars in Federal 
transportation funds are at risk if conformity is not demonstrated for 
new transportation plans. As a result, transportation and air agencies 
must be collaborative partners on SIPs and transportation plans, which 
are linked because motor vehicle emissions are a dominant element of 
SIPs in California and nationwide. Determining the emission and air 
quality impacts of motor vehicles is a major part of the CCOS effort.
    Heavy-duty trucks are known to have very different driving patterns 
than light duty cars and, despite smaller numbers, are responsible for 
a disproportionate amount of emissions (e.g. approximately 50 percent 
of California's mobile source NOx emissions). The continued growth of 
heavy-duty truck travel, including increases in inter-State and 
international goods movement, makes this element of the SIP 
transportation emission estimate critical. Thus, to support the 
region's new SIPs and to address the new NAS recommendations, 
improvement of the temporal and spatial distribution of heavy-duty 
truck emissions is needed. We propose funding of this activity at a 
level of $500,000. The funding will go to collect data that can be used 
to more accurately characterize heavy-duty truck emissions, including 
those resulting from NAFTA.
    Thank you very much for your consideration of our request.

                        COOPERATIVE PARTNERSHIP

Private Sector
    Western States Petroleum Association; Pacific Gas and Electric 
Company; Electric Power Research Institute; Nisei Farmers League and 
Agriculture; Independent Oil Producers' Agency; California Cotton 
Ginners and Growers Associations.

Local Government
    San Joaquin Valley Unified Air Pollution Control District (On 
Behalf of Local Cities and Counties); Bay Area Air Quality Management 
District; Sacramento Metro Air Quality Management District; San Luis 
Obispo County Air Pollution Control District; Mendocino County Air 
Pollution Control District.

State Government
    California Air Resources Board; California Energy Commission.

Federal Government
    Environmental Protection Agency; Department of Agriculture; 
Department of Commerce; National Oceanic and Atmospheric 
Administration; Department of Transportation; Department of Interior; 
Department of Energy (Invited Partner).
                                 ______
                                 
     Prepared Statement of the Coalition of Northeastern Governors

    As the subcommittee begins the fiscal year 2007 transportation 
appropriations process, the Coalition of Northeastern Governors (CONEG) 
is pleased to share with the subcommittee testimony on transportation 
and community development programs in the fiscal year 2007 
Transportation, Treasury, the Judiciary, Housing and Urban Development, 
and Related Agencies Appropriations bill. The CONEG Governors commend 
the subcommittee for its past support of funding for the Nation's 
highway, transit, and rail systems. We understand that the complex, 
interlocking issues that the subcommittee faces in crafting this 
appropriations measure are compounded by the overall budget 
challenges--challenges that are intensified by the deficit and defense 
and security needs. We urge the subcommittee to continue the important 
Federal partnership role that is vital to strengthening the Nation's 
multi-modal transportation system. This system is a critical 
underpinning to the productivity of the Nation's economy and the 
security and well-being of its communities.

                             TRANSPORTATION

    The subcommittee's challenge in the transportation arena is 
compounded by the uncertainty surrounding the future of contributions 
to the Highway Trust Fund and its ability to sustain the structure 
created by the Safe, Accountable, Flexible, Efficient Transportation 
Equity Act: A Legacy for Users (SAFETEA-LU) (Public Law 109-59). The 
CONEG Governors strongly support the National Surface Transportation 
Policy and Revenue Study Commission created by SAFETEA-LU (Section 
1909) and are concerned that it produce a credible report. We encourage 
the subcommittee to review the funding levels provided to the 
Commission and urge your active involvement.
    The Governors urge the subcommittee to fund the combined highway, 
public transit and safety programs at levels consistent with the 
authorized levels in SAFETEA-LU. This Federal funding is essential to 
continue the progress in recent years to improve the condition and 
safety of the Nation's highways, bridges and transit systems. Continued 
and substantial Federal investment in these infrastructure 
improvements--in both urban and rural areas--is necessary if the 
Nation's surface transportation system is to safely and efficiently 
move people and support the substantial growth in freight movement that 
is projected in the coming decade.
  --We are pleased that the President requested a Federal aid highway 
        obligation limit of $39.1 billion for fiscal year 2007, a level 
        equal to the authorized contract authority plus $842 million 
        from the Revenue Aligned Budget Authority (RABA).
  --The Governors strongly urge the subcommittee to fund public transit 
        at the fiscal year 2007 authorized funding level of $8.97 
        billion. The proposed $100 million shortfall in the newly-
        created Small Starts program is of concern. This program is 
        attractive since it provides the flexibility to fund small but 
        vital transit projects, such as bus rapid transit, that might 
        not be efficient or cost-effective if subject to the lengthy 
        approval process needed for larger endeavors. Although the 
        administration questions the funding level needed as the Small 
        Starts program gets underway in fiscal year 2007, this does not 
        justify a reduction in the overall funding level for the 
        Capital Investment Grants program--a program which is highly 
        competitive and oversubscribed. Furthermore, a failure to fully 
        fund transit would undermine the important and historic 80/20 
        funding split between highways and transit.
  --The Governors also urge the subcommittee to provide sufficient 
        funding for the Coordinated Border Infrastructure Program. A 
        strong program--one that invests in transportation projects 
        addressing both security and transportation needs--can 
        contribute to safer, more efficient and secure flows of people 
        and goods across international borders and through gateways.
    The CONEG Governors also request that the fiscal year 2007 
appropriations include $1.598 billion in Federal funding for intercity 
passenger rail, with specific funding levels provided for operations, 
capital and debt service. This funding level requested by the Amtrak 
Board can ensure the stability of the current national system as 
capital investment and operations reform are undertaken through 
concerted and hopefully coordinated activities of Amtrak, the U.S. 
Congress, the U.S. Department of Transportation (USDOT), and the 
States. The administration's request of $900 million for Amtrak, 
particularly its exclusion of funds required for debt service, could 
undermine the reforms and critical capital investments currently 
underway.
  --Capital investment in infrastructure and equipment is the key to 
        improved reliability, increased ridership, and greater 
        operational efficiency. It is essential that the Federal 
        Government continue to be a consistent partner in funding the 
        capital needs of the Nation's intercity passenger rail system. 
        Across the Nation, States already partner with Amtrak by 
        investing in tracks, stations and equipment. Between 2002-2006, 
        the Northeast States have spent or committed approximately $1.7 
        billion for infrastructure improvements that benefit intercity 
        passenger rail. Amtrak is embarked upon a long-deferred capital 
        program to bring the federally-owned Northeast Corridor (NEC) 
        to a state of good repair. In fiscal year 2006, Northeast 
        Corridor States and commuter agencies and other third parties 
        will provide almost half of Amtrak's NEC infrastructure budget. 
        We are particularly concerned that the subcommittee ensures 
        that Amtrak can continue to fund the critically needed bridge 
        repair projects and life-safety work in the New York and 
        Baltimore tunnels.
  --Intercity passenger rail is a complex and interconnected system. 
        Therefore, operations reform, such as that being developed for 
        Amtrak's long distance service, is an incremental process that 
        must be carefully designed and implemented to minimize 
        unintended consequences for ridership and revenues. Since 
        actual savings may not be realized for a number of years, we 
        urge the subcommittee to continue providing Federal operating 
        funds to Amtrak as part of its regular quarterly grant, not as 
        the discretionary Efficiency Incentive grant. The quarterly 
        operations and capital grant process is already subject to 
        USDOT oversight and approval.
  --Amtrak has incurred substantial debt in past years to maintain 
        operations of the national system, acquire and improve 
        equipment for the entire system, and invest in infrastructure. 
        As in fiscal year 2006, we believe that the fiscal year 2007 
        appropriations should specifically include adequate Federal 
        funds for debt service so that this expense, incurred on behalf 
        of the entire national system, should not be paid at the 
        expense of essential capital investment.
    The CONEG Governors recognize that the Appropriations Committee has 
assumed a primary role in instituting reforms of Amtrak's internal 
management, and more recently, reform of system management. We 
previously shared with the subcommittee and the administration our 
concerns with a number of specific and immediate reform provisions 
imposed by the fiscal year 2006 transportation appropriations bill 
(Public Law 109-115). We appreciate the subcommittee's recognition of 
the importance of consulting with States in a number of these proposed 
system reforms. However, we continue to believe that reform of 
intercity passenger rail must occur in an orderly, timely process that 
reflects collaboration with the States--not through an annual 
appropriations process.
  --We are deeply concerned with the NEC commuter access fee provision 
        that, for the first time, injects the USDOT into the public-
        private contractual arrangements that govern passenger rail 
        cost-sharing on the Northeast Corridor. Rail service on the NEC 
        is governed by hundreds of carefully negotiated legal, 
        financial and operating agreements that involve substantial 
        State financial investments and numerous in-kind exchanges. The 
        Northeast Governors met with Secretary Mineta and Deputy 
        Secretary Cino, and chief executive officials from the State 
        transportation agencies and commuter authorities are engaged in 
        on-going discussions about this access fee. As previously 
        noted, Northeast Corridor commuter agencies already fully pay 
        for the additional operations expenses incurred by Amtrak due 
        to commuter rail service, and they participate in numerous 
        joint-benefit capital projects on this vital national 
        transportation corridor. Therefore, we urge the subcommittee to 
        allow the issue of cost-sharing to continue as part of 
        negotiated agreements between the commuter agencies and 
        Amtrak--and to allow any future changes to be undertaken as 
        part of these negotiations or parallel authorization 
        legislation.
  --As the subcommittee also reviews the fiscal year 2006 appropriation 
        bill's reform provision dealing with restrictions on ticket 
        pricing and food and beverage service, we urge careful 
        consideration to ensure that any legislative requirements do 
        not negatively impact the ability of State-supported intercity 
        services to offer innovative food and beverage service and 
        market-based fares to grow intercity ridership, improve overall 
        financial performance, and meet State transportation goals.
    A number of other national rail programs are important components 
of the evolving Federal-State-private sector partnerships to enhance 
passenger and freight rail across the country. SAFETEA-LU creates a new 
Rail Relocation Program and enhances the Swift High Speed Rail 
Development Program. We encourage the subcommittee to provide funding 
for both these programs. We are concerned with the President's budget 
proposal to eliminate the Railroad Rehabilitation and Improvement 
Financing (RRIF) loan program, the principal Federal program for 
addressing shortfalls in rail infrastructure investment. This proposal 
is at odds with the tenfold increase in the RRIF program authorized by 
SAFETEA-LU. The RRIF program provides an important financial tool, 
particularly for the many regional and short line railroads that serve 
communities across the Northeast and the Nation, as they seek to 
upgrade infrastructure and equipment to meet the demands of changing 
and competitive markets.
    The CONEG Governors also support a modest increase in funding for 
the Surface Transportation Board (STB) to $25.6 million. This funding 
level will allow the STB, which provides essential oversight services 
for the Nation and the Northeast, to maintain current service levels 
while also addressing its increased building and security costs.

                         COMMUNITY DEVELOPMENT

    The CONEG Governors urge the subcommittee to maintain the fiscal 
year 2006 funding level for the Community Development Block Grant 
(CDBG) program in fiscal year 2007. Federal funding for CDBG is an 
efficient Federal investment since it leverages significant private and 
public funds. Each $1 of Federal CDBG funding is matched by $3 in 
private funds. The CDBG enables States to provide funding for 
infrastructure improvement, housing programs, and projects that attract 
businesses to urban and rural areas. It helps create new jobs and spurs 
economic development, growth and recovery in the Nation's low income 
and rural communities.
    The CONEG Governors thank the entire subcommittee for the 
opportunity to share these priorities and appreciate your consideration 
of these requests.
                                 ______
                                 
      Prepared Statement of the National Treasury Employees Union

                      FISCAL YEAR 2007 IRS BUDGET

     NTEU represents 150,000 Federal employees in 30 Federal agencies 
and departments, including the men and women who work at the Internal 
Revenue Service. I appreciate the opportunity to provide the 
subcommittee with comments on the IRS budget for fiscal year 2007.
    There are several items in the administration's IRS budget that 
NTEU believes would be detrimental to the IRS's mission. The two most 
egregious items include the administration's plans to contract out tax 
collection to private collection agencies starting this summer, and an 
inadequate budget request that will prevent the IRS from continuing to 
improve its customer service record while bolstering enforcement.

                                 BUDGET

    The IRS budget forms the foundation for what the IRS can provide to 
taxpayers in terms of customer service and how the agency can address 
the ever-increasing tax gap through enforcement. Without an adequate 
budget the IRS cannot expect continued IRS customer service performance 
ratings and to shrink the tax gap. I commend the administration for 
acknowledging in its fiscal year 2006 Budget in Brief (page 12) that 
the ``IRS yields more than four dollars in direct revenue from its 
enforcement efforts for every dollar invested in its total budget.'' 
However, I must criticize the administration for failing to request a 
budget for fiscal year 2007 that is commensurate with the needs of the 
agency to meet its customer service, as well as enforcement challenges.
    NTEU supports the IRS Oversight Board's overall IRS budget 
recommendation which calls for an increase of $732 million over the 
enacted fiscal year 2006 IRS budget. The Board's budget represents a 
6.9 percent increase over the fiscal year 2006 budget and includes 
increases in enforcement and taxpayer service programs, in contrast to 
the President's budget request which calls for a cut of 2,500 full-time 
equivalent (FTEs) employees and relies on unrealistic assumptions such 
as an increase of $135 million in user fees. NTEU specifically supports 
the increased enforcement budget proposed in S. Con. Res. 83, the 
fiscal year 2007 Budget Resolution, as passed by the Senate. The Senate 
Budget Resolution quadruples the President's enforcement request from a 
$137 million increase over fiscal year 2006 to an additional $500 
million increase for IRS enforcement in fiscal year 2007.
    NTEU believes that if the IRS is going to continue to ask for 
improved performance from its employees then it must request a 
realistic budget that is commensurate with the agency's goals. The 
President's budget request falls short and I would urge the 
subcommittee for an appropriation that is commensurate with the IRS's 
goals of bolstering enforcement and improving customer service.

                            SPAN OF CONTROL

    I realize that Congress does not operate in a vacuum and it must 
consider all Federal Government budget needs. In its fiscal year 2006 
IRS Budget/Special Report, the IRS Oversight Board stated that it 
``agrees that investing in enforcement does pay for itself many times 
over, not only in increased revenues but by reinforcing the belief that 
all taxpayers are paying their fair share.'' Although it's widely 
recognized that additional funding for enforcement may provide a great 
return on the investment, the administration seems reluctant to request 
an adequate budget for the IRS enforcement budget. Thus, the agency 
must look toward other cost-cutting measures within its budget 
framework.
    NTEU recommends the IRS look at the management-to-bargaining-unit 
employee ratio to find much needed resources for additional collection 
work. Although the number of frontline employees who do the work at the 
IRS has decreased by 5.1 percent since 2000, the number of managers who 
supervise these employees has increased by 1 percent over this same 
period. If the IRS decreased the number of managers and management 
officials at the same rate as it has decreased its rank and file 
employees, the agency could put the savings toward bolstering 
collections work, and avoid cuts to customer service.

                            CUSTOMER SERVICE

    Congress must continue to reject IRS's plan to implement draconian 
cuts to customer service. I was pleased that the subcommittee decided 
to halt IRS's plans to move forward with cuts to customer service at 
the end of last year with language in H.R. 3058 (Section 205), the 
Transportation, Treasury, Housing and Urban Development, the Judiciary, 
the District of Columbia, and Independent Agencies Appropriations Act, 
2006. H.R. 3058, Section 205, uses broad language that prohibits any of 
the appropriated funds to ``be used to reduce taxpayer services as 
proposed in fiscal year 2006 until the Treasury Inspector General for 
Tax Administration completes a study detailing the impact of such 
proposed reductions on taxpayer compliance and taxpayer services . . 
.''. The IRS decided to move forward with cuts to the toll-free service 
by reducing hours of service and closing call sites, despite the 
language this subcommittee imposed in H.R. 3058. In response, the 
subcommittee followed up with additional language to clarify its intent 
in H.R. 2863, Section 5021 (the fiscal year 2006 Defense Appropriations 
bill) further explaining that ``reduced taxpayer services'' in the 
Transportation-Treasury Appropriations bill included--but was not 
limited to--any reductions in telephone service.
    Despite these two explicit directives from Congress not to make any 
taxpayer customer service cuts, the IRS closed the Chicago and Houston 
telephone call sites. Furthermore, the IRS continues to consider 
cutting Taxpayer Assistance Centers (TACs) as a cost-saving measure, as 
confirmed in a recent TIGTA report (Reference Number: 2006-40-061). The 
report also indicates that management does not have reliable data on 
the TACs to make decisions about TAC operations. TIGTA also points out 
that 47 of the 400 TACs nationwide--nearly 12 percent--are 
``critically'' understaffed--meaning that they would be in danger of 
closing were it not for the dedicated IRS employees who are filling in 
from nearby TACs and through the use of seasonal employees. In its 
first report responding to the congressional mandate in Section 205 of 
H.R. 3058, TIGTA sharply criticizes the business model the IRS used to 
justify the TAC closings last year (see TIGTA Reference Number: 2006-
40-067). Clearly, the IRS lacks the management information necessary to 
provide adequate oversight of its TAC operations--much less make a 
decision to close any of them.
    I urge the subcommittee to continue to oppose the IRS's plan to 
drastically cut customer service until the IRS has the data to justify 
its customer service cuts and can explain the effects of such cuts on 
taxpayers.

                         PRIVATE TAX COLLECTION

    NTEU strongly opposes the administration's plan to privatize IRS 
debt collection, as authorized by Congress in 2004 in H.R. 4520, the 
American Jobs Creation Act of 2004. Under the statute, the IRS is 
permitted to hire private sector debt collectors and pay them a bounty 
of up to 25 percent of the money they collect. NTEU opposes this short-
sighted proposal, anticipates its complete failure as witnessed in a 
similar 1996 pilot program and will continue to work towards its 
repeal.
    The IRS has said that it has learned from the 1996 project and is 
better equipped to address the problems raised. However, a revealing 
report by the Treasury Inspector General for Tax Administration (TIGTA 
Audit No. 2003-20-010) provides evidence to the contrary. It shows how 
IRS contractors, revamping IRS computers, put taxpayers' data at risk.
    The objective of the TIGTA audit was ``to determine whether the 
Internal Revenue Service (IRS) has adequately protected Federal 
Government equipment and data from misuse by contractors.'' The review 
found: ``The involvement of non-IRS employees in critical IRS functions 
increases the risk of misuse or unauthorized disclosure of taxpayer 
data, and could lead to loss of equipment or sensitive taxpayer data 
through theft or sabotage.'' The TIGTA audit found that the ``lack of 
oversight of contractors resulted in serious security 
vulnerabilities.'' The report, found that, ``contractors blatantly 
circumvented IRS policies and procedures even when security personnel 
identified inappropriate practices.''
    A more recent report by the General Accounting Office (GAO-06-328) 
highlights the continuing failure of the IRS to ensure the internal 
security of sensitive taxpayer data. GAO reported the IRS has corrected 
only 41 of the 81 information security weaknesses it previously 
discovered at two of the agency's critical data processing sites; 
moreover, GAO said it has identified ``new information security 
weaknesses that threaten the confidentiality, integrity and 
availability of IRS financial information systems and the information 
they process.'' These include, for example, the agency's failure to 
implement effective ``electronic access controls related to network 
management, user accounts and passwords; user rights and file 
permissions; and logging and monitoring of other information security 
controls to physically secure computer resources, and to prevent the 
exploitation of vulnerabilities.'' Its report added: ``Collectively, 
these weaknesses increase the risk that sensitive financial and 
taxpayer data will be inadequately protected against disclosure, 
modification, or loss, possibly without detection, and place IRS 
operations at risk of disruption.''
    The GAO report presents yet another warning signal about the 
dangers of the IRS effort to move ahead with plans to hire private 
sector debt collectors to pursue tax debts. Rather than seek to move 
personal and sensitive taxpayer information into private hands the IRS 
needs to devote time, attention and resources to ensuring it can 
protect these vital data when the information is in its own hands. I 
don't think anyone can realistically be satisfied right now that the 
agency has accomplished that.
    Clearly, the IRS does not have sufficient oversight of the current 
contractors or technology it employs. Combine this fact with a 25 
percent bounty incentive paid to the contractors and you have a recipe 
for disaster, resulting in overly aggressive and abusive tactics on the 
part of the private debt collectors.
    While the IRS is currently liable for damages caused by an IRS 
employee's misuse of sensitive taxpayer information, taxpayers would 
not have proper redress with the Federal Government for misuse of their 
confidential information by contractors. Instead, taxpayers would be 
left to seek damages against the private collection agency while the 
reputation of the IRS and the Federal Government is tarnished.
    Furthermore, the debt collectors won't be given the same training 
that is given to IRS collections employees. Even the National Taxpayer 
Advocate in her 2005 Annual Report to Congress recognizes the problems 
with implementation of the private debt collection initiative:

    ``However, the current plan shortchanges taxpayers by exempting 
private collectors from the type of training required of IRS employees 
in similar functions . . . Yet, the private collectors will not receive 
even a small fractions of the training that is given to the IRS 
employees in similarly situated positions. Moreover, the private 
collectors themselves will administer the PDC training.'' (Volume 1, 
page 78).

    Not only will the private debt collectors not be given the same 
training as IRS employees, but the contractors will be administering 
the training. IRS collection professionals have a wealth of tax 
knowledge that they have at their disposal in every case where they 
deal directly with the taxpayer. The private debt collectors on the 
other hand, will only be given a fraction of the training and not have 
that same level of expertise as the IRS employee.
    One of the most often-heard arguments in favor of the use of 
private collection agencies is that if they are paid out of the 
proceeds of what they collect, IRS's enforcement capabilities increase 
without having to increase appropriations. Numerous congressional 
supporters said they would prefer to have tax collection done by 
Federal employees, but would go along with the use of private 
collection agencies solely because it avoids the difficult issue of 
getting Congress to approve additional appropriations for the IRS.
    The statute that gives the IRS the authority to use PCAs allows 25 
percent of collected revenue to be returned to the collection companies 
as payment and 25 percent to be retained by the IRS for enforcement 
efforts, thereby circumventing the appropriations process altogether. 
There is nothing magical about revenues collected by private collection 
companies. If those revenues could be dedicated directly to contract 
payments and IRS enforcement efforts, there is no reason some small 
portion of other revenues collected by IRS employees couldn't be 
dedicated to IRS enforcement efforts. This would allow for increased 
enforcement by IRS employees, which most people indicate is the 
preferable route and eliminate large payments (up to 25 percent of 
collections) to private collection companies, significantly increasing 
net revenue to the General Treasury. While legislation would be 
required to allow for this kind of dedication of revenue, I believe the 
precedent has now been set with the private collection agency funding 
provisions. Congress should consider supporting this approach as a 
common sense way to make real progress in closing the tax gap, lowering 
our deficits and making more funding available for our Nation's 
critical needs.
    It is a plain and simple fact: This plan to privatize tax 
collection at the IRS will hurt U.S. taxpayers, will hurt IRS workers 
and will erode the great gains the IRS has made with improved customer 
satisfaction ratings. I urge the subcommittee to scrutinize the IRS's 
accountability of its contractors and hold the private collection 
agencies to the same standards as IRS employees.

                               PAY PARITY

    The administration has asked Congress to provide only a 2.2 percent 
pay raise for Federal workers in fiscal year 2007. This would be the 
lowest raise since 1998, at a time when the cost of living rate is 
steeply increasing and health insurance premiums are going up 
dramatically. While in past proposals the Bush Administration did not 
honor the historic practice of parity between the civilian and military 
workforce, this year's proposal provides an equally insufficient pay 
raise to both parts of government service.
    Not only are Federal employees taking an effective pay cut once 
inflation and health care costs are considered but the pay gap between 
them and the private sector is widening. The Federal Employees Pay 
Comparability Act (FEPCA), enacted in 1990 to close the gap between 
Federal and private sector pay, has never been fully implemented. 
Today, Federal pay lags 13 percent behind the private sector. Bringing 
Federal worker pay into line with the private sector would be the most 
effective cure to the Federal Government's hiring crisis.
    Further reducing the potential fiscal year 2007 pay raise, the 
administration proposes to reduce pay in fiscal year 2007 by funding 
special rate pay out of this meager increase. While agencies should 
have the resources they need to provide special rate pay, it should not 
come by raiding the locality adjustments and annual pay increase for 
Federal workers.
    NTEU urges the subcommittee to oppose the administration's 
legislative proposal to fund special rate pay by diverting part of the 
locality and annual pay raise. I also seek your continued support for a 
fair and equitable pay raise for the Nation's Federal civilian and 
military workforce for fiscal year 2007.

                            CONTRACTING OUT

    Last year, the House and Senate Transportation-Treasury HUD 
subcommittees worked in a bipartisan, bicameral fashion to enact 
legislation in H.R. 3058, Section 852 that begins to level the playing 
field for Federal employees. NTEU supports the provisions and thanks 
the subcommittee for its work last year. The legislation allows Federal 
employees to offer their own realistic best bid with a most efficient 
organization (MEO) in job functions being performed by more than 10 
Federal employees; requires a 10 percent or $10 million cost savings of 
the contractor in order for the work to be contracted out; and allows 
executive agency heads to conduct public-private competitions to bring 
contracted work back in-house. NTEU would strongly recommend that the 
same provisions be included in the fiscal year 2007 Transportation-
Treasury Appropriations bill and additional flaws in the process be 
examined.
    For example, the process should prohibit the contractor from 
receiving a cost advantage in the competition by offering an inferior 
employer-sponsored health benefit than the Federal employees receive. 
Contractors have an incentive to cut benefits to their workers in order 
to reduce labor costs when offering their best bid. However, 
contracting out should not be a race to the bottom. If contractors want 
to offer inferior benefits to their workers, they should not be 
rewarded for this by being given an advantage in the competition for 
the work. Congress must also make sure that Federal employees are 
treated fairly throughout the competition process by allowing us the 
same legal standing before GAO for appeals purposes as has long been 
enjoyed by contractors.
    This list is by no means exhaustive but it's a good starting point. 
If the administration is going to insist on using its flawed revised A-
76 Circular, then Congress must insist on correcting those flaws in the 
competitive sourcing rules.

                                  RIFS

    I commend the subcommittee for acknowledging the IRS's haphazard 
approach to reorganizing the agency and directing ``the IRS to consult 
with the Committee prior to elimination, consolidation, or 
reorganization of its workforce, and prohibits the IRS from proceeding 
with matters relating to such job movement prior to the Committee's 
action on the IRS budget.'' (Senate Rept. 109-109--Transportation, 
Treasury, the Judiciary, Housing and Urban Development and Related 
Agencies Appropriations Bill, 2006).
    Despite the committee Report language, the IRS moved forward with 
its planned reductions in force (RIFs) in several different areas. 
Generally speaking, NTEU believes that the IRS would benefit both in 
terms of cost savings and human resource satisfaction by placing a 
greater emphasis on retraining current employees for other positions 
within the IRS. Unfortunately, this has not been the approach taken by 
the IRS with regards to RIFs at the agency. A more sensible downsizing 
model is needed if the IRS wishes to keep the talented workforce it 
currently has but also in order to attract new talent. A more 
comprehensive, thoughtful approach to RIFs will also ensure that the 
improved customer service gains made since 1998 are not lost.

                               CONCLUSION

    It is indisputable that the IRS workforce is getting mixed signals 
regarding its value to the mission of the Service and the level of 
workforce investment the Service is willing to make. Without a doubt, 
the frontline employees are committed to working with management to 
increase efficiency and customer satisfaction. NTEU is committed to 
striking a balance between taxpayer satisfaction, business results and 
employee satisfaction. I invite Congress to join us in this endeavor.
                                 ______
                                 
          Prepared Statement of the City of San Marcos, Texas

AIRPORT IMPROVEMENTS REQUEST--SAN MARCOS MUNICIPAL AIRPORT, SAN MARCOS, 
                                 TEXAS

    Mr. Chairman and members of the subcommittee, on behalf of the City 
of San Marcos, Texas, I am pleased to submit this statement in support 
of our requests for project funding for fiscal year 2007.
    The City of San Marcos requests Federal funding for the San Marcos 
Municipal Airport to accomplish improvements that are in the public 
interest. The improvements are described in the three specific projects 
listed below:

------------------------------------------------------------------------
                                                              Amount
------------------------------------------------------------------------
Northside T-Hangar Construction.........................      $3,500,000
New Terminal Building...................................       4,500,000
Fixed Base Operator (FBO) Facility......................       1,500,000
                                                         ---------------
      Total Request.....................................       9,500,000
------------------------------------------------------------------------

    The San Marcos Municipal Airport is a public general aviation 
airport owned and operated by the City of San Marcos, Texas. It is 
located just east of Interstate Highway 35 on Texas Highway 21 
approximately 30 miles south of Austin and 45 miles north of San 
Antonio in one the fastest growing corridors in Texas.
    The airport is part of a closed military base; the remainder of the 
former Air Force Base is occupied by the United States Department of 
Labor's Gary Job Corps Center. When the base was closed and divided in 
1966, the Job Corps retained the portion of the property with the 
buildings and other amenities while the City of San Marcos was given 
the aeronautical facilities consisting of runways, taxiways, and the 
parking apron.
    This arrangement has resulted in a ``bare bones'' airfield that 
lacks the support structure to sustain an economically viable modern 
airport. We have adequate aeronautical facilities and real estate but 
little other facilities. In addition, current legislation provides for 
airport capital improvement funding assistance through the Federal 
Aviation Administration for aviation infrastructure, but not for the 
type of improvements that this airport needs.
    The City of San Marcos requests help to transform the airport into 
a modern, self-sustaining enterprise. After analysis and master 
planning, we have determined that the three projects herein described 
will get us the ``biggest bang for the buck.'' These projects will meet 
our highest priorities and most immediate needs, and they will be a 
highly visible indicator that the San Marcos Municipal Airport is on 
the move. We are firmly convinced that these improvements will kick-
start further development and attract private investment that will far 
surpass the amount that we are seeking in Federal support.
    The following program descriptions outline our three requests:

             NORTHSIDE T-HANGAR CONSTRUCTION--$3,500,000

    The layout of the former Gary Air Force Base is such that all the 
buildings and developed area of the base were to the south of the 
airfield. When the base was divided between the Gary Job Corps Center 
and the San Marcos Municipal Airport, the airport was given only a thin 
sliver of land on the south side to provide access and support the 
airfield. There is not enough room for all the support facilities such 
as hangars, maintenance shops, and terminal buildings that an active 
airport requires.
    However, on the north side of the airfield is real estate that has 
never been developed. One prime piece of the northside area consists of 
approximately 40 acres of very desirable airport land that fronts on 
Texas Highway 21 and borders a newly refurbished main airport taxiway. 
Except for the absence of infrastructure, it is the ``McDonald's'' 
location on the airport. The area requires an access road, drainage 
improvements, pavements, and utilities. It also needs a seed project to 
stimulate private investors to move into the area.
    Our plan proposes to construct the infrastructure and to then build 
approximately 50 nested T-hangars in two or three city-owned buildings. 
Our planning estimate for the cost to implement this project is 
$3,500,000. We are also convinced that once this northside development 
ball starts to roll, the future of the new San Marcos Municipal Airport 
will shift from the limited and constrained south side to the several 
hundred acres of undeveloped land available on the north side.

                   NEW TERMINAL BUILDING--$4,500,000

    The commercial, economic, and public service hub of a modern 
airport is the public terminal building. The terminal building provides 
public amenities such as a waiting room or lounge, airport 
administration offices and public meeting rooms, restrooms, flight 
planning facilities and communications links to obtain flight planning 
information, commercial lease space for such businesses as an airport 
restaurant, airport shops, and other aviation-related commercial 
activities.
    These facilities are sorely lacking in our present airport 
configuration. It is opportune that the Federal Aviation Administration 
is programming a new air traffic control tower for our airport in 
fiscal year 2007. A new terminal building located adjacent to the 
control tower could be architecturally coordinated with the control 
tower for aesthetic advantage. The two facilities could achieve a 
significant efficiency in the coordinated construction of road access, 
utility services, parking facilities, drainage improvements, and 
landscaping. This same concept is being touted at several other 
airports similar to ours. (Dallas Executive Airport is a prime 
example.) The planned terminal building planning concept is for a 
building of approximately 10,000-square-feet first floor and total cost 
estimated at $4,500,000.

             FIXED BASE OPERATOR (FBO) FACILITY--$1,500,000

    For general aviation operations, airport activity centers on the 
FBO. This is where the transient and based pilots and aircraft 
operators go to buy fuel and obtain direct support for their flights. 
It is also a place where transient and based pilots can arrange to have 
their aircraft serviced, repaired, and hangared overnight or longer 
when required.
    It is again opportune that the San Marcos Municipal Airport has an 
established FBO that is capable of accomplishing these vital services 
if a facility were available for them to lease. We propose that a 
modern, state-of-the-art FBO be constructed to meet the airport's 
present and future commercial requirements. The approximately 30,000 
square foot structure would be mainly hangar space with an attached 
business, shop, and office area. Cost is estimated at $1,500,000. Lease 
payments and other airport fees would offset this investment; and the 
investment is calculated to be a profitable enterprise for the airport 
in the long term.
    The 1,356 acre San Marcos Municipal Airport is a potential economic 
dynamo for this region of Central Texas. The three airport improvement 
projects that we are proposing will result in an increase in activity 
and private investment. This is a good investment of public revenue 
that will result in more high-paying aviation jobs, an increased tax 
base, and more direct revenues in the form of airport fees and rents. 
Our airport will also better serve the aviation needs of the region and 
spur further growth, development, and prosperity for our citizens. 
These projects are grounded in sound public policy principles. They 
will result in excellent value for the American taxpayer and for the 
traveling public that will utilize the facilities.
    The City of San Marcos sincerely appreciates your consideration of 
these requests for funding in the fiscal year 2007 cycle, and 
respectfully requests your support.
                                 ______
                                 
                 Prepared Statement of the Access Board

    The Access Board is requesting a total budget authority of 
$5,956,000 for fiscal year 2007. The proposed budget is a 1.28 percent 
increase over the amount requested for fiscal year 2006. The Board is 
not planning new costly initiatives in fiscal year 2007. The Board will 
continue its primary programs and has followed the directives issued by 
the Office of Management and Budget for the preparation of the fiscal 
year 2007 budget.

                              INTRODUCTION

    The Board was established by section 502 of the Rehabilitation Act 
and is the only Federal agency whose mission is accessibility for 
people with disabilities. The Board has three primary programs: 
guidelines and standards development; technical assistance, training, 
and research; and enforcement.
    The Board is responsible for developing accessibility guidelines 
under the Americans with Disabilities Act, the Architectural Barriers 
Act, and the Telecommunications Act. The Board is also responsible for 
developing standards under section 508 of the Rehabilitation Act for 
accessible electronic and information technology used by Federal 
agencies. Additionally, the Board has responsibilities under the Help 
America Vote Act to serve on the Election Assistance Commission's Board 
of Advisors and Technical Guidelines Development Committee.
    The Board provides technical assistance and training on each of its 
guidelines and standards, and on a variety of other accessibility 
issues. The Board also maintains a small research program that develops 
technical assistance materials and provides information needed for 
guidelines and standards development.
    Finally, the Board enforces the Architectural Barriers Act, which 
requires federally financed facilities to be accessible.
    The Board has adopted this mission statement to guide its programs: 
The Board is the catalyst for achieving an accessible America. The 
statement recognizes that achieving an accessible America requires 
bringing together the public and private sectors.
    The Board has established long-range goals and annual objectives 
for its programs in accordance with the Government Performance and 
Results Act. The objectives are described in terms that permit future 
assessment regarding whether the objectives were achieved. To satisfy 
the requirements for an annual performance plan, this discussion and 
budget justification presents information under each of the Board's 
programs and reports on the results from fiscal year 2005 activities, 
reviews the planned fiscal year 2006 activities, and presents the 
fiscal year 2007 objectives.
    The Board's long range goals are to promote accessibility by being 
a:
  --Leader in developing and updating guidelines, standards, and codes 
        for accessibility;
  --Leader in information, education, and outreach on accessibility; 
        and
  --Leading partner with Federal agencies to make the Federal 
        Government a model of compliance with accessibility standards.
    The Board's strategies for achieving its long-range goals and 
annual objectives involve working with its stakeholders. The Board 
involves its stakeholders through advisory committees and review of 
draft guidelines and standards to establish consensus-based guidelines 
and standards that provide accessibility. The Board involves its 
stakeholders in developing and disseminating information, education, 
and outreach that will help covered entities understand and comply with 
the guidelines and standards. Where the Board has enforcement 
responsibilities over Federal agencies, the Board assists those 
agencies to achieve compliance with accessibility standards.
    The Board's programs will result in accessible buildings and 
facilities, transportation vehicles, telecommunications equipment, and 
electronic and information technology across our country and, 
ultimately, the full economic and social integration of people with 
disabilities into our society. Achieving these results will depend not 
only on the Board's activities, but also on the level of commitment and 
action taken by other Federal agencies, State and local governments, 
and businesses that are required to comply with or enforce the various 
laws that guarantee the civil rights of people with disabilities.

                  GUIDELINES AND STANDARDS DEVELOPMENT

    The Board's long-range goal is to be a leader in developing and 
updating guidelines, standards, and codes for accessibility. The Board 
will continue to develop and update accessibility guidelines and 
standards and to work cooperatively with organizations that develop 
codes and standards affecting accessibility through fiscal year 2007 
and beyond.
    In January 2006, the Board committed itself to three new rulemaking 
priorities. The three priorities include: (1) updating and revising the 
Section 508 standards for accessible electronic and information 
technology and the Telecommunications Act Accessibility Guidelines; (2) 
updating and revising the Americans with Disabilities Act (ADA) 
Accessibility Guidelines for Transportation Vehicles; and (3) 
rulemaking on a variety of communications access issues.
    Updating and revising the Section 508 standards and the 
Telecommunications Act Accessibility Guidelines is the Board's top new 
rulemaking priority. The Board plays a central role in the 
implementation of Section 508 and keeping our standards current is a 
vital part of this role. The telecommunications provisions in the 
section 508 standards are based on and are consistent with the Board's 
Telecommunications Act Accessibility Guidelines. Therefore, updating 
and revising the Section 508 standards and the Telecommunications Act 
Accessibility Guidelines should be done in one rulemaking. The Board 
plans to charter a Federal advisory committee in fiscal year 2006 to 
begin this rulemaking. The committee will include representation from 
other Federal agencies, disability organizations, industry trade 
associations, and others. It will also include representation from 
other countries and international standards-setting organizations so 
the new standards are harmonized with efforts being taken around the 
globe.
    Updating and revising the ADA Accessibility Guidelines for 
Transportation Vehicles is needed to address emerging technologies such 
as bus rapid transit and low floor vehicles. This rulemaking will be 
accomplished by holding a series of information meetings in fiscal year 
2006 and 2007 to collect information before issuing a proposed rule.
    Rulemaking on communications access issues will address features 
not already addressed, or not addressed fully, by the Board's 
guidelines such as interactive transaction machines, point of sale 
machines, drive-through machines, alerting devices for deaf and hard-
of-hearing individuals including carbon monoxide detectors and sleeping 
room applications, and public address systems. This rulemaking will be 
accomplished by holding a series of information meetings in fiscal year 
2006 and 2007 to collect information before issuing a proposed rule.
    The status of current guidelines and standards efforts is presented 
below.

Outdoor Developed Areas
    The Board's Outdoor Developed Areas Regulatory Negotiation 
Committee presented its report to the Board in September 1999. This 
committee developed new sections for parks, trails, camping and picnic 
areas, and beach access routes. In October 2001, the Board sponsored an 
information meeting on the final report of the Outdoor Developed Areas 
Regulatory Negotiation Committee. The meeting was held in Denver, CO 
during the annual meeting of the National Recreation and Park 
Association. The meeting was informal and provided an opportunity for a 
dialogue with Board members about the report.
    In September 2003, the Board decided to develop a proposed rule on 
outdoor developed areas using only its rulemaking authority under the 
Architectural Barriers Act. Taking this approach will help move this 
rulemaking forward and allow the Federal Government to take the 
initiative of addressing accessibility in this area before applying 
requirements to State and local governments or private entities. Future 
rulemaking under the ADA will be enhanced by the experience of 
implementing accessibility guidelines at Federal facilities and the 
Federal Government will gain experience in implementing the guidelines. 
This experience should prove important before applying them to other 
entities. The Board expects to publish a proposed rule for public 
comment in fiscal year 2006.

Passenger Vessels
    In September 1998, the Board convened a 21-member Passenger Vessel 
Access Advisory Committee to develop accessibility guidelines for 
cruise ships, ferries, excursion boats, and other vessels covered by 
the Americans with Disabilities Act. The Committee presented its report 
with recommendations to the Board in November 2000. The Board created 
an ad hoc committee of Board members to review the recommendations and 
begin developing a proposed rule on access to passenger vessels.
    On November 26, 2004, the Board published for public comment an 
advance notice of proposed rulemaking (ANPRM) which addressed access to 
and in smaller passenger vessels and a notice of availability (NOA) 
releasing draft guidelines that addressed access to and in larger 
passenger vessels. The Board is coordinating this rulemaking with the 
Department of Transportation. The Department of Transportation issued 
an ANPRM on operational issues affecting passenger vessels on the same 
date as the Board. The Board held three public hearings in fiscal year 
2005 to gather information and input on the ANPRM and the NOA. Over 150 
vessel designers and operators, pier operators, persons with 
disabilities, and others attended the hearings. The Board plans to 
issue a second draft of the accessibility guidelines before issuing a 
notice of proposed rulemaking. The second draft is expected to be 
published in fiscal year 2006.

Public Rights-of-Way
    In October 1999, the Board created a 32-member Public Rights-of-Way 
Access Advisory Committee to assist it in developing new guidelines for 
access to sidewalks, street crossings, and related pedestrian 
facilities. The Committee presented its report with recommendations to 
the Board in January 2001. The Committee will develop recommendations 
for a technical assistance manual for agencies and practitioners to 
support implementation of the future guidelines. In June 2002, the 
Board released draft guidelines on accessible public rights-of-way for 
public comment prior to issuing a notice of proposed rulemaking. Over 
1,400 comments were received on the draft. The Board also held one 
public hearing during the comment period. The Board has revised the 
draft guidelines based on public comments and issued a notice of 
availability in November 2005 placing the revised draft guidelines in 
our rulemaking docket. The purpose of placing the draft guidelines in 
the docket is to facilitate gathering of additional information for the 
regulatory assessment and the preparation of technical assistance 
materials to accompany a future rule. The Board is not seeking comments 
on the draft guidelines. The Board will issue a notice of proposed 
rulemaking in fiscal year 2007 and will solicit comments at that time.

Codes and Standards
    The Board works with model codes organizations and voluntary 
consensus standards groups that develop and periodically revise codes 
and standards affecting accessibility. We have voting membership in 
several codes and standards organizations, and monitor or are actively 
involved in the development or revision of dozens of other codes and 
standards affecting accessibility.
    By working cooperatively with codes and standards-setting bodies, 
Federal and private codes and standards will be more similar, or 
harmonized, and the Board will be more alert to non-Federal influences 
affecting its constituencies. Harmonization between Federal and private 
requirements will make it more likely that buildings and facilities 
will be accessible, thus reducing the necessity for complaints and 
litigation.

Fiscal Year 2005 Results--Rulemaking
    In fiscal year 2005, the Board:
  --Published a notice of availability of revised draft guidelines on 
        access to public rights-of-way.

Fiscal Year 2005 Results--Codes and Standards
    In fiscal year 2005, the Board:
  --Actively participated in the development of the NSPI-9 Standard for 
        Aquatic Recreation Facilities. This new standard addresses 
        water parks and water attractions. The American National 
        Standards Institute's (ANSI) Board of Standards Review approved 
        NSPI-9 2004 ``Aquatic Recreation Facilities'' as an American 
        National Standard.
  --Provided comment on revisions to the Manual on Uniform Traffic 
        Control Devices (MUTCD) which includes coverage of pedestrian 
        signals, intersection design issues, pavement markings, 
        signage, signalization, and other traffic control issues and 
        actively participated on the Signals Committee Task Force to 
        develop a draft standard for accessible pedestrian signals.

Fiscal Year 2006 Planned Activities--Rulemaking
    In fiscal year 2006, The Board will issue two proposed guidelines:
  --NPRM on outdoor developed areas.
  --Second draft of guidelines for passenger vessels.
    The Board will also charter a Federal advisory committee to begin 
the process of updating and revising the Section 508 standards and the 
Telecommunications Act Accessibility Guidelines.

Fiscal Year 2006 Planned Activities--Codes and Standards
    The Board worked with the Election Assistance Commission (EAC) in 
the development of voluntary voting system guidelines under the Help 
America Vote Act. The guidelines were made available in January 2006. 
The voting system guidelines were developed with the assistance and 
input of a Technical Guidelines Development Committee and Board of 
Advisors. Two Access Board members serve on these groups. In fiscal 
year 2006, the Board will continue working with the EAC on the next 
version of the guidelines.

Fiscal Year 2007 Objectives--Rulemaking
    In fiscal year 2007, the Board will issue one final rule and two 
proposed rules:
  --Final rule on access to outdoor developed areas.
  --NPRM on public rights-of-way accessibility.
  --NPRM on access to passenger vessels.

Fiscal Year 2007 Objectives--Codes and Standards
    In fiscal year 2007, the Board will continue efforts to harmonize 
its guidelines with model codes and standards, including the ICC/ANSI 
A117.1 Standard for Accessible and Usable Buildings and Facilities.
              technical assistance, training, and research
    The Board's long-range goal is to be a leader in information, 
education, and outreach on accessibility. The Board provides technical 
assistance to a wide variety of people regarding the accessibility 
guidelines and standards it issues. The Board's customers include 
architects, builders, designers, manufacturers, people with 
disabilities, State and local governments, and Federal agencies. The 
Board's technical assistance program has four components:
  --Responding to customer inquiries. The Board responds to about 
        12,000 customer inquiries each year. We have four toll-free 
        telephone lines for customers to call with questions. Customers 
        also e-mail and fax us questions. Many literally are sitting at 
        a drawing table with a design problem. They want accurate, 
        reliable, and timely advice. Our customers value being able to 
        discuss their questions directly with our accessibility 
        specialists who developed the guidelines and standards.
  --Developing and disseminating bulletins, manuals, and other 
        publications. The Board maintains about 30 publications on 
        accessibility issues. These range from short bulletins 
        responding to frequently asked questions about specific issues 
        such as accessible parking, to manuals on the Board's 
        guidelines and standards. We send out about 15,000 publications 
        each year in print and alternate formats.
  --Providing training. The Board conducts about 90 training sessions 
        each year. Training usually is provided at conferences and 
        seminars sponsored by other organizations. Training sponsors 
        generally reimburse us for travel expenses.
  --Maintaining the Board's website. The Board's website (www.access-
        board.gov) has become a very effective way to distribute 
        information to the public. Customers can download many of our 
        publications and view our accessibility guidelines and 
        standards from our website. We received over 2.2 million user 
        sessions on our website in fiscal year 2005.
    The Board also has informal partnerships with other organizations 
such as the American Institute of Architects, the National Association 
of ADA Coordinators, and the Disability and Business Technical 
Assistance Centers (DBTAC) to disseminate information about the Board's 
programs. Many of the Board's guidelines and publications are available 
through these organizations' on-line networks. The Board also provides 
training for these organizations.
    As the Board develops guidelines for new areas such as outdoor 
developed areas, passenger vessels, and public rights-of-ways, there 
will be increased demands for technical assistance from existing and 
new customer groups. There also will be opportunities to use existing 
partnerships and establish new partnerships with customer groups to 
disseminate information about the Board's guidelines and standards.

Fiscal Year 2005 Results--Technical Assistance, Training, and Research
    Recently, the Board adopted a ``focus issue'' approach to public 
outreach and technical assistance that will allow the Board to reach a 
wider variety of audiences than it does now. The focused approach will 
supplement the Board's existing outreach programs. Focusing on an issue 
will allow the Board to make a large impact in a narrow segment of 
society in a way that its current approach does not allow. The Board 
selected access to courthouses as its first focus issue and in October 
2004 created a 31-member Courthouse Access Advisory Committee to guide 
this work. The committee has met five times since its creation. It is 
scheduled to complete its work in November 2006. The committee will 
develop technical assistance materials related to the accessibility of 
courthouses, particularly courtrooms, including best practices, design 
solutions, and the promotion of accessible features.
    The Board unveiled its newly redesigned website in June 2005 using 
the Board's new agency graphic identity. This new graphic identity 
provided the Board with a coordinated range of new templates for the 
layout of reports, bulletins, internet presence, and other print and 
electronic materials. The Board developed this new and more appropriate 
graphic expression, including both logo and text, for its family of 
print materials. The Board did this to reflect its professionalism and 
to communicate that the Board is the only Federal agency devoted to 
accessibility in the built environment and in communications and 
electronic technologies.
    In fiscal year 2005, the Board responded to 12,271 customer 
inquiries; distributed 1,250 information packets; and conducted 108 
training sessions, which were attended by 9,100 people. An information 
packet usually contains several publications. Since the Board does not 
collect data on publications disseminated through partner 
organizations, the actual number of publications disseminated to its 
customers is greater than the current data indicate.
    The Board has used its website to provide copies of the Board's 
guidelines and answers to frequently asked questions about the 
guidelines so that more customers can get the information they need. 
The number of user sessions on the Board's website continues to grow. 
There were approximately 2.2 million user sessions in fiscal year 2005, 
nearly 600,000 more than the previous year. Due to the increasing use 
of the its website, the Board is focusing on web-based dissemination of 
information since this allows a variety of options for speedy 
distribution at a low cost to the Board. The Board also published and 
distributed six issues of Access Currents, a free newsletter issued 
every other month by mail and e-mail.
    Technical assistance, research, and training projects funded in 
fiscal year 2005 include:
  --Retail Checkout Counters and Point-of-Sales Machines.--This project 
        will develop a technical assistance bulletin demonstrating in 
        well-illustrated and detailed case studies and best practices 
        the application of accessibility requirements to the design, 
        engineering, fabrication, and construction of check-out 
        counters and transaction machines.
  --Wheeled Mobility Research.--This multi-year project will research 
        and report on the space requirements, horizontal and vertical 
        maneuvering parameters, reach ranges, and other key factors of 
        occupied power wheelchairs and scooters in use in buildings, 
        facilities, and transportation vehicles. The data collected is 
        to be presented in a report that will facilitate comparison 
        with provisions in current accessibility guidelines, with key 
        published studies of mobility aid space and maneuvering 
        requirements, and will enable consideration of several 
        increments of accommodation for both power wheelchairs and 
        scooter types.
  --Effects of Static Electricity in Play Areas.--Static electricity in 
        play areas is potentially harmful to children who have cochlear 
        implants. This project will collect measures of the levels of 
        static electricity being created in play areas where plastic 
        play components are installed. The contractor will analyze the 
        findings from several test areas and compare them to the 
        charges that result from other sources and charges known to 
        have effects on hearing technologies. A second phase of work 
        will support additional site testing.
  --Measures and Materials.--This project will bring together 
        representatives of design and construction industry 
        organizations to work with the Board to incorporate information 
        on tolerances relative to accessibility in industry 
        specifications. A technical assistance publication will also be 
        developed.
  --Wayfinding at Intersections.--This project funded a workshop that 
        brought together highway engineers, orientation and mobility 
        specialists, and people with disabilities in a 2-day workshop 
        to consider possible changes to roadway design to facilitate 
        wayfinding. Fiscal year 2005 funding supported continued 
        discussion and development of standard intersection plans based 
        upon workshop recommendations, with the objective of arriving 
        at consensus schemes that can be implemented by industry.
  --Passenger Vessels Regulatory Assessment.--This project will develop 
        an initial case study for use in the Passenger Vessels 
        Regulatory Assessment.

Fiscal Year 2006 Planned Activities--Technical Assistance, Training, 
        and Research
    In November 2005, the Board set its research priorities for fiscal 
year 2006. The projects include the following:
  --Communications in Transportation Facilities.--This project will 
        study and determine the need for changes in communications 
        accessibility provisions in the Board's guidelines for 
        transportation facilities and vehicles.
  --Pedestrian Signals at Roundabouts.--The draft public rights-of-way 
        guidelines require pedestrian signals at multi-lane crossings 
        of roundabouts. This study will identify candidate technologies 
        in use elsewhere around the world.
  --Wayfinding Research.--The Department of Blind Rehabilitation at 
        Western Michigan University is using seed funding from the 
        National Eye Institute to assess the relative effectiveness of 
        several physical wayfinding cues in the outdoor environment, 
        including returned edges, tactile surfaces, guidestrips, and 
        curb ramp orientation. Our funding will enable them to do more 
        dispositive research with a larger group of subjects and test a 
        wider range of cues.
  --Standards for Assisted Transfer.--This project will follow-up on an 
        earlier one that collected and presented information on current 
        practices in medical care and assisted living facilities by 
        convening an expert group of stakeholders to recommend changes 
        to the Board's guidelines.
  --Slope and Surface Effects on Manual Wheelchair Users.--This project 
        will commission a comparative analysis relative to manual 
        wheelchair use of the several standard protocols used to 
        measure work, effort, energy expenditure, efficiency, 
        difficulty, and rollability to develop a more accurate 
        protocol.
  --APS Troubleshooting.--This project will commission a technical 
        assistance bulletin regarding how to specify accessible 
        pedestrian signals that are appropriate to specific 
        intersection types and conditions.
  --Sign Language Versions of Selected Board Material.--People who are 
        deaf would like to access materials in their native language, 
        American Sign Language. This project will develop short video 
        clips using American Sign Language to convey information about 
        the Board and ways to file Architectural Barriers Act 
        complaints and place the clips on the Board's web site.
  --Indoor Environmental Quality Follow-up.--This project will 
        commission the National Institute of Building Sciences to 
        pursue key recommendations of a previous Board sponsored study 
        on improving the indoor environment for individuals with 
        multiple chemical sensitivities and electromagnetic 
        sensitivities.
  --Study Lighting for Low Vision Users.--This project will commission 
        a research synthesis on existing lighting research and 
        standards affecting people with low vision. This synthesis will 
        be useful in providing technical assistance to improve access 
        for people with low vision and could lead to eventual 
        rulemaking.
  --Regulatory Assessment for Passenger Vessel Rulemaking.--This work 
        is required by our rulemaking agenda.
  --Regulatory Assessment for Public Rights-of-Way Rulemaking.--This 
        work is required by our rulemaking agenda. This year the Board 
        will fund the incidental expenses necessary to convene industry 
        leadership to plan for data gathering and analysis.
    Because of the Board's expertise in accessibility issues, many 
government agencies and private organizations ask for its assistance in 
ensuring access at their facilities. The Board provided technical 
assistance to the Department of Commerce on the proposed new Census 
Bureau building in Suitland, MD. Members of the Maryland Congressional 
delegation requested the Board's assistance to help make this building 
a model of accessibility. The Board also reviewed accessibility issues 
for the planned new Department of Transportation headquarters building.

Fiscal Year 2007 Objectives--Technical Assistance, Training, and 
        Research
    In fiscal year 2007 and beyond, the Board will develop training and 
technical assistance materials on its planned final rules on outdoor 
developed areas, passenger vessels, and public rights-of-ways. As the 
Board publishes final rules, it makes every effort to ensure that 
training and technical assistance materials will be available to 
organizations and individuals that must apply the new requirements.

                 ARCHITECTURAL BARRIERS ACT ENFORCEMENT

    The Board enforces the Architectural Barriers Act (ABA), which 
requires that most buildings designed, constructed, altered, or leased 
by the Federal Government and certain other federally financed 
facilities be accessible to people with disabilities. Complaints 
received by the Board concern post offices, national parks, military 
facilities, veterans hospitals, courthouses, and a variety of other 
facilities. When the Board has jurisdiction and finds that the 
applicable accessibility standards were not followed, it requests a 
corrective action plan and monitors the case until the barrier is 
removed. Even when the Board does not have jurisdiction or no violation 
is found, it attempts to negotiate voluntary barrier removal.
    The Board's long-range goal is to be a leading partner with Federal 
agencies to make the Federal Government a model of compliance with 
accessibility standards. The Board's experience with enforcement of the 
ABA is that most violations are not intentional. When violations are 
found, it is usually because the people responsible for designing 
buildings, reviewing plans, and on-site construction did not have a 
good understanding of the accessibility standards and how to apply 
them. People responsible for building planning and design at 
headquarters, regional and field offices, and local sites must have a 
working knowledge of the accessibility standards if compliance is to be 
achieved. As Federal agencies are reorganized and personnel assignments 
and responsibilities change, it is important that agencies have 
effective systems for training new people responsible for applying the 
accessibility standards and for monitoring compliance with the ABA. The 
Board has also worked with the Federal agencies responsible for issuing 
accessibility standards for facilities covered by the ABA to update 
their standards to be consistent with the Board's new ADA and ABA 
Accessibility Guidelines that were issued in July 2004. In November 
2005, the General Services Administration updated its accessibility 
standards for the ABA. The new standards will apply to most Federal 
facilities that are constructed, altered, or leased after May 8, 2006. 
The United States Postal Services also updated its ABA standards for 
postal facilities in May 2005. The Board continues to work with the 
Department of Defense and the Department of Housing and Urban 
Development to update their ABA standards.

Fiscal Year 2005 Results--ABA Enforcement
    In fiscal year 2005, the Board received 168 written complaints. 
These included complaints investigated under the Architectural Barriers 
Act, and also those concerning facilities not covered by that law but 
potentially covered by other laws, such as the Americans with 
Disabilities Act and the Rehabilitation Act. Of the 168 complaints, the 
Board opened 90 as new Architectural Barriers Act cases. Although the 
Board did not have authority under the Architectural Barriers Act in 
the other 78 complaints, the Board responded to the complainants, 
usually by referring them to the appropriate enforcement agency. In 
addition, the Board referred another 46 complainants to other agencies 
for action when our investigations revealed there was no violation of 
the Architectural Barriers Act or the Board did not have jurisdiction.
    The Board responds quickly to all new complaints and contacts 
complainants frequently to update them on the status of their 
complaints. In fiscal year 2005, the Board sent initial letters to 
complainants acknowledging receipt of their complaint or began an 
investigation of the issues they raised within an average of 5 days. 
The Board's customers regularly say they are pleased to hear from a 
Federal agency so promptly. It is Board practice to keep complainants 
informed on a regular basis throughout the course of our 
investigations. In fiscal year 2005, the Board contacted 159 
complainants to provide updates on the status of their complaints.

Fiscal Year 2006 Plans--ABA Enforcement
    In fiscal year 2006, the Board will continue to investigate 
complaints under the Architectural Barriers Act. The Board anticipates 
responding to complaints in an average of 5 or fewer business days and 
will continue to provide periodic updates to complainants on the status 
of their complaints. At the beginning of fiscal year 2006, the Board 
had 107 active cases. The Board expects to receive 180 new complaints 
in fiscal year 2006. Of this total, the Board estimates that 100 will 
be opened as new Architectural Barriers Act cases and 80 will be 
referred to other agencies for enforcement under other laws, such as 
the Americans with Disabilities Act and the Rehabilitation Act. This 
represents an increase over fiscal year 2005, which are anticipated in 
response to an outreach effort the Board just completed to provide 
informational packets on the Architectural Barriers Act to independent 
living centers and technical assistance centers throughout the country.

Fiscal Year 2007 Objectives--ABA Enforcement
    In fiscal year 2007, the Board will continue to investigate 
complaints under the Architectural Barriers Act. The Board estimates 
that it will have 105 active cases at the beginning of fiscal year 2007 
and will receive 180 new complaints. The Board expects to open 100 new 
Architectural Barriers Act cases and refer 80 complaints to other 
agencies for enforcement under other laws. The Board will continue to 
provide good customer service.
                                 ______
                                 
Prepared Statement of the Capital Metropolitan Transportation Authority

    Mr. Chairman and members of the subcommittee, on behalf of the 
Capital Metropolitan Transportation Authority in Austin, Texas, I am 
pleased to submit this statement for the record in support of our 
fiscal year 2007 funding requests from the Federal Transit Authority 
for Capital Metro--the transportation provider for Central Texas. I 
hope you will agree that the appropriating of funds for these Central 
Texas projects warrants serious consideration as Austin and the 
surrounding Texas communities plan for our region's growing 
transportation needs.
    First, let me thank you for your past financial support for 
transportation projects in Central Texas. Your support has proven 
valuable to Capital Metro and to our Central Texas community as we face 
new challenges.
    As you know, Interstate 35 runs from Canada to Mexico, and along 
the way it also runs through the City of Austin and Capital Metro's 
600-square-mile service area. While traffic in this important corridor 
has always been a challenge, the North American Free Trade Agreement 
has resulted in increased traffic and congestion for our region. In 
fact, a 2002 study by the Texas Transportation Institute determined 
Austin, Texas to be the 16th most-congested city nationwide.
    Also, Central Texas' air quality has reached near non-attainment 
levels. Together, our community has developed a Clean AirForce, of 
which Capital Metro is a partner, to implement cooperative strategies 
and programs for improving our air quality. Capital Metro has also 
unilaterally implemented several initiatives such as offering free 
rides on ozone action days for the last 14 years, converting its fleet 
to clean-burning Ultra Low Sulfur Diesel (ULSD), becoming the first 
transportation authority in Texas to introduce environmentally-friendly 
hybrid-electric buses, and creating a GREENRide program to carpool 
Central Texas workers in low emission hybrid gas/electric automobiles.
    To address these transportation and air quality challenges as well 
as our region's growing population, in 2004 Capital Metro conducted an 
extensive community outreach program to develop the All Systems Go 
Long-Range Transit Plan. This 25-year transportation plan for Central 
Texas was created by Capital Metro, transportation planners, and local 
citizens. More than 8,000 citizens participated in the design of the 
program that will bring commuter rail and rapid bus technologies to 
Central Texas. The plan will also double Capital Metro's bus services 
over the next 25 years.
    By a vote of over 62 percent, this long-range transportation plan 
was adopted by the Central Texas community in a public referendum on 
November 2, 2004. The plan received bipartisan support, along with 
endorsements from the business community, environmental organizations, 
neighborhood associations, and our community leaders.
    An important component of the All Systems Go Long Range Transit 
Plan is the creation of an urban commuter rail line along a 32-mile-
long freight rail line currently owned and operated by Capital Metro. 
The proposed starter route would provide urban commuter rail service 
extending from downtown Austin (near the Convention Center) through 
East and Northwest Austin and on to Leander.
    To implement the community's All Systems Go Transit Plan, Capital 
Metro is seeking $10 million for fiscal year 2007 for five projects of 
importance to our Central Texas community:

                     RAPID BUS PROJECT--$2 MILLION

    The All Systems Go Long-Range Transit Plan relies heavily on new 
rapid bus technologies. The plan creates several new rapid bus routes 
throughout the Central Texas region. The Rapid Bus Project is designed 
to provide faster, frequent and dependable service in main bus 
corridors with high ridership while avoiding large fixed costs and long 
lead times. Capital Metro is seeking $2 million for the Rapid Bus 
Project.

  ENHANCEMENT AND IMPROVEMENT OF BUSES AND BUS FACILITIES--$5 MILLION

    Capital Metro has embarked on a long-term plan to improve and 
expand bus service. In addition to improving bus routes, the agency is 
investing in critical park and ride facilities, transit centers and 
enhanced bus stop locations and amenities. As Capital Metro's service 
area and the population we serve continue to grow, we will continue to 
enhance our system and facilities while addressing traffic congestion 
and air quality concerns. In the next 3 years, Capital Metro has 
planned to invest $82.5 million in capital projects to better serve our 
growing population. Capital Metro seeks $5 million from the 
appropriations process for these improvements and expansions of our bus 
service and facilities.
    Also, Capital Metro is seeking funds for three new strategically 
located park and ride facilities in our service area.

               LEANDER PARK AND RIDE FACILITY--$1 MILLION

    The Leander Park and Ride will anchor Capital Metro's Urban 
Commuter Rail and express bus services serving Leander and rapidly 
growing areas of Western Williamson and Travis Counties. Connecting 
circulator service in Leander is also planned to expand and improve 
Capital Metro's service in Northwestern suburbs and throughout Central 
Texas. Capital Metro is seeking $1 million for this project.

              OAK HILL PARK AND RIDE FACILITY--$1 MILLION

    The Oak Hill Park and Ride facility will anchor Capital Metro's 
future rapid bus services to rapidly growing areas of Southwest Austin 
and Travis County. This facility and its routes will connect local 
service to several nearby neighborhoods to serve the growing number of 
suburban commuters in this portion of Capital Metro's service area. 
Capital Metro is seeking $1 million for this project.

             SOUTH IH-35 PARK AND RIDE FACILITY--$1 MILLION

    The South IH-35 facility will anchor Park and Ride and Rapid Bus 
services to Downtown Austin. It will also serve as a connecting point 
for local bus services in Far South Austin. These local services will 
expand as the area grows to improve Capital Metro's service in Southern 
suburbs and throughout Central Texas. Capital Metro is seeking $1 
million for this project.
    I look forward to working with the committee in order to 
demonstrate the necessity of these projects. Your consideration and 
attention are greatly appreciated.
                                 ______
                                 
      Prepared Statement of the Greater Orlando Aviation Authority

    Chairman Bond and distinguished members of the Senate 
Appropriations Subcommittee on Transportation, Treasury, the Judiciary, 
Housing and Urban Development, and Related Agencies, the Greater 
Orlando Aviation Authority (``the Authority'') greatly appreciates the 
opportunity to present written testimony in support of our funding 
request for important safety and capacity enhancements at Orlando 
International Airport.
    The Authority respectfully requests your subcommittee's 
consideration and support of the following Federal initiative: Runway 
36L Instrument Landing System Category II (ILS Cat II), with an 
Approach Lighting System with Sequenced Flashing Lights, associated 
Environmental Assessment and West Airfield modifications at Orlando 
International Airport (MCO).
    The Authority respectfully requests the subcommittee to include the 
following line item in the fiscal year 2007 FAA F&E Budget:

    ``Acquisition and Installation of Runway 36L Instrument Landing 
System Category II (ILS CAT II) with an Approach Lighting System with 
Sequenced Flashing Lights (ALSF-2); and associated Environmental 
Assessment and West Airfield modifications at Orlando International 
Airport--$4,140,000''.

    Serving nearly 34 million passengers in 2005, Orlando International 
Airport is Florida's busiest commercial service airport and is ranked 
as the 14th busiest airport nationwide. With its four parallel runway 
system, the airport averages nearly 1,000 daily aircraft operations 
(over 350,000 take-offs and landings annually). Runway 36L serves as 
the predominant arrival runway when aircraft are landing in a ``north 
flow'' approach at MCO. This runway end currently does not have 
precision instrument approach capability.
    Installation of ILS/ALS equipment will increase capacity, reduce 
flight delays and provide enhanced safety and aircraft separation, by 
allowing FAA Orlando Air Traffic Control staff to optimize its 
preferred operational procedures of landing on outer runways and taking 
off on the interior runways.
    In addition, Orlando International Airport is currently served by 
56 different air carriers. The ILS CAT II system is the only 
established navigational system that is fully compatible with existing 
air carrier instrument flight capabilities.

                       JUSTIFICATION AND CLOSING

    Orlando International Airport remains steadfast in its commitment 
to help our Nation in its mission to provide safe, efficient, and 
affordable air travel as an integral part of our Nation's aviation 
system.
    Orlando International Airport (OIA) is one of the Central Florida's 
primary assets and has been previously designated as a U.S. Security 
Category X airport. In 2005, OIA served over 34 million passengers, 
surpassing Miami International Airport as the busiest commercial 
passenger airport in Florida. Additionally, OIA is the 14th busiest 
commercial service airport in the Nation and the 24th busiest in the 
world. In terms of origin and destination (O&D) passenger traffic at 
domestic airports, OIA ranked 4th behind Los Angeles International, Las 
Vegas' McCarran International and traditional airline hub airports such 
as Chicago's O'Hare International. O&D passengers represent 
approximately 95 percent of all passengers at OIA. This high level of 
O&D activity is expected to continue.
    OIA has scheduled service to 84 non-stop domestic destinations and 
19 non-stop international destinations, promoting increased airline 
service and competitive fares. The largest rental car market in the 
world is located at OIA. The airport shares a unique relationship with 
the regional economy. An Economic Impact Study completed in 2004 
estimated that OIA generates a $20.7 billion annual economic impact to 
the Central Florida Region and is responsible for 62,100 direct and 
indirect jobs.
    The Authority expresses its gratitude for the opportunity to 
present this testimony to your subcommittee. We look forward to working 
with you and your staff in advancing these safety and capacity 
initiatives that will benefit the National Aviation System. If the 
subcommittee requires any additional information regarding the 
identified funding needs, please do not hesitate to contact the Greater 
Orlando Aviation Authority.

RUNWAY 36L INSTRUMENT LANDING SYSTEM CATEGORY II (ILS CAT II), APPROACH 
     LIGHTING SYSTEM WITH SEQUENCED FLASHING LIGHTS AND ASSOCIATED 
  ENVIRONMENTAL ASSESSMENT AND WEST AIRFIELD MODIFICATIONS AT ORLANDO 
                         INTERNATIONAL AIRPORT

    ``All of us who work for and with aviation safety professionals 
take pride in the results of our collective efforts, especially given 
the economic turbulence being experienced by U.S. carriers. But even as 
we recognize how safe it is to travel in commercial air transportation, 
we must look beyond to face the challenge of how to make the system 
safer. How can we continue to improve aviation safety as demand and 
complexity increase? We are facing record setting passenger numbers, 
new light jets, UAVs, . . . even space travel is not as far away as it 
once was. We cannot afford to rest on our laurels.''--Statement of 
Marion C. Blakely, FAA Administrator, before the Senate Commerce 
Committee, Subcommittee on Aviation on Safety Issues on Aviation 
Safety, November 17, 2005.

    The Authority respectfully requests the subcommittee to include the 
following line item in the fiscal year 2007 FAA F&E Budget:

    ``Acquisition and Installation of Runway 36L Instrument Landing 
System Category II (ILS CAT II), with an Approach Lighting System with 
Sequenced Flashing Lights (ALSF-2); and associated Environmental 
Assessment and West Airfield modifications at Orlando International 
Airport--$4,140,000''.

    This high priority airfield capacity enhancement project will 
include the following elements:
  --Development of an Environmental Assessment (EA) to evaluate the 
        planned ILS and ALS.
  --Procurement of ILS and ALS related equipment: glide slope, 
        localizer, marker beacons (inner, middle, outer/DME), Runway 
        Visual Range (RVR) and ALSF-2.
  --Design, construction, installation, and certification of ILS and 
        ALS equipment.
    To support this airport capacity and safety related initiative, the 
following upgrades to existing facilities will be necessary:
  --Runway/taxiway pavement markings and signage.
  --Electrical system and lighting.
    Installation of an ILS CAT II on Runway 36L will provide the 
following benefits:
  --Increased capacity.
  --Reduced flight delays.
  --Enhanced safety and aircraft separation.
  --Allow FAA Orlando Air Traffic Control staff optimization of its 
        preferred operational procedures by landing on outer runways 
        and taking off on the interior runways.
  --Full compatibility with existing instrumentation utilized by all 56 
        air carriers currently serving Orlando International Airport.

      PROJECT COST ESTIMATE--RUNWAY 36L ILS & ALS AND WEST AIRFIELD
            IMPROVEMENTS, ORLANDO INTERNATIONAL AIRPORT (MCO)
------------------------------------------------------------------------
        Item Description                 Cost              Comments
------------------------------------------------------------------------
ILS CAT II \1\ \2\..............         $1,500,000  ILS eqpt. to be
                                                      upgraded to CAT
                                                      III as a future
                                                      project.
ALSF-2 \1\ \2\..................          1,500,000  To serve R/W 36R
                                                      ILS CAT II &
                                                      future ILS CAT
                                                      III.
ILS/ALS EA......................             35,000  EA--Environmental
                                                      Assessment.
                                 -------------------
      Subtotal..................          3,035,000  ...................
West Airfield Modifications.....            100,000  Allowance for
                                                      electrical system,
                                                      lighting, marking,
                                                      signage
                                                      improvements.
                                 -------------------
      Construction Total........          3,135,000  ...................
Professional Fees/Markups.......          1,008,216  ...................
                                 -------------------
      TOTAL.....................          4,143,216  ...................
      TOTAL (ROUNDED)...........          4,140,000  ...................
------------------------------------------------------------------------
\1\ Costs were provided by Dave Gigowski (FAA Southern Region) and are
  stated in 2006 dollars.
\2\ Includes costs for NAVAID design, equipment procurement,
  installation/construction and flight certification.

                                 ______
                                 
                Prepared Statement of the Navajo Nation

NAVAJO DIVISION OF COMMUNITY DEVELOPMENT--INDIAN COMMUNITY DEVELOPMENT 
                              BLOCK GRANT

                              INTRODUCTION

    The Navajo Nation reservation lies within the three States of 
Arizona, New Mexico and Utah and covers about 27,000 square miles--
about the size of the State of West Virginia. According to the 2000 
Census count the Navajo Nation has a population of 269,202 enrolled 
members and is considered the largest federally recognized Indian Tribe 
in North America. Most of its members still live in substandard 
housing, consisting of one room dwelling units with no running water or 
electricity and continue to suffer from high unemployment with about 43 
percent of Navajos living below the poverty level with per capita 
income averaging about $7,269 as compared to the national poverty level 
of 9.2 percent and $21,587 for the national per capita income level. 
The Navajo people suffer chronic unemployment and must cope with a 
chronic massive need for housing and infrastructure. While unemployment 
in American averages 5 percent, the Navajo unemployment rate averages 
38 percent to 56 percent, depending on the season.
    The Navajo Nation's need for adequate housing is amply supported by 
other distressing statistics. For example, over 32 percent of Navajo 
homes do not have plumbing or water, 60 percent do not have telephone 
services and 28 percent lack of adequate kitchen facilities. We have 
estimated the need for at least 30,000 new housing units and over 
50,000 needing basic utility services.

                  NAVAJO NATION COMMUNITY DEVELOPMENT

    The Navajo Nation Division of Community Development is responsible 
for providing housing and related assistance to low-income families who 
qualify under the following programs: (1) Weatherization Assistance 
Program; (2) Housing Services Program, and (3) Community Development 
Block Grant Program.
    The Navajo Division of Community Development is established as part 
of the Executive Branch within the Navajo Nation government. It is the 
only Division responsible for providing community development 
throughout the Navajo Nation in terms of governmental buildings and 
home construction and related infrastructure. The Division of Community 
Development administers the Weatherization Assistance Program, the 
Housing Services Program, and the Community Development Block Grant 
Program, the Capital Improvement Office, Design and Engineering 
Services and Local Government Support Centers that provide assistance 
and services to communities throughout the Navajo Nation. The services 
provided by these programs are funded through the treasury of the 
Navajo Nation government and through external funds received from State 
and Federal grants and through appropriations administered through the 
Bureau of Indian Affairs.
    The Navajo Nation relies on revenues generated from mineral leases 
that flow into its tribal treasury and is used to operate the Navajo 
government. In fiscal year 2007 the Navajo Nation will lose about $21 
million from its main employers who operate mineral leases that will 
expire or will cease to continue operations if negotiations fail with 
companies that do not upgrade their operation under the Clean Air Act 
and Court Decree filed by environmental groups. For this reason, the 
Navajo Nation looks to its trustee, the Federal Government to provide 
Federal appropriations to serve its vast population, many of whom live 
in rural and remote locations of the reservation and continue to have 
inadequate housing and no running water and electricity. This is all 
due to the vast Navajo land base that requires tens upon thousands of 
dollars to run power lines, sewer lines and other basic necessities 
through the rural communities and without Federal dollars to address 
basic services from the Federal Government and as part of it trust 
obligation to the Navajo Nation, the many Navajo members will continue 
to live below the poverty level well into the next decade and beyond.

                   COMMUNITY DEVELOPMENT BLOCK GRANT

    The Navajo Nation hereby provides a position on the following 
proposed policy as it pertains to the Community Development Block 
Grant.

The Navajo Nation Recommends More Tribal Consultation of Any Proposed 
        Allocation That Impacts Tribal Governments
    At the present time there is basically no consultation between the 
Federal Government and the Navajo Nation.
    The Navajo Nation strongly opposes President Bush's proposal to 
reform the CDBG formula by consolidating Native American Programs with 
other similar programs. Native Americans live in a very unique society 
and should not be grouped or compared with other distressed 
communities.
    The President's fiscal year 2007 budget proposes to reform the 
ICDBG by consolidating and eliminating several economic development 
programs. The President's proposal will establish regional councils to 
focus more on programs that have regional impacts. The regional 
councils will not be familiar with Native American communities and have 
a different interpretation of rural communities. Indian country simply 
cannot sustain or support such a severe reduction in funding or changes 
in the ICDBG.
    If other programs are consolidated into CDBG, the primary 
intentions of the ICDBG program will be lost. The focus will shift from 
infrastructure development such as water, electric, public facilities 
and economic development other types of development.

The Navajo Nation Opposes the Transfer of ICDBG to the Department of 
        Commerce
    The Navajo Nation strongly opposes the Bush Administration's 
proposal to transfer the Indian Community Development Block Grant 
program to the Department of Commerce. The Navajo Nation urges the 
Congress to keep the ICDBG program within the U.S. Department of 
Housing and Urban Development. Most of the work the Department of 
Commerce has done has been with municipalities and urban areas. If the 
ICDBG is transferred to Commerce, the rural areas and particularly the 
Indian tribes will be neglected, because of the unfamiliarity of the 
Department of Commerce with rural development and Indian tribes.
    If the ICDBG is transferred and consolidated with other programs 
with a common set of performance goals, it will probably be oriented 
towards established communities and not rural areas.

The Navajo Nation Opposes Any Budget Cuts in the ICDBG and NAHASDA 
        Programs
    The Navajo Nation opposes any proposed budget cuts in the ICDBG and 
NAHASDA. The Navajo Nation has been providing infrastructure of basic 
utilities to hundreds of Navajo families since 1976. The need for 
infrastructure and housing continues to escalate while the funding 
remains at the same level. The cost in materials, labor, inflation, and 
the increase in the Navajo population has all resulted in increase 
costs. A large number of the Navajo people need infrastructure 
development (electricity and water/wastewater facilities). The Navajo 
Nation continues to advocate for an increase in ICDBG funding to start 
addressing a large number of families.
    Despite the proposed changes, reform, or decrease in funding, the 
ICDBG has made tremendous positive impacts to communities who have 
received ICDBG funding in the past. Within the past 5 years, the ICDBG 
has accomplished the following:

------------------------------------------------------------------------
                                                              No. of
                  Year                     Amount Funded     Families
                                                             Benefited
------------------------------------------------------------------------
1999....................................      $5,000,000             407
2000....................................      $5,000,000             314
2001....................................      $5,000,000             240
2002....................................      $5,000,000             345
2003....................................      $4,345,941             295
2004....................................      $5,491,000             314
------------------------------------------------------------------------

                               conclusion
    Therefore, the Navajo Nation urges the Congress to either increase 
the level of funding of ICDBG or maintain the current level of funding 
to provide the basic infrastructure for the increasing Navajo 
population. Lastly, Navajo urges Congress not to make any changes in 
organizational structure or formula structure of the CDBG until tribal 
consultation is made.
                                 ______
                                 
  Prepared Statement of the American Public Transportation Association

    APTA is a nonprofit international association of more than 1,600 
public and private member organizations including transit systems and 
commuter rail operators; planning, design, construction and finance 
firms; product and service providers; academic institutions; transit 
associations and State departments of transportation. APTA members 
serve the public interest by providing safe, efficient and economical 
transit services and products. More than 90 percent of persons using 
public transportation in the United States and Canada are served by 
APTA members.

                              INTRODUCTION

    Mr. Chairman and members of the committee, on behalf of the 
American Public Transportation Association (APTA), we thank you for 
this opportunity to submit written testimony on the need for and 
benefits of investment in Federal Transit Administration (FTA) programs 
for fiscal year 2007.

                                OVERVIEW

    Mr. Chairman, the fiscal year 2007 Transportation, Treasury, the 
Judiciary, Housing and Urban Development, and Related Agencies 
Appropriations bill is an opportunity to advance national goals and 
objectives through increased investment in our surface transportation 
infrastructure, particularly public transportation. For that reason, we 
strongly urge Congress to fund the Federal transit program at no less 
than the $8.975 billion level authorized in the Safe, Accountable, 
Flexible, Efficient Transportation Equity Act--A Legacy for Users 
(SAFETEA-LU), which Congress approved by overwhelming margins just last 
summer.
    Transit plays a number of important roles, including advancing 
energy independence. It reduces congestion and it provides mobility 
options. In fact, expanding public transportation options is more 
important than ever, since transit is the single quickest way for 
individuals and families to beat the high cost of gasoline.
    Americans took more than 9.7 billion transit trips in 2005, and 
transit ridership grew faster than highway travel (1.3 percent vs. 0.1 
percent). Since 1995, the use of public transportation has increased by 
25.1 percent--more than the growth of highway travel (22.5 percent) 
over that period. The growth of transit ridership during the past 10 
years demonstrates that Americans want transportation choices and will 
leave their cars behind when convenient, quality public transit service 
is available. As gas prices continue to rise, the demand for public 
transportation will only continue to grow.
    Additionally, it is important to recognize that public 
transportation benefits those who drive, as well as those who use 
transit. According to the 2005 Texas Transportation Institute's Annual 
Urban Mobility Report, transit is successfully reducing traffic delays 
and related congestion costs in America's 85 largest urban areas. 
Without transit, nationwide delays would have increased 27 percent, 
costing residents and businesses in those major urban areas an 
additional $18.2 billion in lost time and fuel.

                         FISCAL YEAR 2007 GOALS

    APTA recognizes the need to wisely invest limited Federal 
resources, and we believe that investment in public transportation is a 
wise use of limited resources. Our Nation has a tremendous need for new 
investment in transit and the rest of our surface transportation 
infrastructure. According to a recent study by the U.S. Chamber of 
Commerce's National Chamber Foundation, if the Federal share of 
transportation investment remains constant, in 2015 the Federal share 
of the average annual capital investment needed to maintain the 
Nation's existing highway and transit systems will be $64 billion, and 
the Federal share to improve highway and transit systems will be $89 
billion.
    APTA's funding request for FTA programs in fiscal year 2007 is 
based upon SAFETEA-LU, which was enacted last year. SAFETEA-LU 
authorizes and guarantees $8.975 billion for Federal Transit 
Administration programs in fiscal year 2007. APTA urges Congress to 
fund the transit program at the authorized level so that communities 
across the Nation, utilizing State and local resources in tandem with 
Federal funds, can begin to address the overwhelming need both to 
preserve the existing transit infrastructure and to expand and improve 
that infrastructure in growing communities and those without good 
transit service.
    SAFETEA-LU builds on the success of the two most recent surface 
transportation authorization laws--the 1991 Intermodal Surface 
Transportation Efficiency Act and the 1998 Transportation Equity Act 
for the 21st Century. Under SAFETEA-LU, the Federal transit program 
structure remains largely the same, retaining formula programs that 
target Federal investment to transit systems based on need and capital 
investment programs that address special needs and projects. The new 
law also provides for increased transit investment in rural 
communities, many of which have little or no transit service. It also 
establishes a number of new programs, including programs for new small 
fixed guideway projects, transit in our national parks, and another 
meant to help address the needs of people with disabilities beyond 
service required under the Americans with Disabilities Act.

                      PRESIDENT'S BUDGET PROPOSAL

    The administration's fiscal year 2007 budget proposal recognizes 
the importance of public transportation investment. While we are 
pleased that the administration's proposal adheres to the authorized 
transit program in most respects, we want to identify two concerns APTA 
has with the President's fiscal year 2007 budget proposal.
    First, the administration proposes to fund only $100 million of the 
$200 million authorized in fiscal year 2007 for the small starts 
program that is meant to assist the development and construction of 
smaller fixed guideway projects such as streetcars, trolleys, commuter 
rail, and bus rapid transit systems. This program is part of the 
program that provides funding to new fixed guideway projects--heavy and 
light rail, bus rapid transit, commuter rail, and trolleys--and the 
President's proposal would actually reduce total funding for this 
program below the fiscal year 2006 level.
    Second, the President's budget proposal for the Federal Railroad 
Administration (FRA) proposes, consistent with last year's 
appropriations bill, that commuter railroad riders will assume a higher 
portion of maintenance and capital expenses on the Amtrak-owned 
portions of the Northeast Corridor. We are concerned that the 
imposition of these fees by the Federal Government will increase 
operating costs for these commuter railroads and result in higher costs 
for commuter rail users and the State and local taxpayers who fund 
these systems, and therefore urge Congress not to include this fee in 
this year's appropriations bill.

                        NEW STARTS/SMALL STARTS

    Mr. Chairman, APTA is disappointed that the administration has 
proposed to fund transit below the level so recently authorized and 
guaranteed by Congress. The administration requested $100 million less 
than the amount authorized from the general fund for the new starts 
program, proposing only half of the funding authorized for the new 
small starts program, a program to fund less costly fixed guideway 
projects such as light rail, commuter rail, and bus rapid transit 
systems.
    As this committee knows, there is overwhelming demand for new 
starts projects, and SAFETEA-LU authorized 387 projects. New fixed 
guideway projects are an important part of meeting transit needs, but 
these major capital projects take years to develop and require a 
predictable funding commitment. Once appropriated for a fiscal year, 
new starts program funding remains available for the 2 subsequent 
fiscal years. The effect of underfunding the small starts/new starts 
program will be felt disproportionately in future years by causing 
transit providers to fall further behind in the development of new, 
less expensive projects due to the cuts that would be implemented under 
the administration's proposal, robbing communities of the congestion 
relief and environmental benefits associated with the projects.
    We want to make another point, Mr. Chairman. SAFETEA-LU 
restructured the general fund and Mass Transit Account (MTA) funding 
sources so that MTA outlays are now scored when they are actually spent 
rather than when they are appropriated. The good news is that MTA 
balances now are significantly higher than they would have been under 
the old scoring system. But this also means that the new starts program 
is now funded exclusively from the general fund. Mr. Chairman, it is 
important to emphasize that this was done to improve the overall 
financing of the Federal transit program, and was not meant to create 
funding uncertainty or program cuts, as the administration proposes.
    Finally, and importantly, we note that 2005 ridership on light rail 
systems in the United States has grown at a faster rate than any other 
form of transit. Ridership on light rail grew by 6 percent in 2005. 
Some light rail systems showed double digit increases in ridership: 
Minneapolis (168.9 percent); Houston (38.0 percent); New Jersey (17.8 
percent); Salt Lake City (13.3 percent); Sacramento (12.8 percent); and 
Los Angeles (10.5 percent). There is clearly overwhelming demand for 
these and other new starts projects. We look forward to working with 
this committee and ask for your support for fully funding new starts 
and all other elements of the fiscal year 2007 Federal transit program 
at the authorized level.

                NORTHEAST CORRIDOR COMMUTER RAIL ISSUES

    We are also concerned about another issue in the proposed fiscal 
year 2007 budget. The administration proposes that commuter railroads 
will assume a higher portion of capital and maintenance expenses on the 
Amtrak-owned portion of the Northeast Corridor. An amount of $59 
million in fees on commuter railroads is assumed in each of fiscal year 
2006 and 2007 to support Amtrak spending.
    The provision in the fiscal year 2006 Transportation Appropriations 
law that requires the Federal Railroad Administration to assess these 
fees has proven very difficult to implement. The administration began 
the process with a ``top down'' approach that did not take heed of the 
accompanying conference report which directed the Secretary to seek to 
achieve consensus among all stakeholders in the corridor. In fact, the 
FTA went so far as to place a notice in the Federal Register indicating 
its intent to make payment of these fees a condition for receipt of 
Federal transit grants to commuter railroads. More recently, the 
process has improved, but it still requires a series of very difficult 
calculations and has absorbed a considerable amount of time among top 
leaders of the FRA, State DOTs and commuter railroads.
    The only silver lining for the 2006 process is that significant 
time has been invested by governors, State DOTs and commuter railroads 
in working with FRA on corridor issues. This time and effort should be 
devoted to developing a long-term plan for improving the corridor not 
to figuring out how to add to the substantial payments commuter 
railroads already make for corridor maintenance and capital 
improvements.
    For fiscal year 2007, APTA urges Congress not to include language 
on commuter railroads similar to last year's appropriations law. 
Commuter railroads already pay a fair share of Northeast Corridor costs 
as established through carefully negotiated legal, financial and 
operating agreements involving substantial State investments.

             PUBLIC TRANSPORTATION AND ENERGY INDEPENDENCE

    APTA is pleased that President Bush highlighted the need to focus 
on energy independence in his State of the Union address earlier this 
year. The President said that ``keeping America competitive requires 
affordable energy . . . America is addicted to oil, which is often 
imported from unstable parts of the world.'' He further stated that 
``the best way to break this addiction is through technology.''
    We agree, Mr. President! We cannot think of a more important 
technology in that regard than fixed guideway transit, including heavy 
and light rail, commuter rail, and bus rapid transit. This technology 
is readily available and many communities already have systems which 
can be expanded with more investment.
    We must remember also that at its current level of use, public 
transportation is already reducing Americans' energy bills:
  --For every passenger mile traveled, public transportation is twice 
        as fuel efficient as private automobiles.
  --Public transportation saves more than 855 million gallons of 
        gasoline a year, or 45 million barrels of oil. These savings 
        equal about 1 month's oil imports from Saudi Arabia. In 2005, 
        9.7 billion trips were taken on public transportation.
    Moreover, transit agencies are increasingly investing in 
alternative fuel buses to reduce dependence on oil. Almost 17 percent 
of fixed route buses now use alternative fuels and 20 percent of buses 
on order will use alternative fuels. Public transportation is clearly 
doing its part to promote energy independence through innovative 
technologies, and that is why we urge Congress to honor SAFETEA-LU and 
fully fund the transit program in fiscal year 2007.

                               CONCLUSION

    Public transportation plays a key role in meeting the goals of the 
administration and Congress in providing energy independence, 
congestion relief and transportation mobility options for Americans. 
APTA strongly believes that the Federal Government should invest no 
less than the level authorized and guaranteed by Congress for fiscal 
year 2007 in SAFETEA-LU if we are to advance these goals.
    Mr. Chairman, on behalf of APTA's member organizations, I thank you 
for this opportunity to express our views.
                                 ______
                                 
     Prepared Statement of the National Alternative Fuels Training 
                  Consortium, West Virginia University

    Chairman Bond, Ranking Member Murray and members of the 
Transportation, Treasury, the Judiciary, Housing and Urban Development, 
and Related Agencies Subcommittee on Appropriations, the National 
Alternative Fuels Training Consortium (NAFTC) respectfully supports the 
request of the National Association of State Fire Marshals (NASFM) 
fiscal year 2007 funding of $950,000 to develop, offer and implement a 
comprehensive nationwide training program for all first responders to 
learn about the specifics of Alternative Fuel and Advanced Technology 
Vehicles. This program will provide first responders with the necessary 
training to safely respond to accidents involving these vehicles to 
minimize the potential for injury to themselves as well as the accident 
victims.
    I am Al Ebron, Executive Director of the NAFTC, a consortium 
consisting currently of 27 educational institutions (listed in the 
attached table) dedicated to supporting the use of alternate fuel 
vehicles (AFVs)/advanced technology vehicles. First responders 
(including fire, police, EMT and other emergency personnel) need 
standardized training on the proper procedures to follow in accidents/
incidents involving alternative fuel and advanced technology vehicles. 
These first responders require training to recognize the dangers 
inherent in advanced technology vehicles in order to ensure their 
safety, that of the persons involved in the accident, and bystanders. 
For example, the new hybrid technology vehicles contain battery packs 
which can discharge shocks in excess of 500 volts to the unwary. Fuel 
cell vehicles contain hot surfaces which can cause burns. Hydrogen-
powered cars may be inherently dangerous from storage cylinders or fuel 
lines. All are safe with proper training.
    I would like permission to enter into the record as part of my 
testimony a letter dated May 24, 2006, from Frank A. Burns, President 
of the NASFM, to the leadership of the Senate and House Appropriations 
Committees making them aware of this training needed for our first 
responders. This letter adds validity and urgency to our ability to 
jointly respond to this training need in order to save lives.
    Many of these alternative fuel vehicles (AFVs) and advanced 
technology vehicles are in service today. These vehicles have all of 
the appearances of a conventional-technology vehicle, but contain 
components which can be dangerous to personnel unfamiliar with advanced 
technology vehicles.
    General Motors, Ford, Toyota, Honda and other automobile companies 
have sold hundred of thousands and have announced their intentions to 
build hundreds of thousands more of these advanced technology vehicles 
over the next 5 to 10 years. This large a fleet dramatically increases 
the potential for hazards faced by first responders at the scene of 
accidents involving these new vehicles. The U.S. Department of Energy's 
(DoE) Energy Information Administration estimates that in the near 
future, AFVs /advanced technology vehicles will comprise more than 20 
percent of the light duty vehicles in the United States. This means 
that one in every five accidents could involve an AFV/advanced 
technology vehicle.
    First responders (including other emergency personnel) should have 
standardized training on the proper procedures to follow in accidents/
incidents involving alternative fuel and advanced technology vehicles. 
Such training can be accomplished through the development and 
dissemination of specialized courses that meet industry standards and 
the offering of such courses through a network of properly trained 
instructors. Currently available curricula are not structured to 
provide comprehensive training for working safely with damaged vehicles 
of these types. Resources to provide training for First Responders are 
limited. This program proposes to evaluate and review all known 
resources, combine the relevant resources into one training curriculum 
and associated training programs, and disseminate the materials across 
the United States. This type of integrated program is currently not 
available on a comprehensive basis. We propose to conduct 2 to 3 
regional or nationwide events/meetings to disseminate the information 
and to conduct numerous local training classes.
    West Virginia University and its National Alternative Fuels 
Training Consortium has the ability to conduct this project with the 
management of the National Association of State Fire Marshals and 
industry assistance. The NAFTC is a nationwide organization of post-
secondary education institutions that develops advanced training 
curricula, conducts training classes taught by certified instructors, 
and promotes the use of alternative fuel and advanced technology 
vehicles. The NAFTC is prepared and ready to develop, offer and promote 
comprehensive training programs for first responders that cover the 
following alternative fuel or advanced technology vehicles:
  --Hybrid Electric;
  --Electric;
  --Fuel Cell;
  --Hydrogen ICE;
  --Biodiesel;
  --Ethanol/Methanol Flex-Fuel;
  --Natural Gas (Compressed and Liquefied); and
  --Propane.
    NAFTC training is modular in concept to allow instructors to:
  --Address all of the alternative fuels and advanced technologies in a 
        course;
  --Customize the course for a specific need;
  --Training modules will include: Instructor Manuals, Participant 
        Manuals/Textbooks, PowerPoint Presentations for Effective 
        Lectures, and Scenario Training With Videos;
  --Classes taught by certified NAFTC instructors and industry 
        instructors to train students and future instructors; and
  --Education and outreach materials.
    Individuals completing these courses would learn how to: (1) 
determine the type of vehicle being approached; (2) avoid or circumvent 
on-board systems that could cause injury during victim extraction; (3) 
safely extract victims from vehicles; and (4) minimize damage to the 
environment, others, and themselves.
    The National Alternative Fuels Training Consortium (NAFTC) is the 
only nationwide training organization dedicated to improving air 
quality and decreasing U.S. dependence on foreign oil by promoting, 
supporting, and expanding the use of alternative fuel and advanced 
technology vehicles. It is the premier organization to develop first 
responder training and provide train-the-trainer courses for first 
responder organizations.
    The NAFTC currently:
  --Offers over 20 courses and workshops nationwide on alternative 
        fuels and advanced technology vehicles;
  --Develops and delivers new courses and workshops yearly to meet 
        demand and updated technology needs;
  --Provides extensive technical assistance through timely and accurate 
        technical data available on NAFTC web site;
  --Produces two NAFTC Newsletters reporting on alternative fuel and 
        advanced technology vehicles--the NAFTC eNews, a monthly web 
        based newsletter and the NAFTC Clean Alternatives Report 
        (CAReport), a printed bi-annual publication.
    Since its inception in 1992, the NAFTC has created tremendous 
impact through:
  --Delivery of over 700 courses and training to over 7,000 
        technicians, fleet managers, students, decision makers, and 
        others on alternative fuel and advanced technology vehicles;
  --Conducting over 775 workshops and education/awareness events with 
        over 160,000 attendees;
  --Enhanced liaisons with automobile manufacturers;
  --Enhanced alliances with aftermarket retailers;
  --Heightened awareness for millions about alternative fuels and 
        advanced technology vehicles by conducting National AFV Day 
        Odyssey. In 2004, this event consisted of 54 sites throughout 
        the United States and two sites in Canada with nearly 25,000 
        direct attendees and over 24,000,000 people reached through 
        media coverage.
    The NAFTC has conducted training classes and workshops for 
government and private organizations such as the U.S. Department of 
Energy, U.S. DoE Clean Cities Coalitions, NASA, General Services 
Administration, U.S. Postal Service, U.S. Air Force, U.S. Navy, U.S. 
Federal Law Enforcement Training Center and Disney World.
    Organizations in support of establishing a training program for 
first responders include the National Association of State Fire 
Marshals and the 27 members of the National Alternative Fuels Training 
Consortium (NAFTC), headquartered at West Virginia University. The 
NAFTC members are post-secondary academic institutions (with 10 to 25 
new members to be added over the next year). Other supporters include 
numerous industry organizations in the AFV/Advanced Technology Vehicle 
and the Automotive Industry (including automobile manufacturers), 
Professional Associations, and Industry Trade Associations (including 
electric, biodiesel, natural gas, hydrogen and flex-fuel). The NAFTC 
will work cooperatively to promote and distribute the training through 
regional agencies (e.g., WVU Fire Extension Service and State Fire 
Academies), national agencies such as the National Association of State 
Fire Marshals, the National Fire Protection Association (NFPA), the 
National Fire Academy in Emmitsburg, Maryland, the Transportation 
Emergency Rescue Committee, International Association of Fire Chiefs 
and other first responder organizations.
    I am pleased that the NAFTC has centers in the States of Chairman 
Bond and Ranking Member Murray as well as many other members of the 
committee. The NASFM has nationwide representation and leaders of their 
organization are in your States.
    Thank you very much for your committee consideration of the joint 
NASFM-NAFTC proposal to bring our first responders up to speed on 
dealing with alternative fuel and advanced technology vehicles that are 
growing in popularity.
    Today's worsening energy crisis and consumers flocking to 
alternative fueled vehicles are cause for concern among firefighters 
and other first responders. Firefighters and emergency personnel 
arriving on the scene of accidents and vehicle fires are sometimes 
searching for the answers to complex questions about alternative fueled 
vehicles. The answer to this dilemma is fiscal year 2007 funding of 
$950,000 to launch a much-needed national program to provide 
alternative fuels safety training for emergency responders.
    The need for this program was not so apparent just a few months 
ago. With energy prices at record levels, we have seen consumers, 
corporations, and government agencies move increasingly to alternative 
energy sources. Hundreds of companies have launched alternative energy 
products into the market place and are involved in extensive R&D in 
almost all States. These new technologies are vital to the future 
security and energy independence of our country, but a barrier 
threatens to halt progress. Firefighters simply are not prepared to 
protect the public or themselves in incidents involving these new 
technologies.
    The United States has learned the hard way with pipelines, LNG and 
other energy infrastructure that local officials and the public take 
notice when emergency responders are apprehensive about new risks. 
Responders already have expressed concern about electrical hazards with 
hybrid autos, the proper firefighting foams to use on ethanol fires, 
and explosion risks with compressed gases. Fire departments have 
refused permits for some hydrogen demonstration projects.
    Proper training and education of responders is the only practical 
solution. The National Association of State Fire Marshals (NASFM) 
consists of senior State-level public safety officials who either 
manage or play a key role in emergency responder training at State, 
regional and local academies in their States. NASFM has the ability to 
reach responders quickly and efficiently.
    With modest funding from U.S. Department of Transportation, NASFM 
has organized a national consortium of emergency responders, Federal 
and State agencies, universities, auto producers, energy companies and 
others who have been working on an alternative fuels safety training 
program for emergency responders.
    Our plan is to complete work on a curriculum and materials, rapidly 
deploy the program to five existing academies which shall serve as 
regional centers, provide instructors and the program materials, and 
initiate train-the-trainer programs by the end of fiscal year 2007. The 
regional centers will require support to improve facilities and add 
training props, but these costs can be discussed at a later date. 
Without adequate resources, this program is unlikely to be ready much 
sooner than 2008 and would be slow to implement and inadequate in its 
content.
    Elements of a strong and credible curriculum already exist. The 
National Alternative Fuels Training Consortium (NAFTC) at West Virginia 
University has much of what is needed, and other elements are available 
from industry, existing hazardous materials safety curricula and other 
sources. That process is underway with NAFTC working in collaboration 
with the University of Montana's College of Technology and the Missouri 
Transportation Institute, with input from the U.S. Departments of 
Energy and Transportation.
    While the curriculum is developed, the NAFTC will adapt its 
material for the purpose of training first responders and add scenario 
and video training. NASFM and NAFTC are in the process of designating 
five State agencies to coordinate the regional training centers we will 
need to deliver the program. The leading candidates are the Missouri 
Division of Fire Safety; the Office of the State Fire Marshal, State of 
New Hampshire; the New Mexico State Fire Marshal; the Florida State 
Fire College; and the Office of the State Fire Marshal, State of 
Washington.
    To move this program forward now, the NASFM, with support from the 
NAFTC is requesting a total of $950,000 in fiscal year 2007 for the 
following tasks, consisting of these costs:
  --$600,000 to assemble and validate these components, produce and 
        test a videotape and manual, and establish a website for on-
        line training.
  --$100,000 to enable us to make needs assessments of the existing 
        fire academies to serve as regional alternative fuel safety 
        training centers;
  --$100,000 to support two senior trainers to work with regional 
        academy staff; and
  --$150,000 to produce and distribute sufficient copies of the videos 
        and program materials to launch the program.
    Safety is a shared responsibility. The public must be assured that 
their safety is in the forefront of a shift to alternative fuels. We 
have the people, the ideas and the responsibility to work with Congress 
and the administration to make the transition to alternative fuels.
    The States and localities already invest much in our Nation's 
emergency responder training. In subsequent years, NASFM and NAFTC will 
seek support from industry partners. Many have been generous in helping 
State and local academies upgrade facilities for the pipeline safety 
programs that NASFM operate in cooperation with the U.S. Department of 
Transportation. But, it is doubtful that first responders can be 
adequately prepared for the influx of alternative fueled vehicles 
without fiscal year 2007 Federal dollars.

                    CURRENT NATIONAL TRAINING CENTERS
------------------------------------------------------------------------
                                      Educational
              State                   Institution            City
------------------------------------------------------------------------
Arizona.........................  Gateway Community   Phoenix
                                   College.
California......................  Rio Hondo College.  Whittier
Connecticut.....................  Gateway Community   North Haven
                                   College.
Florida.........................  Traviss Career      Lakeland
                                   Center.
Illinois........................  Morton College....  Cicero
Indiana.........................  Ivy Tech Community  Gary
                                   College of
                                   Indiana.
Iowa............................  Des Moines Area     Ankeny
                                   Community College.
Louisiana.......................  Louisiana           Baton Rouge
                                   Technical College.
Maryland........................  Com. Col. of        Baltimore
                                   Baltimore County
                                   (Catonsville).
Massachusetts...................  Wentworth           Arlington
                                   Institute of
                                   Technology.
Michigan........................  Lansing Community   Lansing
                                   College.           Kalamazoo
                                  Kalamazoo Valley
                                   Community College.
Missouri........................  Ranken Technical    St. Louis
                                   College.
Nebraska........................  Central Community   Columbus
                                   College.
Nevada..........................  Community College   North Las Vegas
                                   of Southern
                                   Nevada.
New York........................  Onondaga Community  Syracuse
                                   College.
North Carolina..................  Wake Technical      Raleigh
                                   College.
Ohio............................  University of       Lima
                                   Northwestern Ohio. Cleveland
                                  Ohio Technical
                                   College.
Oregon..........................  Portland Community  Portland
                                   College.
South Carolina..................  York Technical      Rock Hill
                                   College.
Tennessee.......................  Nashville Auto-     Nashville
                                   Diesel College.
Texas...........................  Tarrant County      Ft. Worth
                                   College.
Washington......................  Shoreline           Shoreline
                                   Community College.
West Virginia...................  West Virginia       Morgantown
                                   University.
------------------------------------------------------------------------


                   TARGETED NATIONAL TRAINING CENTERS
------------------------------------------------------------------------
                                      Educational
              State                 Institution\1\           City
------------------------------------------------------------------------
Alaska..........................  University of       Anchorage
                                   Alaska.
Utah............................  Salt Lake           Salt Lake City
                                   Community College.
Vermont.........................  Vermont Technical   Randolph Center
                                   College.
Virginia........................  Northern Virginia   Alexandria
                                   Community College.
------------------------------------------------------------------------
\1\ Additional training centers will be recruited next in Alabama,
  California, Colorado, Idaho, New Mexico, New York, Oklahoma, and
  Pennsylvania.

                                 ______
                                 
 Prepared Statement of the National Association of Railroad Passengers

    The National Association of Railroad Passengers strongly supports 
Amtrak's fiscal year 2007 grant request of $1.598 billion and the 
additional $275 million in ``strategic investment initiatives'' Amtrak 
outlined. That $275 million includes:
  --$100 million to be administered by the Secretary of Transportation, 
        for a matching-funds program to support State efforts to 
        improve and expand intercity passenger rail services. This 
        would help address rail's longstanding competitive disadvantage 
        with other modes of transportation, which enjoy Federal funding 
        matches of 50 to 90 percent. We also support Amtrak's call for 
        a Federal-State partnership including ``reliable'' Federal 
        funding (80 percent Federal match).
  --$50 million (which also could be administered by the Secretary) for 
        ``joint investment [with States and railroads] targeted to 
        network chokepoints and linked to threshold performance 
        improvements in intercity passenger rail on-time performance.''
  --$100 million to restructure some of Amtrak's debt, saving money 
        both for Amtrak and the Federal Government. Amtrak says the 
        restructuring ``is intended to achieve savings of $45 million, 
        above the initial $100 million cost, and a rate of return of 
        14.8 percent per year.''
  --$25 million for Americans with Disabilities Act compliance 
        (supplementing $22 million for this purpose in the $1.598 
        billion ``base request'').
    This is the second straight year that Amtrak's board, composed 
entirely of Republicans appointed by President Bush, has supported a 
significant increase in Federal investment in Amtrak and passenger 
rail.
    We of course agree with this from a May 28 New York Times 
editorial: ``Amtrak does not need to make a profit, but it does need to 
work. The government directs billions of dollars to roads and bridges. 
Airports get plenty of help, but somehow very little trickles down to 
the rails. Amtrak, which at one point was to have received zero federal 
funds after 2002, has been offered $900 million by the administration 
for next year. That amount is so low it should be an insult . . . If 
President Bush really wants transportation alternatives, it is time for 
a strategic look at how the railroads can serve as an even more 
important escape valve for the nation's overloaded transportation 
system.''
    Viewed in the context of national need and world energy concerns, 
as well as the last sentence in the above quotation, Amtrak's request, 
which totals $1.873 billion, is conservative.

                    WHY TRAINS ARE A GOOD INVESTMENT

    Citizens Want Them!--Harris Interactive, Inc. provides the latest 
major poll indicating that Americans want more rail service and believe 
that this should be mainly a responsibility of the Federal Government. 
Significantly, the poll--released February 8--was taken December 8-14, 
2005, before the latest run-up in gasoline prices.
    Harris Interactive, Inc, asked, ``In the future, as more people 
travel, which two of the following would you like to see have an 
increasing share of all passenger transportation?'' Americans 
overwhelmingly chose commuter and long-range trains (44 percent and 35 
percent, respectively) compared to long distance travel by car (10 
percent) and bus (6 percent).
    When Harris asked ``. . . which of the following would you like to 
see have an increasing share of all goods and commodities movements in 
the United States?'' the response was even more striking: fully 63 
percent of respondents favored freight railroads, more than air freight 
(35 percent) and trucks (24 percent) combined. The survey then asked: 
``Who do you think should be mainly responsible for maintaining and 
improving the transportation system in the Nation as a whole?'' More 
than two-thirds (68 percent) of adults said the Federal Government. 
(Full poll: http://harrisinteractive.com/harris_poll/index.asp?PID=638)
    The Traveling Public Votes ``Yes''.--Amtrak ridership has risen in 
8 of the last 9 years, with fiscal year 2005 ridership 29 percent above 
that for fiscal 1996.
    I will not repeat the list of ``justifications'' for passenger rail 
I recited a year ago. However, when energy price increases are ``above-
the-fold'' news, normal public support for passenger rail becomes even 
stronger, as does the public policy case for providing that service.
    In his State of the Union Address, President Bush said, ``America 
is addicted to oil, which is often imported from unstable parts of the 
world.'' He was correct. Strengthening and expanding passenger rail 
will help reduce the vulnerability of our citizens and our economy to 
high energy prices. Strengthening public transportation in general as a 
response to high energy prices and concerns about long-term oil 
supplies is at once popular and sound policy.
    The longer the Federal Government starves intercity passenger rail, 
the angrier the American people will be when they discover they do not 
have choices that help them adapt to higher energy costs while still 
preserving their freedom to travel and maintaining their quality of 
life.
    We urge that all Amtrak routes be continued--and the New Orleans-
Orlando segment restored--while Amtrak improves its cost-effectiveness 
in various ways, many of which are discussed below.

                       AMTRAK EFFICIENCY CONCERNS

    We share the concern of the subcommittee--and every responsible, 
interested party--that Amtrak use its revenues (both commercial and 
taxpayers) efficiently.
    Mechanical.--Some of the biggest opportunities to improve Amtrak's 
bottom line while maintaining and even expanding service involve 
updating Amtrak's maintenance practices. The much-quoted GAO report on 
Amtrak management cites an important report by the Amtrak Inspector 
General. A key passage from the Amtrak IG's report reads: ``Both of our 
consultants independently commented that Amtrak's maintenance 
operations are being performed similar to the way the other major 
railroads in North America did maintenance over 20 years ago. The other 
Class I railroads have since moved on to more sophisticated approaches 
to maintenance to improve reliability and reduce costs.''
    Thus, Amtrak is updating and improving its practices, with an 
expectation that its Mechanical Department can boost output and quality 
while reducing costs.
    Dining Cars.--Amtrak is well underway with projects that will 
significantly reduce the net cost of on-board food and beverage 
services. On long-distance trains, Amtrak is revising dining car 
processes and reducing on-board staff; reductions began before 
Christmas and are scheduled to be complete before the end of May.
    Reducing food losses is a reasonable goal; eliminating them is not. 
Carriers worldwide consider on-board food and beverage service not as a 
profit center but as a necessary expense to attract and retain 
business. In a November 2005 speech, Jonathan Metcalf, Chief Operating 
Officer of Britain's Great Northeastern Railway, said that food service 
on his trains ``probably loses 2-3 million a 
year, if we didn't do food, we'd lose passengers . . . it's a key 
reason why they travel with us . . . we probably would have lost 
20-30 million in ticket revenue (without food 
service).''
    Mail.--Our Association repeatedly testified in support of David 
Gunn's work to improve Amtrak. We believe Amtrak is much better off for 
his having served there. Nonetheless, we have urged Amtrak to look 
seriously at undoing one ill-advised step that he took. He completely 
eliminated mail carriage even though every study of which we are aware 
indicated mail was profitable for Amtrak. Amtrak invested in the mail 
business and still owns relevant infrastructure and a sizable number of 
cars with good life expectancy. I have written to Amtrak urging a 
careful review of opportunities to restart mail carriage where this 
would be incrementally profitable.
    Fares and Technology.--Amtrak is not buying market-share with low 
prices. Amtrak ridership has grown in spite of fare increases. Amtrak's 
yield (average fare per passenger-mile) has increased every year since 
at least fiscal year 1994 with the sole exception of fiscal year 2003. 
(A passenger-mile is one passenger traveling 1 mile.) Fiscal year 2005 
yield was 65 percent above that in fiscal year 1994.
    Through the first 7 months of fiscal year 2006 (October-April), the 
yield was 9.8 percent above the same period in fiscal year 2005. If 
anything, Amtrak arguably has been too aggressive in raising fares.
    Amtrak does offer good deals on-line where this makes business 
sense--i.e., handling ``distressed inventory'' (that is, seats that 
otherwise would go empty and where eliminating their operation is 
impractical or would not achieve savings). This is also important for 
cultivating tomorrow's revenues, since some of the people who have time 
to search the internet for elusive good deals are young people who may 
become tomorrow's ``full fare,'' loyal customers. If Amtrak was not 
doing this sort of thing, others would criticize its fare-setting 
practices as out-of-date.
    Creative use of the internet is not new at Amtrak. It offered full 
booking capability on-line starting in February, 1997, at about the 
same time as Continental Airlines and well before the other major 
airlines. Another indication of Amtrak's on-line sophistication is the 
interactive route map Amtrak recently introduced.
    The DOT Inspector General, incidentally, criticized GAO's report 
for its glass-half-empty approach, that is, for not giving ``equal time 
and space [to] what works' at Amtrak, and what has been improved at 
Amtrak.''
    Fares and Public Policy.--Sound public policy should encourage low 
fares. Lower fares mean higher ridership, and help America and its 
people deal more effectively with scarce oil. California's financial 
support for its three Amtrak corridors helps support lower fares than 
are found in many other parts of the Amtrak system. This should be 
encouraged!

            STATUTORY DIRECTIVES (INCLUDING REPORT LANGUAGE)

    We urge Congress to hold Amtrak accountable for the bottom line, 
but to be as restrained as possible with regard to specific directives 
as to how to get there.
    The history of Amtrak is replete with examples of ``good 
legislative intentions'' which sometimes have resulted in higher costs 
rather than reform--including directives in the 1980's regarding food 
service.
    The more the law contains specific directives about how to manage 
the company, the greater the danger that management focus would be 
distracted from doing what is best for the bottom line, and that 
responsibility for results would shift from management to the sources 
of the specific directives.

                             FUNDING LEVELS

    The Bush Administration's request of $900 million--30 percent below 
the current level of $1.3 billion--would not keep the trains running. 
The administration characterizes its budget request as a ``reward'' for 
progress that Amtrak has made on reforms, but the numbers are clear.
  --Debt service is estimated at $295 million. Amtrak has taken on no 
        new debt since June, 2002. From September, 2002, to December, 
        2005, total outstanding debt fell by $300 million--from $3.9 
        billion to $3.6 billion.
  --The operating grant requirement is estimated at $498 million, which 
        Amtrak's Board says ``represents a significant stretch goal . . 
        . $42 million below the approved fiscal year 2006 budget [of 
        $540 million] and $88 million below the DOT Inspector General's 
        baseline operating budget.''
  --Amtrak seeks $730 million for capital (not counting $177 million in 
        non-Federal funding), and $75 million for working capital.
    If a $900 million Federal grant did not cause an immediate 
shutdown, it certainly would begin a visible, downward spiral in 
service quality and reliability, due to elimination of rolling stock 
heavy overhauls and of work on infrastructure. Chances would grow that 
the failure of a moveable bridge would end Boston-New York service.
    After debt service and operations (the first two bullets above), 
only $107 million would remain for capital. This would be almost 
totally consumed by the $90 million Amtrak seeks for ``investment 
required to address legal and regulatory requirements, including NY 
tunnel life safety program, environmental remediation and pollution 
control, police and security, FRA-mandated rolling stock investment, 
and initial ADA station compliance work.''

                          LONG-DISTANCE TRAINS

    Amtrak's long-distance and shorter corridor services both are 
important, complementing each other and other U.S. transportation.
  --Long-distance trains continue to show strength. In fiscal 2005, 
        they carried an average 356 passengers per run, and the number 
        on board at any one time (passenger-miles-per-train-mile) was 
        171. Sleeping car ridership was up 30,000 (or 6 percent) from 
        fiscal 2004. Sleeping car passengers accounted for 15 percent 
        of ridership but 39 percent of revenues on these trains.
  --A substantial number of coach passengers on long-distance trains 
        travel very long distances--55 percent traveled at least 400 
        miles, 25 percent at least 800 miles. These fiscal year 2005 
        figures understate trip length since they are ``unlinked 
        trips,'' that is, for example, a Washington-Milwaukee passenger 
        must change trains in Chicago and thus is recognized as a 
        Washington-Chicago passenger and a Chicago-Milwaukee passenger.
  --Therefore, elimination of dining cars would hurt coach ridership. 
        Any analysis that assigns 100 percent of dining-car costs to 
        sleeping car passengers is wrong. Amtrak reports that usage of 
        dining cars by coach passengers has been increasing with the 
        new ``simplified dining service'' Amtrak has introduced on most 
        trains in the past several months.
  --Sleeping cars and food service are needed to attract discretionary 
        travelers. If trains were operated only for those without any 
        other option, ``bottom fishing'' would produce lower-volume, 
        higher-unit costs and lower economic efficiency.
  --On a passenger-mile basis, corridor and long-distance trains 
        require similar levels of operating support. [A passenger-mile 
        is one passenger traveling 1 mile.] In fiscal year 2004, the 
        ``fare box loss'' per passenger-mile actually was higher 
        (``worse'') for short-distance trains (25 cents) than for long-
        distance trains (15 cents).
  --Long distance trains are the only intercity passenger trains in 25 
        States.
  --One cannot simply ``buy everyone a plane ticket cheaper than 
        running an Amtrak train'' because hundreds of cities that 
        Amtrak serves have no access to discount airline service. In 
        addition, many Americans cannot or chose not to fly.
    Thank you for considering our views. We stand ready to help the 
subcommittee as we are able, including by providing such further 
information as you may request.
